Disney is purposely limiting the expansion of its Hulu brand partly because an increase in value for the subscription service would mean it would have to pay more to buy out Comcast when the bill comes due in 2024.
This idea comes courtesy of Bloomberg, which said it spoke to sources close to Disney’s executive team, a unit that is still being shuffled around in respect to direct-to-consumer platform management.
Prior to having Hulu’s top-level decision-makers assimilated into the Disney DTC Group collective, the Hulu brass was reportedly set to pitch then-CEO Bob Iger in January 2020 on a plan for having Hulu catch up to rivals Netflix and Amazon Prime Video in the international streaming market.
But according to Bloomberg, that meeting never happened. And over the summer, the conglomerate announced that its India-spawned Star brand would be the moniker behind the global expansion of its more adult targeted general interest SVOD brand (Disney Plus being the kids and family iteration).
“In terms of the general entertainment offering internationally, we want to mirror our successful Disney Plus strategy by using our Disney Plus technical platform, bringing in content we already own and distributing it under a successful international brand that we also already own, which is, of course, Star,” current Disney CEO Bob Chapek told investors.
Hulu has much less of an international footing than Star. And choosing to establish Hulu in foreign markets from scratch would have cost Disney $4 billion, a steep price to pay, particularly amid major pandemic-caused disruption to the company’s theme parks and theatrical exhibition businesses. Hulu is already losing about $1 billion a year for Disney.
But the Comcast bill reportedly loomed large in the decision, too. Last year, Disney took full control of Hulu, acquiring Fox’s entertainment assets, buying AT&T/WarnerMedia’s 10% stake and negotiating operational control from remaining joint venture partner Comcast.
At the time, Disney agreed to buy out Comcast’s 30% share in Hulu, then valued at around $9 billion, in 2024 for an as-yet determined price. Disney could dilute Comcast’s share by investing more in Hulu programming, but the minimum payout will be $5.8 billion.
However, an aggressive international expansion would drive Hulu’s value way up, and along with that, the payout owed to Comcast.
“The irony is the more you pump up Hulu, the more Disney has to pay in hard cash to Comcast, which I’m not sure they want to do," MoffettNathanson analyst Michael Nathanson said. “If I was them, I’d be really leery of creating more value right now.”
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