In recent years, the competition in the streaming industry has been heating up as new competitors have entered the market and old firms have expanded their offering of services. In this highly competitive environment, one of the most prominent participants, Hulu, has been the focus of rumors and questions about its future. According to CNBC, the CEO of the Walt Disney Company, Bob Iger, is open to selling Hulu.
In a stunning move, Bob Iger has reportedly set his sights on trading Hulu for ESPN. Sources say that the trade could be a game-changer in the streaming industry, as it could reshape how consumers think about live sports and entertainment.
The sale of Comcast’s one-third ownership in Hulu to Disney, which is valued at more than $9 billion, may be triggered by Comcast in January 2024, according to this information. Comcast CEO Brian L. Roberts may also want to purchase Hulu from Disney. And yet another: Disney and Comcast are holding an open auction to find new buyers for Hulu. Iger hinted once again that he is willing to sell Hulu after his firm revealed its profitability for the first quarter of the fiscal year 2023 last week. “Everything is on the table right now,” he said.
There is also a fourth scenario: Disney might sell its investment in ESPN to Comcast and get the 33% stake of Hulu back from them. (80 percent of ESPN is controlled by Disney, 20 percent remaining by Hearst). In an interview, Bob Iger said that the business would “lean even more into” ‘STAR WARS’ to help prevent the loss of Disney+ subscribers.
Disney CEO Bob Iger says the company will "lean even more into" 'STAR WARS' to help prevent the loss of Disney+ subscribers.pic.twitter.com/GqMZeV96gh
— Star Wars – CoveredGeekly (@SW_Covered) February 14, 2023
Last week, Puck legal writer Bill Cohan, in a published conversation with his colleague Matt Belloni, noted that the “valuations can be adjusted with cash, and the transaction would be tax-free to all parties,” reviving an idea that was originally discussed at last year’s Allen & Company Sun Valley Conference, an annual Idaho-based summer camp for the biggest media executives and their investment-banking friends.
While the details of the proposed trade between Comcast and Disney are still emerging, the move is already causing ripples throughout the industry. Critics have expressed concern that giving up Hulu could put Disney at a disadvantage in the increasingly competitive streaming market. To understand the logic behind this move, we have to take a closer look at the state of the streaming industry and the challenges that Disney faces in this space.
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Disney already has 80% shares of ESPN and it’s worth a lot more than owning 33% rights of Hulu but Disney would still make the trade as Comcast has cash in hand. While ESPN was never quite able to blend in with the Disney atmosphere, NBCUniversal already has a strong sports presence with the broadcast of “Sunday Night Football.” NBCU also offered live competition to the young Peacock via Premier League soccer and the WWE Network, making it a stronger contender in the sports space. Disney, however, would make a lot of money by selling off ESPN in this day and age when the rights to sports are commanding exorbitant prices.
The ESPN-Comcast transaction will be strongly dominated by NFL concerns. The NFL has unique rights arrangements with all four major broadcasters (ABC occasionally streams ESPN’s “Monday Night Football”) and Amazon. How will the market react if two broadcasters combine? Would ESPN-NBCU gain an edge in sports rights pricing?
“I think there would probably be a lot of nervousness on the parts of all the sports leagues,” Martin said. “That would probably reduce the leverage of those sports to play the rights holders off one another.”
Nearly 25 million people had subscribed to ESPN+ as of the end of December. ESPN+ is one of the services included in the Disney bundle, along with Disney+ and Hulu. At the earnings conference for Disney on February 8, Bob Iger said that he is not “thinking” of selling or spinning off ESPN now. However, as Belloni stated in his back and forth with Cohan, “nobody seems to believe” that. This was particularly true when Iger’s reorganization of Disney, which included separating ESPN from the rest of Disney Entertainment, took place.
“ESPN is a differentiator for this company. It’s the best sports brand in television. It’s one of the best sports brands in sports. It continues to create real value for us,” he responded. “It is going through some challenging times because of what’s happened in linear programming.”
“The brand of ESPN is very healthy, and the programming of ESPN is very healthy. We just have to figure out how to monetize it in a disrupting world. That’s it,” Iger continued. “But we’re not engaged in any conversations right now or considering a spinoff of ESPN. That had been done, by the way, in my absence, and I’m told the company concluded after exploring it very carefully that it wasn’t something the company wanted to do.”
That’s right, Chapek’s Disney evaluated the idea but eventually decided against moving through. On the other hand, Iger’s Disney has been busily rolling back most of Chapek’s reforms. Comcast, which is loaded with cash, is set to get a bonus. With this potential asset exchange, NBCU would be “ideally” positioned for a merger with Warner Bros. Discovery, as Cohan put it. He wrote with certainty, “These deals are going to happen,” referring to the ESPN-for-Hulu and NBCUniversal/WBD mergers.
