Walt Disney Co (NYSE: DIS) and Comcast Corporation (NASDAQ: CMCSA) are in an escalating feud over the direction of Hulu, the streaming service jointly owned by the rival companies, with Comcast reportedly putting a freeze on its funding of Hulu while agitating for a large payoff when Disney is slated to buy Comcast’s minority stake in 2024.
The Source Of The Issue: Hulu was created in 2007 as a partnership spanning multiple companies including Disney, Fox, NBCUniversal and TimeWarner. Over time, Disney acquired Fox, AT&T Inc. (NYSE: T) acquired the TimeWarner assets and Comcast acquired NBCUniversal. AT&T sold its 10% stake, leaving Comcast with a 33% stake and Disney with the majority ownership.
Disney and Comcast signed an agreement to jointly run Hulu through 2024, at which time Disney could buy Comcast’s stake for fair market value. Reportedly, the agreement enabled Comcast to stop funding Hulu, but that action would result in a reduced ownership stake based on several factors.
The Ongoing Crisis: According to a report in the tech news site The Information based on unnamed sources, relations between Disney and Comcast have frayed since last summer when Disney reversed its plans to launch Hulu in overseas markets, choosing instead to reach global viewers under the Star brand name for programming that did not fit the Disney+ family-friendly line-up. The Star programming includes shows seen by U.S. viewers on Hulu.
Disney CEO Bob Chapek told investors last August the decision not to bring Hulu abroad was because the service had “no brand awareness outside the U.S.” and lacked the international rights to some of its programs. The Information’s unnamed sources claimed Disney’s decision was heavily influenced by the tumult it experienced when the COVID-19 pandemic upended its operations, noting the “company began hemorrhaging money” when its theme parks and theatrical activities suddenly stopped.
Comcast was upset with Disney’s decision, reportedly claiming that Hulu could have grown much faster and become more profitable if Disney did not change its plans.
Since last summer, Comcast has not paid for its share of Hulu’s funding needs since this occurred, according to “a person familiar with the situation.”
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What Happens Next: The problem for Comcast is that its interest in Hulu will drop below 33%, though how far below is not immediately clear.
As of the beginning of April, Hulu has 41.6 million U.S. subscribers and The Information estimated its current value could be worth more than $40 billion, translating into $13 billion for Comcast’s 33% stake.
But if Hulu’s subscriber base grows over the next three years, its fair market value could be substantially larger when Disney has the ability to buy out Comcast — provided Comcast resumes funding the service.
(Photo by Bill Strain / Flickr Creative Commons.)
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