Disney and Comcast have announced a deal which results in Disney gaining full operational control over Hulu, beginning immediately. The deal promises that Comcast will sell its Hulu stake to Disney within the next five years for a sum of at least $9.2 billion.
However, this is not without consequence for Hulu subscribers. Comcast’s NBCUniversal will have the right to cancel most of its content-licensing agreements with Hulu by the year 2022 as a part of this deal. Additionally, NBCUniversal programming that was previously licensed exclusively to Hulu could be pulled within one year. While this doesn’t explicitly mean this content will be pulled from Hulu, it does mean this content could show up on other streaming services.
While Disney will begin immediate full control over Hulu, Comcast’s NBCUniversal will still retain its preexisting 33% ownership interest in Hulu. However, Comcast can require Disney to purchase NBCU’s interest in Hulu beginning as early as January 2024. Conversely, Disney can require NBCUniversal to sell the 33% interest to Disney for its fair market-value by that same time (January 2024).
As part of this deal, Disney has guaranteed Comcast a sale price for their stake in Hulu that will be representative of the service’s valuation of at least $27.5 billion. Doing the math with Comcast’s ownership at 33%, this means that Comcast’s stake will be valued at $9.2 billion at least when the sale occurs in 2024. Hulu’s fair-market value for their 33% will be “assessed by independent experts.”
Fortunately for Hulu subscribers, NBCUniversal has already agreed to extend their Hulu license of NBCU content and the contract for Hulu’s live TV service with NBCU channels until late 2024, so this content will remain safely on Hulu for the time being. As part of the deal, Comcast will continue to distribute Hulu content on its Xfinity X1 platform.
Even though NBCU content will remain on Hulu until at least late 2024, Comcast can still terminate most of its content license agreements with Hulu in the next three years, and within one year, NBCUniversal will be able to distribute certain content on its own service that is currently licensed exclusively to Hulu, in return for reduced licensing fee payable by Hulu. Disney and Comcast have also agreed to fund Hulu’s recent purchase of AT&T Inc.’s 9.5% interest in Hulu.
From now on, Comcast will have the option to fund its share of Hulu’s future capital calls and will be diluted if they choose not to fund going forward. Disney has also agreed that only $1.5 billion of a company’s annual capital calls can be funded with additional equity investments funded by debt that is non-diluting. Disney has agreed that Comcast’s ownership interest in Hulu will never drop below 21% and that Comcast is guaranteed to receive a minimum of $5.8 billion under their put/call agreement.
Of course, as Disney now gains full control over Hulu, there is no telling how this will affect Disney’s content distribution methods as they operate both Hulu and their upcoming Disney+ streaming service.