The content wars in the media landscape, a frequent topic of past articles on this site, took a surprising turn on Tuesday with the news that Disney has obtained what the press release deemed as “full operational control” of streaming service giant, Hulu.
The analysts and other media experts had predicted that Comcast would try to oppose ceding full control of Hulu to Disney, especially given their contentious recent bidding wars for Sky TV and 21st Century Fox. Comcast owns 31% of Hulu through their subsidiary business unit, NBCUniversal.
The deal announced Tuesday between these two media goliaths is a “put/call”. The terms of the deal translate to provide mechanisms to both sides. Comcast could by January 2024 initiate the mechanism that would require Disney to purchase their 31% stake at a market valuation determined by independent analysts.
Furthermore, Disney could require Comcast to sell their stake if certain market factors are realized in the future. It depends upon the performance of the service and reports state that Disney has committed to a minimum value of $27 billion. Disney stock jumped Tuesday to over $130 per share and is nearing an all-time high based on the Hulu acquisition news.
The agreement also includes that Comcast will continue to stream Hulu over the X1 set top box and that Comcast has extended the rights to their NBCUniversal content to be streamed through Hulu for another three years. However, the fine print of the deal also allows for some of that content to be pulled in a year to be streamed through a Comcast streaming service at a later point.
The timing was very good for Disney as they needed to gain full control of Hulu at this point in time with the planned launch of the streaming service known as “Disney+” by the end of this year. Some analysts have predicted that the Hulu platform is where Disney will put some of their “non-family” content, which would make sense.
The deal makes sense for Comcast because the advertising revenue and the subscription bases for Hulu and Hulu Live TV services will both grow exponentially with the trend toward “cord-cutting” in the next four to five years. They will also have options on whether they want to pull their NBC and Universal based content in the future, once their streaming service is optimized. In the meantime, they will get a deal for sharing that content with Hulu from Disney. Comcast is going to get a big check from Disney in five years.
Disney has now stated that they plan to position a future offer to customers that “cord-cut” from cable and satellite a package to buy two or all three of their streaming services: Disney+, Hulu, and ESPN+ for a bundled rate. That is an interesting approach and signals the way of the future for television that is becoming increasingly customized and internet streaming reliant.
The agreement today puts pressure on the other players in the industry, especially CBS, which has to figure out how they will grow to compete in a world that is being dominated by Disney and Comcast. The DirecTV Now service is losing subscribers already to Hulu Live and You Tube Premium because DirecTV changed their packages for channel offerings and increased prices.
These changes alienated long-time customers and drove them to seek alternative service providers with better rates and packages. This deal today is only going to strengthen Hulu and their tiered offerings: $5.99 per month for commercials, $11.99 per month for commercial-free streaming, and $44.99 per month for Hulu Live television service which is a 60 channel package.
Disney took another step toward dominating the relatively new industry space of the subscription streaming services. It remains to be seen how the rest of the industry will respond, how it will impact the NBCUniversal streaming service set to launch in 2020, and what Comcast will do with the money it will receive for their stake in the “put/call” arrangement they made in five years.
One thing is clear: times are changing in the television programming industry.
(Some industry background information courtesy of: Fox Business, USA Today, and CBS Market Watch)