The Walt Disney Company has agreed to acquire an additional 33% stake in Hulu, currently held by Comcast Corp.’s NBC Universal (NBCU), making it the sole owner of the streaming platform.
Why is Disney doing this? Since taking back Disney’s CEO seat in November of last year, Bob Iger has been far more focused on streaming than traditional broadcast tv. There are endless rumors that Disney is looking to offload its linear channels and change ESPN to a digital platform. In a May earnings call, Iger said Disney would soon launch a “one-app experience” in the U.S. which would see Hulu and Disney+ content available in the same place. Owning Hulu outright is the most significant step Disney can take in that direction.
What will this cost Disney? According to a brief release put out by Disney on Wednesday, the company will pay at least $8.61 billion for Comcast’s shares on December 1.
Where does the price tag come from? The $8.61 billion figure is a floor value set when Disney and Comcast entered their co-ownership agreement in 2019 and could change before this deal is finalized. The agreement still requires an appraisal process, which Disney expects to wrap up sometime in 2024. A final price will be determined at the end of that process.
How does appraisal work? The fair value of Hulu is being assessed by financial firms JPMorgan Chase (representing Disney) and Morgan Stanley (representing Comcast). If the figures from the two banks are not within 10% of each other, a third assessor will be brought in to make another estimate. Hulu’s final valuation will be set as the average of the two figures closest to each other.
What happens if the price goes up? According to Disney, if the appraisal comes back with a higher figure, “Disney will pay NBCU its percentage of the difference between the equity fair value and the guaranteed floor value [$8.61B].”
Is Hulu worth more now than in 2019? Back in 2019, Hulu was valued at $27.5 billion. Comcast believes the streamer is is worth far more today. In September of this year, Comcast CEO Brian Roberts said the 2019 figure was “hypothetical” and suggested the final price could be much higher. On the company’s last earning call, Roberts claimed Hulu is “the number two 2 AVOD/SVOD service behind Netflix. The number one company [Netflix] has a $200 billion valuation in the market today.”
What are the companies saying about Wednesday’s announcement? Disney’s release was mostly legalese, but the company did explain: “The acquisition of Comcast’s stake in Hulu at fair market value will further Disney’s streaming objectives.”
Comcast released its own statement, which reads: “We look forward to the appraisal process and the determination of Hulu’s fair market value, which we expect will reflect the extraordinary value of the business.”
Pictures at top: Family Guys, available to stream on Hulu.