Disney is now the only one with its hands on Hulu’s steering wheel.
Disney and Comcast announced a deal under which Disney will assume full operational control of Hulu, effective immediately. Within five years, Comcast has agreed to sell its Hulu stake to Disney for at least $5.8 billion.
Under the deal, Comcast’s NBCUniversal will continue to license content to Hulu through late 2024. However, as soon as next year, NBCU will have the right to pull back programming previously licensed exclusively to Hulu (continuing to make it available to Hulu on a nonexclusive basis for a reduced licensing fee). By 2022, NBCUniversal will have the right to cancel most of its content-licensing agreements with Hulu. NBCU is planning to launch a free, ad-supported streaming service next year.
“We are now able to completely integrate Hulu into our direct-to-consumer business and leverage the full power of The Walt Disney Company’s brands and creative engines to make the service even more compelling and a greater value for consumers,” Disney chairman/CEO Bob Iger said in a statement about the pact.
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Comcast/NBCU will retain its 33% ownership interest in Hulu but as early as January 2024, Comcast can require Disney to buy NBCU’s interest in Hulu. By the same token, Disney can require NBCU to sell its interest to Disney for its fair market value at that time, the companies announced Tuesday.
Disney has guaranteed a sale price for Comcast’s stake in Hulu that will represent a valuation for the streaming-video joint venture of at least $27.5 billion. The companies said that when the sale of NBCU’s stake occurs in 2024, Hulu’s fair-market value will be “assessed by independent experts.”
Comcast agreed to extend the Hulu license of NBCU content and the carriage agreement for Hulu’s live TV service for NBCU channels until late 2024 and also to distribute Hulu on its Xfinity X1 platform. But it can nix most of the licensing agreements by 2022.
Last month, AT&T sold its 9.5% stake in Hulu to Disney and NBCU for $1.43 billion, valuing Hulu at $15 billion. Disney and Comcast agreed to allocate that purchase on a pro-rata basis, giving Disney a 66% ownership and Comcast/NBCU a 33% equity stake.
Disney secured 60% ownership of Hulu after it acquired the entertainment assets of 21st Century Fox for $71 billion, and was actively looking for a path to securing 100% of the company in talks with Comcast.
What Comcast’s Hulu ownership stake will be worth within five years is subject to different factors.
Comcast will have the option but not the obligation to fund its proportionate share of Hulu’s future capital calls and will be diluted if it elects not to fund. Disney has agreed that only $1.5 billion of any year’s capital calls can be funded through further equity investments with any capital in excess of that annual amount being funded by non-diluting debt. Whether Comcast funds its share of those equity capital calls or not, Disney has agreed that Comcast’s ownership interest in Hulu will never be less than 21% such that Comcast is guaranteed to receive at least $5.8 billion under the put/call agreement.