Comcast and Disney have agreed to accelerate their timetable to negotiate the sale of streaming subscription service Hulu which they jointly own. Originally, the talks were to begin in January 2024, but the negotiations will now begin on September 30, according to Fortune. Disney currently owns two thirds of Hulu, and Comcast owns the remaining one third. Either of the two parties can force a sale of Comcast’s ownership in Hulu. When the parties originally agreed to the deal five years ago, the minimum valuation for Hulu was $27.5 billion for all of Hulu. That would be the floor for any future deals. Comcast could also force Disney to buy its ownership stake at that price, The New York Times reports.
Brian Roberts, CEO of Comcast, spoke about the potential and value Hulu might bring to the bargaining table at a Goldman Sachs investor conference last week. He said Hulu is the second most popular streaming subscription service after Netflix and the value of the service may actually be quite a bit higher. Roberts also said that tech companies with deep pockets might bid on Hulu if it were sold in an open auction.
“No one’s ever sold or auctioned off a pure play streaming asset that’s in this kind of position,” said Roberts. “That’s a scarce kingmaker asset for whoever would get that.”
Whoever buys Comcast’s share of the streaming subscription service would own all of Hulu’s content including Hulu Originals like Only Murders in the Building, The Handmaid’s Tale, Nine Perfect Strangers, Little Fires Everywhere, Big Little Lies, The Dropout and other popular shows. They would also benefit from the Disney trio subscription bundle which includes Disney+, ESPN+ and Hulu. As of July 1, 2023, Hulu had 48.3 million subscribers, including 44.0 million from the streaming subscription service and 4.3 million viewers who subscribe to Hulu Live TV and the streaming service.
“We’re selling all of this as if there’d be a line of bidders around the block to actually buy all the content, all the bundling of Hulu,” Roberts said. “Usually, buyers in robust auctions pay for all the benefits of the synergy.”
Now that the negotiation process has been accelerated, Comcast and Disney will each hire an appraiser to determine Hulu’s value. If the valuations are similar, the parties may mutually agree on a particular value for Hulu. If not, they may bring in a third appraiser to determine Hulu’s value. Once the value has been determined, negotiations for the sale of Comcast’s ownership shares can begin. Proceeds of Comcast’s portion of Hulu would be returned to Comcast’s investors as stock buybacks.
“It will take a little time for this to play out, but both companies wanted to get it behind us,” Roberts said. “So we pulled the date forward.”
It is interesting that Comcast and Disney have agreed to move up negotiations three months. What is the advantage to the two parties of selling Comcast’s one-third ownership stake now? Disney is already losing money on its direct-to-consumer streaming services. Is Disney hoping to make a much-needed profit on a sale above the $27.5 billion valuation? With Bob Iger back in the driver’s seat at Disney, this may be part of his grand plan to turn things around, but it isn’t clear why the parties agreed to a three-month jumpstart. Do they know something we don’t?
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