Disney and Comcast agree to accelerate Hulu deal
Comcast and Disney have accelerated a deadline that will determine the future ownership of Hulu, the streaming service that is now two-thirds owned by Disney and one-third by Comcast.
Under a five-year agreement, Comcast (Ticker: CMCSA) is entitled to return its stake in Hulu to Disney (DIS) — and Disney is entitled to divest the rest of Hulu from Comcast. The original expiration date for this agreement was January 2024, but Comcast CEO Brian Roberts announced Wednesday at the Goldman Sachs Communacopia and technology conference in San Francisco that the parties have now accelerated the target date to begin resolving the issue to September 30.
The original agreement between Comcast and Disney set a minimum valuation on Hulu of $27.5 billion, but Roberts has gone on to say that the company’s actual valuation is much higher.
Speaking at the Goldman conference on Wednesday, Roberts said Hulu is a “great company” and the second-largest player in subscription-based streaming services, noting that Netflix is worth about $200 billion.
Roberts said Hulu’s rating formula includes not only the service itself, but also the content included with the service, much of which Disney produces. In a real Hulu auction, he said, “there will be bidders lining up around the block.” Roberts points out that the process calls for both sides to hire outside appraisers, with a third independent appraiser added to the mix if the two sides are estranged.
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Use the Netflix values per subscriber as a comparable value, eg Barron I wrote recently that Hulu would be worth $40 billion, which is about $13 billion for Comcast. Meanwhile, Hulu brought in $10.7 billion in revenue in 2022, a third of Netflix’s revenue. On a comparable revenue basis, Hulu is valued at $65 billion, which puts Comcast’s stake at more than $20 billion.
Roberts didn’t venture a guess at Hulu’s actual value, but said the business is “much more valuable today” than it was when the two sides set the $27.5 billion minimum for Hulu five years ago.
The proceeds from the sale of Hulu’s stake will be used to buy back stock, with Roberts saying Comcast will accelerate its buyback program by several billion dollars in the second half of calendar 2023.
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Wells Fargo analyst Stephen Cahal wrote in a research note Wednesday that an accelerated settlement of Hulu’s situation could lift the cloud hanging over Disney stock, given another issue like declining linear viewership and streaming subscriber losses. He adds that Disney’s ultimate streaming strategy is on hold as long as Comcast still owns a third of Hulu. “While the rollout of Hulu is a downside for Disney, we see the bottom line as removing backlogs,” Cahal writes.
While Roberts did not say when the process might be completed, Cahal wrote that investors are likely to conclude that the sale will close by the end of the year.
Comcast shares were up 1.6% at $45.25. Disney shares fell 0.5%, to $80.75.
Write to Eric J. Savitz at eric.savitz@barrons.com
(marks for translation) Multimedia content services
