Billion-Dollar Deal: Disney Set to Acquire Full Ownership of Hulu

In a significant development, Disney is nearing the acquisition of Comcast's 33% stake in Hulu, making it the sole owner with complete control of the popular streaming service. This move aligns with Disney's streaming objectives as it continues to expand its presence in the digital entertainment space.

The expected final price tag for the acquisition is $8.61 billion, with Disney set to pay Comcast by December 1st. However, this figure is still being determined, as the two companies have different assessments of Hulu's fair market value. Comcast's CEO, Brian Roberts, sees Hulu as a precious asset, suggesting its synergies alone are worth $30 billion. The final purchase price will be determined through an appraisal process involving bankers from both sides.

Disney's ultimate payout to Comcast for the 33% stake in Hulu will depend on bankers' assessments of the streamer's fair equity value.

The streaming industry

Due to the growing popularity of on-demand content and the emergence of subscription-based streaming services, the streaming business has grown significantly in recent years. 

 The global streaming industry is expected to increase at a compound annual growth rate (CAGR) of 21.0% from its estimated 2020 valuation of $42.6 billion to $184.3 billion by 2027.

Competitors in the streaming space

With a large global presence, Netflix has been the industry leader in the streaming business for a considerable amount of time. As of Q3 2021, Statista’s report on Netflix shows reported around 213 million paid subscribers worldwide, generating revenue of $7.9 to $8.6 billion for the quarter. With an extensive collection of original content and a powerful brand, Netflix continues to be the top rival.

However, Disney has emerged as a formidable competitor with the launch of its own streaming service, Disney+. Launched in November 2019, Disney+ quickly gained traction and has achieved remarkable growth. As of Q3 2021, Disney+ had over 116 million subscribers globally, with revenue of $4.3 billion for the quarter. Disney+ has seen considerable success with its exclusive content, including popular franchises like Star Wars and Marvel.

Hulu and Disney's position

Hulu, established in 2007, has been a significant player in the streaming industry, offering a combination of ad-supported and subscription-based plans. As of Q3 2021, Hulu had around 42.8 million subscribers, with revenue of $3.2 billion for the quarter. Hulu's strength lies in its vast library of TV shows, current seasons, and a selection of movies.

Regarding global presence, while Hulu is primarily available in the United States, Disney+ has expanded its reach to various international markets. Disney's acquisition of full ownership of Hulu will allow it to leverage Hulu's brand and content offerings as part of its streaming strategies worldwide.

While the equity fair value for Hulu is being assessed by third-party banking firms, Disney and Comcast's bankers must agree within 10% of each other's calculations. If this condition isn't met, a third firm will be brought in to make another estimate, ultimately leading to a final valuation for Hulu.

Disney's acquisition of Comcast's stake in Hulu holds strategic significance for the entertainment giant. It will enable Disney to leverage Hulu's capabilities as a general entertainment service on a global scale. Additionally, the integration of Hulu's content into Disney's streaming bundles, along with Disney+, will enhance the company's pricing power and reduce customer turnover, according to industry analysts.

It's worth noting that Hulu's growth has slowed down in recent quarters, with subscriber growth at 4.5% in Q2 of 2023 compared to 8% the previous year. However, Wall Street analysts remain skeptical that Hulu is worth significantly more than the minimum $27.5 billion set in 2019. The focus in the streaming industry has shifted from rapid expansion to profitability.

As the fair market appraisal process continues into 2024, Disney is expected to pay NBCUniversal, a division of Comcast, an amount equal to its equity ownership percentage of the determined fair value. Additionally, Disney announced today it will share 50% of its estimated US tax savings resulting from the acquisition with NBCU over 15 years.

Is Disney+ the biggest in the world?

Although Disney's acquisition of Comcast's stake in Hulu will consolidate its control over the platform, making it the sole owner, it won't immediately make Disney+ the largest streaming service in terms of subscribers. Netflix still holds that position with its broader global footprint and more extensive subscriber base. However, Disney's entertainment empire, which includes Disney+, Hulu, and other assets, positions the company as a significant contender and a strong competitor in the streaming industry.