September 14, 2022
Subscription streaming VOD pioneer Hulu remains a co-owned platform between Disney and Comcast, with Disney having 67% ownership and operating control following its $71 billion acquisition of 21st Century Fox in 2019. Comcast’s NBCUniversal owns the remaining 33% stake in Hulu.
The companies have an agreement in place whereby Comcast has the option to sell its 33% stake in Hulu to Disney in 2024 at a price no less than $27.5 billion. Disney would like to expedite that transaction in an effort to meld Hulu within the Disney+ ecosystem, according to CEO Bob Chapek.
Speaking Sept. 14 at the Goldman Sachs + Technology confab in San Francisco, Chapek said that when the opportunity comes in 2024 to acquire NBCUniversal’s Hulu stake, there will also be an opening to combine the streaming platforms.
Hulu ended the most-recent fiscal period with 42.2 million subscribers, while Disney+ ended the period with 152.1 million.
Specifically, Chapek contends that without full ownership of Hulu, combining the platform with Disney+ is not an option.
“We would love to get to the endpoint earlier, but that obviously takes some level of propensity on [Comcast] to have reasonable [fiscal acquisition] terms to get there,” he said. “And if we can get there, I would be more than happy to try and facilitate [a Disney+/Hulu combination].”
The executive said the company is getting hands-on experience combining diverse content within the Disney+ brand as evidenced by the melding of the Indian-based Hotstar streaming platform with Disney+, as well offering general entertainment in Europe through the Star platform.
“We’re going to have a lot of experience integrating Disney general entertainment into a Disney+ integrated hard bundle,” Chapek said, adding that the combination would revolve around giving consumers more content choices on the Disney+ platform.
The CEO contends the biggest content growth areas for Disney+ revolve around general entertainment, not just family-based fare.
“It’s only natural if you have some young kids and its 8 o’clock at night and you’ve just watched Dumbo, chances are you are not going to want to watch Pinocchio right after that,” Chapek said, adding that content options for older viewers across the Disney spectrum are fragmented and need to be consolidated.
“I’m amazed every day on this job how elastic the Disney brand is, and that we have had no blowback whatsoever in terms of including that general entertainment content on a Disney-branded streaming proposition,” he said.
Based on the success of the Hulu ad-supported subscription streaming tier, Chapek has high confidence Disney can replicate the revenue growth when it launches an ad-supported Disney+ subscription tier on Dec. 8.
“We expect that our ad-driven business will be margin neutral at worst to the full-priced, non-ad version,” he said. “I think this just puts wind in our sails in terms of being able to achieve that. So, we are very optimistic.”
When asked about the pending 38% price hike for the non-ad Disney+ tier and the fact that the ad-supported option will be priced at the current $7.99 Disney+ rate without ads, Chapek contends that when the platform launched in 2019, it was significantly undervalued.
“I think everyone in the room would acknowledge that the launch of Disney+ at that introductory [$4.99] price was pretty absurd,” he said, adding those ongoing investments in Disney+ from both a technology aspect as well content, support price hikes.
“I think we have a lot of room on the price value range, and we believe our churn implications of taking up the price even in the big chunks that we’re doing, is going to be negligible,” he said. “Again, I think it is what the market will bear, which is a direct reflection of price value. And I think we’re way underpriced relative to the value we provide to consumers.”