By CE Critic - Buy Better Tech
Disney has just announced its plan to shell out a staggering $8.6 billion to Comcast, in exchange for the media conglomerate's 33% stake in Hulu. While on the surface, this move may appear to bring Disney closer to consolidating its streaming empire, it raises several critical questions about the company's strategies, its exorbitant spending, and the declining fortunes of the streaming market.
A Historical Quagmire
Hulu was conceived in 2007 as a collective effort to take on the streaming titan, Netflix, without each major studio individually building its streaming platform. Comcast and Fox initiated the venture, and it later garnered support from most significant TV networks. Disney's involvement grew substantially when it acquired Fox's assets in 2019, giving it a 66% stake in Hulu and de facto control.
Over the years, Disney has been wrestling with the question of why it owns two distinct, competing streaming services, Hulu and Disney+. It has attempted to amalgamate the two to make its streaming offers more enticing. This decision to purchase Comcast's remaining share in Hulu will likely pave the way for Disney to promote bundled subscriptions combining Disney+ and Hulu more aggressively.
A Price Tag Predicament
The deal's price tag has been a contentious issue. Comcast's CEO, Brian Roberts, has argued that Hulu's market value surpasses the $8.6 billion floor value agreed upon in 2019. In fact, he touted Hulu as a "scarce, kingmaker asset" worth as much as $30 billion, excluding Hulu's intrinsic value. Disney and Comcast have hired separate investment banks to assess Hulu's fair market value, and it's highly likely that the appraisal process will drag on into 2024.
Hulu's Faltering Growth
While the parties are engaged in a high-stakes appraisal battle, it's worth examining Hulu's recent performance. The once rapidly growing streaming service has seen a slowdown in its subscriber growth, with a mere 4.5% increase in Q2 2023, down from 8% a year earlier. Hulu added just 100,000 subscribers in the quarter ending July 1, bringing its total subscriber count to 48.3 million, with 44 million on subscription-only tiers and 4.3 million on live TV with SVOD plans.
The Uncertain Future of Streaming
The streaming industry has shifted its focus from rapid expansion to profitability, making Hulu's growth woes particularly significant. It begs the question: is Hulu really worth more than the $27.5 billion floor value set in 2019, especially when the streaming landscape is evolving and maturing? Many analysts remain skeptical.
Disney's Vision and the Implications
Disney's ultimate motive for retaining Hulu is to strengthen its streaming bundles, combining Disney+ and Hulu to reduce churn and enhance pricing power. This approach allows Disney to maximize streaming revenues with a fixed cost base. However, it is unclear whether the hefty investment in Hulu will yield the desired results or if the market dynamics have shifted too significantly to justify the expense.
While the acquisition of Comcast's stake in Hulu will inevitably make Disney the sole owner of the service, the real question remains: Is Disney's multibillion-dollar expenditure on Hulu a smart move in an ever-evolving streaming landscape, especially when its own marquee franchises like the MCU and Star Wars are facing declining fortunes? Disney's roadmap to streaming dominance is fraught with uncertainties, and only time will reveal if it's a path well-taken.