Uncertainty in Streaming: What Lies Ahead for Disney and Hulu?

The Clock Is Ticking

As part of a $71 billion deal in 2019, Disney (DIS) acquired a 33% stake in streaming service Hulu from Fox (FOX). That gave Disney 67% ownership of Hulu, leaving Comcast (CMCSA) with the remaining 33%. At the time, Comcast agreed to hold on to its stake, temporarily saving Disney from spending billions of dollars. The deal contains a provision that allows Comcast to force Disney to purchase its stake in January 2024, at a minimum total valuation of $27.5 billion.

The total purchase price could ultimately be adjusted higher by an independent third party. It’s an atypical structure and leaves Disney facing a bit of a crossroads.

Rise of Streaming

The general consensus among industry observers is that Hulu has an undefined role within Disney’s media kingdom. Disney+ is now the company’s flagship streaming program, boasting 138 million global subscribers as of early April. Hulu has just over 41 million subscribers by comparison, and is only available in the US.

The streaming landscape has changed significantly since Disney and Comcast made their agreement in 2019 and global media companies have begun to focus on streaming television in earnest. Comcast launched its Peacock streaming service in 2020 after a three-month testing period. Disney went forward with Disney+, as opposed to leaning on Hulu and attempting to expand its streaming offerings that way.

How Hulu Could Fit In

Some analysts argue while Hulu may seem like an awkward fit for Disney, it still offers plenty of upside. Hulu’s 2022 advertising revenue is estimated at $2.7 billion, which is near the top for streaming services. It also enjoys stronger brand recognition than most competitors due to the fact that it has been around for 15 years.

Some have expressed concerns that if Hulu is simply added as an option to Disney+, it could raise the cost without ultimately boosting the consumer experience. It’s still possible Comcast could decide to switch things up and buyout Disney, becoming Hulu’s majority owner. That would allow Peacock to become a free ad-supported tier, with Hulu as the premium content hub. Billions of dollars and the developing future of streaming could be at stake, and Hulu is smack dab in the middle of an interesting conundrum.

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