Citi has suggested that Disney may go against conventional business wisdom and sell its controlling share in Hulu to minority partner Comcast. To most, a combined Hulu/Disney+ platform may have been the obvious choice for the company. However, news about Disney CEO Bob Iger weighing Hulu sale options has been floating around the market since early last month.
After buying out previous partners Fox and Time Warner, Disney now owns 67% of Hulu, while Comcast owns the remaining third – and a pact for the sale may set up the potential buyout in spring 2024.
If you’re a fan of Hulu living outside the US, here’s how you can watch Hulu Outside US.
Citi saw two options for Disney’s direct-to-consumer business: either “raise pricing to reduce the [profits before interest/taxes] gap (possibly relegating its service to niche status),” or integrate Disney+ and Hulu into a single app, enhancing content and deferring price hikes until later.
Analyst Jason Bazinet says, “we believe the company is less interested in a mass market DTC offering.” In a post-Q1 earnings discussion, Disney CEO Bob Iger stated that the streaming company is pursuing both profitability and growth, and said: “We will focus even more on our core brands and franchises, which have consistently delivered high returns.”
While Disney owns all of Marvel’s intellectual property, Universal has distribution rights for two of the comic book’s characters: The Incredible Hulk and Namor, therefore if Disney creates a movie based on those characters, Comcast will be able to distribute it on Peacock.
Disney may take advantage of a sale of its Hulu stock to gain those distribution rights, according to Bazinet.
But, there are a multitude of options from here, with Disney and Comcast jockeying for position on what Hulu is worth.
Hulu’s financials are not reported separately by Disney, which prompts experts to estimate their own worth. According to Bazinet and Citi, Hulu will produce EBIT between -$0.5B and $1.25B in 2024, resulting in a value between $19.8B and $27.5B.
Would you like to keep tabs on more news about Hulu’s future? Please let us know!
Comcast would profit from acquiring Hulu if the price is less than $27.5 billion, which will lead the company “accelerate DTC scale with potential financial synergies, accelerate its push into live streaming aggregation, & improve its strategic positioning within the media category,” Bazinet said.
Bazinet believes that if Disney sells, the proceeds could be used to pay down debt, which would result in -$0.18 to $0.37 in incremental earnings per share (a range of $3/share downside to $7/share upside); or Disney could retire shares (an incremental EPS of $0.04 to $0.74, or $1/share to $13/share upside).
In December, NBCUniversal chief Jeff Shell said that there are “no indications that anything else is going to happen than Disney writing us a big check” for Hulu in 2024.
