Analyst: Disney May Be Motivated to Sell Hulu Ownership Stake
March 2, 2023
Wall Street investment firm Citi contends Disney may be motivated to sell its majority ownership stake in Hulu (rather than buy Comcast’s minority stake) in a move aimed at reducing Disney’s $1.1 billion Q1 direct-to-consumer operating loss, which included a decrease in Hulu results.
In 10 months, under a fiscal arrangement, Comcast can force Disney to buy its 33% stake in Hulu for at least $27.5 billion, or Disney can force Comcast to sell its stake. The situation emerged following Disney’s $71.3 billion acquisition of 20th Century Fox in 2019.
For Comcast, acquiring Disney’s 66% stake (or another 33% for less than $27.5 billion and majority control) would be a costly “win,” but it could also add 48 million Hulu paying subscribers to NBCUniversal’s Peacock paid sub base of 20 million.
“We believe [Disney] is less interested in a mass market DTC offering,” analyst Jason Bazinet wrote in a note. He attributed this thinking to Disney CEO Bob Iger’s fiscal call comments and related media statements that the company would refocus efforts on core brands and franchises.
On Feb. 19, Iger, in an interview with CNBC, said “everything was on the table” in regards to Hulu’s future with Disney.
“We are intent on reducing our debt,” Iger said. “I’ve talked about general entertainment being undifferentiated. I’m not going to speculate if we’re a buyer or a seller of it. But I’m concerned about undifferentiated general entertainment. We’re going to look at it very objectively.”
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Bazinet said he believes a Comcast majority purchase of Hulu would accelerate the cable operator’s DTC operating scale “with potential financial synergies.”
“[It could] accelerate [Comcast’s] push into live streaming aggregation, and improve its strategic positioning within the media category,” he wrote.
Comcast chairman/CEO Brian Roberts, speaking last September at a Wall Street event, hinted the media company would be interested in acquiring Disney’s stake.
“Hulu is a phenomenal business,” Roberts said. “Its scale is fantastic. I believe if Hulu was put up for sale, Comcast would be interested. So would a lot of other tech and media companies. You would have a robust auction.”