Comcast announced that it has reached a deal allowing Disney to take full operational control of Hulu, effective immediately.
Under the terms of the deal, Comcast as early as 2024 can require Disney to buy its 33% stake in Hulu, and Disney can require Comcast to sell that stake at a fair market value. Disney is guaranteeing a minimum total equity value of Hulu at that time of $27.5 billion.
Comcast also agreed to extend its NBCUniversal distribution agreement with Hulu’s on-demand and live TV services until late 2024. Comcast also said it will distribute Hulu on its Xfinity X1 pay TV platform.
NBCUniversal can terminate most of its content license agreements with Hulu in three years’ time, and in one year NBCUniversal will have the right to show on its own OTT service (launching in 2020) certain content that it currently licenses exclusively to Hulu in return for reducing the license fee payable by Hulu.
Comcast and Disney also agreed to fund Hulu’s recent purchase of AT&T’s 9.5% interest in Hulu, rated according to the current two-thirds, one-third ownership structure.
With this deal Disney eliminates some of the operational overhang with Hulu, which along with ESPN+ and the upcoming Disney+ streaming service is a key part of Disney’s direct-to-consumer streaming strategy.
Hulu’s valuation has climbed in the recent months. In November 2018 Disney said in a regulatory filing that Hulu was worth about $9.3 billion, but AT&T’s recent sale of its Hulu stake raised the company’s implied valuation to $15 billion.
By the time the 2024 end date for Disney and Comcast’s “put/call” agreement rolls around, Hulu is anticipated to have between 40 million and 60 million subscribers. The service currently has 28 million subscribers (26.8 million paid memberships and 1.3 promotional accounts).
Hulu could also turn into a profitable business by the time 2024 arrives. Disney predicted that Hulu’s operating losses will peak this year at $1.5 billion, and that Hulu will achieve profitability by 2023 or 2024.