The U.S.' second-largest streaming service could change hands as Comcast moves up deadline for $27.5 billion option to sell Hulu. 'That's a scarce kingmaker asset'
Comcast and Disney have moved up the date to start their contractually obligated negotiations for the sale of Hulu, the streaming service they jointly own.
The previous agreement between the two companies would have seen them start negotiations for the sale or purchase of Comcast’s one-third stake in Hulu in January 2024. Now, talks are scheduled to start on Sept. 30, Comcast CEO Brian Roberts said at a Goldman Sachs event on Wednesday.
The sped-up deal would settle what’s long been a looming question for the businesses of both Comcast and Disney.
Comcast currently owns one-third of Hulu, with the remaining two-thirds belonging to Disney. Either company can force a sale of Comcast’s stake to Disney, at a minimum valuation of $27.5 billion for all of Hulu. But Roberts believes that Hulu is “way more valuable” than that figure, agreed to five years ago, would indicate. He suggested the service would fetch a higher price on the open market, citing its status as the second-most popular streaming service after Netflix, with hit shows including Only Murders in the Building and a reboot of Futurama.
“No one’s ever sold or auctioned off a pure play streaming asset that’s in this kind of position,” Roberts said. “That’s a scarce kingmaker asset for whoever would get that.”
An eventual deal would get the owner all the content currently on Hulu and, crucially for Disney, the ability to continue bundling the service with their ESPN+ and Disney+ services. The bundle, in particular, is valuable, because it helps reduce churn, which is when consumers cycle in and out of a subscription based on what content is available, Roberts said.
“We’re selling all of this as if there’d be a line of bidders around the block to actually buy all the content, all the bundling of Hulu,” Roberts said. “Usually, buyers in robust auctions pay for all the benefits of the synergy.”
Disney CEO Bob Iger had previously stressed the importance of combining Hulu’s content with that of Disney’s other streamers. In April he said Disney was considering putting Hulu’s content on its flagship Disney+ streaming service. Several months before that he’d indicated that Disney was exploring a variety of options for Hulu. “Everything is on the table,” he told CNBC.
The process would see each company hire an appraiser to evaluate Hulu’s value. If their respective estimates are far apart, a third appraiser would be hired. The first option to sell or buy Hulu would present itself 30 days after the start of negotiations, Roberts said.
The proceeds of an eventual sale would go back to Comcast’s investors in the form of stock buybacks, Roberts said. Comcast has been engaged in an expansive buyback program over the past year or so. Last September, Comcast’s board approved a $20 billion buyback program. At the time it had already repurchased $9.0 billion worth of its shares from investors. Under its current projections for the Hulu sale, Comcast would increase the run rate for its buyback program by several billion dollars, Roberts said.
