• by Karlene Lukovitz  @KLmarketdaily, May 26, 2023

With an early 2024 deadline looming, the long-unresolved issue of Hulu’s fate has reached a tipping point. 

Unable to come to agreement after years of on-and-off discussions, Disney and Comcast’s NBCUniversal -- which own 67% and 33% of Hulu, respectively -- are taking their dispute to an arbitrator, and Comcast has stopped funding the streamer, leaving Disney to foot the bills, according to Wall Street Journal sources. 

Neither company has commented on the report.

In 2019, the companies struck a deal that gave Disney full operational control of Hulu and the option to buy Comcast’s Hulu stake, at a valuation of at least $27.5 billion.   

Just last week, Comcast CEO Brian Roberts said during an industry conference that he thinks it “more likely than not” that Disney will indeed buy Comcast out. 

Roberts cited a change of perspective on the part of Disney CEO Bob Iger, who had previously expressed concerns that Hulu, which has 48 million subscribers, is not differentiated enough from other ad-supported general entertainment streamers. 

In Disney’s second fiscal-quarter earnings call earlier this month, Iger announced plans to launch an additional new streaming option: a combined, ad-supported Disney+ and Hulu platform.

Now that Disney+ has started an ad-supported tier, Hulu’s position as by far the leading ad-supported streamer, with an estimated $3.9 billion in ad revenue last year and a projected $4.8 billion this year, Iger now sees value in leveraging Hulu and synergies to help build Disney+ ad revenue. 

During the earnings call, Iger said that in past talks, everything was on the table — seeming to suggest Disney had not ruled out selling its stake in Hulu rather than buying Comcast’s.

But he added that having had “another three months to really study this carefully and figure out what is the best path for us to grow this business,” it is “clear that that a combination of the content that is on Disney+ with general entertainment is a very positive, is a very strong combination from a subscriber perspective, from a subscriber acquisition, subscriber retention perspective, and also from an advertiser perspective.” 

While Iger characterized the two companies' talks as “constructive” and “cordial," he added “I can’t say where they’ll end up.” 

According to WSJ — which describes the two companies' interactions vis a vis Hulu as a "years-long battle marked by legal threats, broken promises and secret arbitration" — they are still tens of billions of dollars apart in their estimations of Hulu’s value. 

As of October 1, 2022, Disney valued Comcast’s stake at just $8.7 billion — far below the $27.5 billion valuation floor set in the 2019 deal.

Throughout the Hulu partnership, Disney and Comcast, which has a huge investment in building its Peacock streamer, have been parrying moves, trying to realize financial benefits from the streamer without giving the other party an advantage in the short or long term. 

Last year, Comcast pulled its top-tier NBC content from Hulu, moving lucrative in-syndication series including “The Office” and “Parks & Recreation” to Peacock exclusively. Disney, in turn, added TV shows from FX and Freeform to Hulu and struck licensing deals with rivals including Warner Bros Discovery to add other classic TV shows. Hulu has managed to keep its subscriber base stable.