Q: What is Disney buying from Comcast, and why is it happening now?

Walt Disney is to purchase the remaining 33% share of streaming service Hulu from Comcast, giving Disney full ownership over the platform. Disney has exercised its right under the put/call agreement made between the two companies in 2019, which proposed that at any time before 1 Jan 2024 Disney could require Comcast to sell its remaining share in Hulu, and Comcast could additionally require Disney to buy that same share in Hulu. This put/call agreement was bought forward by the two companies to 1 November earlier this year. Disney first acquired a minority stake in Hulu in 2009, which it increased to a majority 67% stake in 2019 after the purchase of 21st Century Fox and the acquisition of part of AT&T’s 10% stake. 

Q: What does this move from Disney indicate about its wider entertainment strategy?

The move by Disney to buy out Comcast’s share in Hulu has been anticipated since the two made the options agreement back in 2019. However, news of the purchase comes while Disney is re-examining many of its domestic and international assets. Discussions over recent months surrounding Disney’s linear assets suggest that CEO Bob Iger is keen to offload channels including ABC, FX and National Geographic to potential bidders, although any potential sale would not include ESPN. In addition, Disney has also been looking at a sale of its Disney Star brand in India to rival Reliance Industries. 

Disney’s intention to buy the remaining stake in Hulu, while possibly selling off key international and linear businesses at the same time, sends a message that Disney is looking to double down on consolidation in its domestic market, with a renewed focus on its streaming operations. Disney’s domestic streaming offering would be made considerably more attractive through the combination of Disney+ and Hulu into one app, something Bob Iger has previously stated will happen before the end of 2023. 

While there have been no details yet on how this would be rolled out, Disney could offer a premium tier which includes both Disney+ and Hulu (similar to Paramount Global’s decision to roll Showtime content into a more expensive Paramount+ Showtime tier). At a time when streaming services are looking to prioritise subscriber retention and ARPU growth over topline subscriber growth, a combined Disney+ and Hulu offering would add an additional 4,500 unique titles to Disney+’s US catalogue of just 1,900 titles. The genre mix of the catalogues also complement each other, with Disney+ providing content focused around Children & Family, and Hulu catering more to fans of Comedy, Crime & Thriller, and Documentaries. With this combination, Disney will be looking to address the roughly 14m Disney+ subscribers in the US who don’t currently take a Hulu subscription, hoping to translate them into higher-ARPU customers with the allure of Hulu’s content offering in one combined destination. 

Q: What happens now?

Disney’s announcement of its intent to buy out the remaining 33% of Hulu from Comcast is only the beginning of this transaction. While in 2019 the two companies agreed on a floor price of $27.5bn (meaning Disney would pay Comcast a minimum of $9bn for its share) Comcast CEO Brian Roberts has recently stated he believes Hulu could be worth $60bn. Hulu, moreover, has had significant success in recent years with hits such as Only Murders in the Building and The Bear, which Comcast will argue has driven up Hulu’s value from the previously agreed $27.5bn.

Disney’s proposed acquisition of Hulu makes sense in an age where streamers are increasingly focused on reducing churn and increasing the revenue from each subscriber. If it takes complete control over Hulu, Disney will have to decide how to monetise its $9bn purchase, whether that means merging Disney+ and Hulu together into one app, or even expanding Hulu into international territories.