Comcast has stopped contributing money to fund the daily operation of Hulu, the money-losing SVOD service for which it owns a 33% stake, and is currently in arbitration with majority owner Disney over the subscription platform’s valuation.
That is the essential takeaway from the increasingly essential paywalled media-technology news site The Information, which gathered its string from its usual unnamed insider sourcing.
According to the site, Comcast remains livid about Disney’s decision last year not to expand Hulu’s international presence. The cable conglomerate, which controls 33% of Hulu through its NBCUniversal media division, believes Disney is intentionally limiting Hulu’s value growth in order to reduce the amount it will have to pay Comcast three years from now when Comcast is able to compel Disney to buy out its share in the joint venture.
Hulu was launched in 2007 as a joint venture between Disney, Fox and NBCU, prior to the latter’s 2011 acquisition by Comcast, mainly as a digital repository for linear network TV shows. The erstwhile Time Warner Inc. later joined the JV as a 9.5% owner, paying $583 million to do so in 2016.
In 2019, Disney acquired Fox’s 30% share in Hulu as part of its $71.3 billion purchase of Fox’s entertainment assets. Also in 2019, with AT&T having closed its $85 billion acquisition of Time Warner, the telecom sold back its 9.5% stake to the joint venture for $1.43 billion, valuing Hulu at around $15 billion at the time.
With its stake restored to 33%, Comcast entered into an agreement with Disney, stipulating that it could compel Disney to buy out its remaining share in 2024 at a minimum Hulu valuation of $27.5 billion.
Comcast’s stake would be valued at more than $9 billion-plus should Hulu’s valuation exceed $27.5 billion in three years.
And this is where it starts getting really sticky.
Last year, amid the pandemic, Disney elected not to pursue an earlier planned aggressive international expansion plan for Hulu, instead opting to pursue foreign growth for Disney Plus through India’s Hotstar, an asset acquired along with Fox entertainment purchase.
Comcast executives are reportedly upset that some of that Star-branded Disney Plus international programming comes from Hulu.
The Information said that Comcast has reportedly stopped paying child support for Hulu, a move that contractually dilutes its stake below 33%.
Comcast reps had no comment for Next TV.
Just how much that dilution is worth is among the issues reportedly being haggled over in arbitration.
For its part, Disney has bundled Hulu along with Disney Plus and ESPN Plus since 2019. And that’s a big reason why Hulu has 41.6 million subscribers now vs. 22.8 million at the end of 2018, Disney claims, downplaying the significance of its international expansion strategy.
So how much is Hulu worth today?
Interestingly, The Information figured it this way: With roughly one-fifth as many subscribers globally as Netflix, Hulu should be worth roughly one-fifth of Netflix’s $217 billion market capitalization.
It's a somewhat apples vs. submarines comparison, given the difference in business models. But we'll call it $43 billion.
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