The Walt Disney Company announced that it will acquire the 33% stake in Hulu, LLC held by Comcast Corp.’s NBC Universal, following Comcast’s November 1 exercise of its right under the put/call arrangement between the two companies. The acquisition of Comcast’s stake in Hulu at fair market value will further Disney’s streaming objectives.
Under the terms of the put/call arrangement, by December 1, Disney expects it will pay NBCU approximately $8.61 billion, representing NBCU’s percentage of the $27.5 billion guaranteed floor value for Hulu that was set when the companies entered into their agreement in 2019 minus the anticipated outstanding capital call contributions payable by NBCU to Disney. Under the appraisal process agreed to by Disney and Comcast, Hulu’s equity fair value will be assessed as of September 30, 2023. If the value is ultimately determined to be greater than the guaranteed floor value, Disney will pay NBCU its percentage of the difference between the equity fair value and the guaranteed floor value. While the timing of the appraisal process is uncertain, we anticipate it should be completed during the 2024 calendar year.
Hulu, the subscription-based streaming platform, was founded in 2007 with joint ownership by a group of media companies, including 21st Century Fox, Comcast, and CNN’s former parent company, Time Warner. In recent years, those companies have begun to focus on their respective streaming platforms. In 2020, NBCU launched its own subscription-based streaming platform, Peacock, and Comcast began shifting programming from Hulu onto the new platform, including Bravo and NBC shows. But Hulu has continued to show growth with hit original movies and shows, including “The Handmaid’s Tale,” “The Bear,” and “Reservation Dogs,” amassing more than 48 million subscribers even as the price of the service has continued to rise.
Disney has also bundled the Hulu service as part of its larger portfolio of streaming services, including Disney+ and ESPN+, offering it at a discounted rate as part of the larger package. But Hulu has been a bright spot in Disney’s media empire as it works to quickly make streaming profitable and capture a large subscriber base lured by its vast entertainment library. “I’ve now had another three months to really study this carefully and figure out what is the best path for us to grow this business,” Bob Iger said on a May earnings call. “It’s clear that a combination of the content that is on Disney+ with general entertainment is a very positive, is a very strong combination from a subscriber perspective.”
Disney Chief Executive Bob Iger in August told investors the company was making extensive Hulu content available to bundle subscribers, with the company moving closer to having one app in the U.S. that combines the general entertainment content of Hulu with content from Disney’s other brands and franchises for bundle subscribers. In remarks at a Goldman Sachs conference this fall, Comcast CEO Brian Roberts called Hulu a "scarce kingmaker asset" that is "way more valuable today" than when the deal was initially struck.
Hulu had 48.3 million subscribers at the end of Disney's third quarter, compared with 28 million paid subscribers for Comcast's Peacock streaming service at the end of Comcast's third quarter. Disney+ had 146.1 million global subscribers at the end of Disney's third quarter. Bankers representing each party will assess Hulu's fair market value, according to regulatory filings. While the timing of the appraisal process is uncertain, Disney anticipates it to be completed in 2024.
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