disney CEO Bob Iger’s apparent openness to selling Hulu marks a sharp reversal in the company’s strategy – and an even more surprising shift if Iger sells the streaming service to Comcast.
Iger said in an exclusive CNBC interview with David Faber on Thursday that “everything is on the table” when it comes to Hulu’s future.
“We intend to reduce our debt,” Iger said. “I talked about general undifferentiated entertainment. I’m not going to speculate whether we’re a buyer or a seller of it. But I’m concerned about general undifferentiated entertainment. We’re going to look at it very objectively.”
Disney currently owns 66% of Hulu, with Comcast owning the rest. The two companies reached an agreement in 2019 in which Comcast can force Disney to buy (or Disney can require Comcast to sell) the remaining 33% in January 2024 at a guaranteed minimum total net worth of $27.5 billion, or approximately $9.2 billion for participation. .
Just five months ago, then-Disney CEO Bob Chapek said he’d love to own all of Hulu “tomorrow” if he could. Chapek’s strategy was to eventually tie Hulu to Disney+ to give consumers a “hard bundle” option in which viewers could watch programming from both the Disney+ family and adult-focused Hulu. Comcast’s stake in Hulu prevented Disney from moving forward with its plans.
“I would like nothing more than to find this solution for a quick agreement,” Chapek said in a September interview with CNBC. “But it takes two parties to come up with something that’s mutually agreeable.”
Chapek had a conversation in 2021 with Comcast CEO Brian Roberts to try to ramp up the sale of Hulu, according to people familiar with the matter. Roberts floated a number of possible ideas, including Disney selling ESPN to Comcast, said the people, who asked not to be named because the discussions were private. No substantive conversation has taken place since, the people said.
Despite dwindling pay-TV subscribers, ESPN and many cable networks are still raking in a lot of profit, which Disney wasn’t about to give up, especially since it helps fund the streaming business. , the people said. Iger said this week that while a spin-out was being considered in his absence, it was concluded that ESPN should stay with Disney. He said talks of a sale were not taking place.
Another proposal made to Disney was to have Hulu bought out by Comcast. Comcast executives believe Hulu could boost its streaming efforts beyond Peacock, the company’s flagship streaming service, according to people familiar with the matter. They remain open to a variety of possibilities with Hulu, the people said. Peacock has approximately 20 million paid subscribers. Hulu has approximately 48 million subscribers. Both services are only available in the United States and US territories.
Spokespersons for Comcast and Disney declined to comment.
Comcast executives walked away from those talks and resigned themselves to taking Disney’s money in 2024 rather than acquiring full ownership of Hulu, as CNBC reported in September.
Iger’s Change
Those circumstances may have changed with Iger’s return. It’s possible that Iger’s comments on Thursday were just posturing. Threatening to be a seller of Hulu rather than a buyer can drive down the price of the streaming asset, which Disney would fall on if it actually bought the 33% stake from Comcast.
Iger previously defended Hulu as part of Disney’s strategy to offer three relatively low-priced services (Disney+, Hulu and ESPN+) rather than a mega-product that would likely be the most expensive streaming service. His thinking was that giving subscribers too much content in a product can lead to what happened with cable TV – consumers are starting to feel like they’re paying too much money for content they don’t watch. .
Selling Hulu would unravel that strategy and could also lead to cancellations of Disney+ and ESPN+. Disney pushed its three-service bundle for $12.99 per month (with ads). That’s about 50% off buying all three services separately, which would cost almost $26.
Still, publicly acknowledging that Disney might be open to selling Hulu is a bold move. This puts Hulu employees on high alert and adds uncertainty to Iger’s own business. Iger’s comments may also be aimed at eliciting a reaction from shareholders.
Competitive dynamics
Iger’s Hulu comment also calls into question one of his longstanding edicts: Don’t beef up Comcast at Disney’s behest.
When Iger acquired the majority of Fox’s assets for $71 billion in 2019, one of his main motivators was to make sure Comcast didn’t acquire a majority stake in Hulu. Activist investor Nelson Peltz, who on Thursday dropped his proxy battle for a seat on Disney’s board of directors, had argued that Iger had paid considerably too much for Fox. Iger’s defense of the deal would have strengthened Comcast and weakened Disney in the streaming wars, according to people familiar with his thinking.
The competitive tension between Comcast and Disney is not new. Roberts made a hostile bid to acquire Disney for $54 billion in 2004. Former NBCUniversal CEO Steve Burke left Disney to come to work for Roberts in 1998. In a streaming environment, Disney products divert eyeballs and subscription revenue from Peacock, and vice versa.
Still, Iger and Roberts have a strong working relationship, according to people familiar with the matter. Iger even spoke at an internal NBCUniversal event last year.
The two companies will need to work closely together to agree on any conclusion for Hulu. Even if Disney buys the remaining stake from Hulu, the parties must agree on the fair market value. Iger’s comments on Thursday could be the start of what could be months of negotiations to follow.
WATCH: Watch CNBC’s full interview with Disney CEO Bob Iger
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
