Disney Gains Full Control of Hulu

Disney will take “full operational control” over Hulu from Comcast, effective immediately, the companies announced Tuesday. Comcast also will be allowed to sell its 33% stake in Hulu to Disney in 2024 at a valuation of at least $27.5 billion, even if the streaming service is worth less, according to the agreement. Comcast is guaranteed at least $5.8 billion for its Hulu stake, according to the agreement.

As part of the deal, Disney has agreed to pay Comcast for its Hulu content for the next five years. NBC channels will be on Hulu Live at a higher rate than previously agreed. NBCUniversal, CNBC’s parent company, will also be able to run the same content on its own streaming service, which is expected to launch in next spring.

“We believe strongly in the direct-to-consumer space and our content is a key driver of that ecosystem,” NBC Universal CEO Steve Burke said in a statement. “The extension of the Hulu content-licensing agreement will generate significant cash flow for us, while giving us maximum flexibility to program and distribute to our own direct-to-consumer platform, as we build that business. Significantly, this transaction also affirms the value of our stake, provides a path to liquidity and ensures our continued equity participation in Hulu’s success.”

Hulu’s original goal was to be a platform for broadcast television shows in the hopes that people would stop going to Google’s YouTube or other portals to watch pirated content. The streaming service managed to grow its subscriber base from 6 million in 2014 to more than 25 million last year by moving aggressively into both original content and offering a pay-TV distributor service called Hulu Plus, which is a low-budget alternative to traditional cable and satellite television.

Hulu’s owners have pumped billions of dollars into the company, which is unprofitable. At an investor conference last month, Disney said Hulu’s operating losses would hit $1.5 billion in fiscal 2019 and a slightly smaller loss in 2020. The company said Hulu’s domestic operations would become profitable in either fiscal 2023 or 2024. As part of their deal, Disney and Comcast agreed that future “capital calls” will be funded through a combination of equity and debt. If Comcast doesn’t participate, its stake would be reduced, though never below 21%.

Todd “Bubba” Horwitz