Dec 5, 2022
Would Comcast Want To Buy Hulu?
Hulu has sort of been in a weird place for the past several years. Originally, as one of the first streaming services, its brand was known for being the single place for watching television on the internet. This was facilitated through ownership from the top media companies in the service. Disney, 20th Century Fox, NBCUniversal, and Warner all had a stake in the company and had deals in place for both their networks and others that made Hulu a great service for TV viewers. But as streaming competition grew, and media companies began forming their own services or simply discontinuing deals like Viacom to keep its cable operators happy, several media companies began forming deals outside of Hulu, and Warner eventually sold its stake. Disney bought Fox, which meant it became a 66% owner in the company with NBCU left as the minority owner.
And Disney seemed intent on buying out the rest of Hulu with a deal signed in 2019 that it could buy out the rest of Comcast’s ownership by 2024. While the service still has deals in place with many outside networks for shows and movies, it’s largely the home of the Disney-owned content that doesn’t necessarily fit into the silos on Disney+, like ABC, a few other former-Fox properties, and some R-rated stuff. It also has a decent viewer base of nearly 50 million subscribers, with an AVOD for lucrative ad-dollars and is the top vMVPD with Hulu + Live TV. Plus, the service has great brand recognition among streaming viewers making it a very valuable service.
The problem is the partial NBCU, or Comcast, ownership. Hulu has seen some original programming, but not to the degree seen on Disney+, HBO Max, and especially not Netflix. Only Murders in the Building has been an incredibly popular show, but beyond that, the service has sporadically released shows and movies, with many not catching much hype. It doesn’t seem like Disney wants to grow the Hulu service very much, primarily because to buy-out Comcast, they need to agree on the value of the service. More original content will drive up the price of their stake, which Comcast would very much want. For both companies, Hulu is a great asset. As stated above, the brand is strong, so is the subscriber base, and it has a great number of shows and movies. If Disney bought all of Hulu, it might make a lot of sense to roll the programming into Disney+, which would benefit from the greater variety of programming on Hulu, although I would imagine Disney has little interest in being a vMVPD.
Despite the deal in place, Comcast CEO Brian Roberts and NBCU CEO Jeff Shell have both publicly expressed interest in acquiring Hulu. Initially I was under the impression that this was simply to raise Disney’s buy-out price they’d have to send to Comcast, but there’s likely more interest from Comcast for Hulu than I originally thought. First off, I was under the impression that Peacock was in a better position; recent numbers reveal that Peacock has 18 million subscribers, and 30 million active users. While Peacock has had a rough start being the only new service not based on an existing one (Paramount+ was CBS All Access which started in 2014, HBO Max was HBO, and while Disney+ was new, it’s Disney), I had higher estimates for the service than what has so far materialized.
The other issue is the amount of money being poured into the service. NBCU bought the exclusive rights to Yellowstone, one of the biggest shows on TV right now. It bought the rights to the WWE Network. It is the exclusive home to Bravo and NBC shows which no longer appear on Hulu. And recently, they announced the linear feeds of the Hallmark channels were added to their service. All these deals could not have been cheap, yet Peacock is still the least subscribed service of the top conglomerates.
And Disney’s streaming business isn’t in great shape. Disney+, which is one of the most subscribed streaming services, lost over a billion dollars in the most recent quarter. It’s certainly not alone in having a streaming service that isn’t profitable, but Disney promised shareholders it would break even in 2024, and that seems to be very unlikely. While it helps Disney’s subscriber numbers and subscription income to have three separate streaming services (Disney+, Hulu, and ESPN+), Hulu is still another service that Disney is on the hook for content development, app development, ad sales, marketing, and all the other expenses associated with running a streaming service. Sure, there’s money to be made, but there’s also a lot of money that needs to be spent. And with Disney’s former and current CEO Bob Iger announcing the company with be making no new acquisitions, selling off Hulu and not paying off Comcast would be a great way to reach that goal.
Not to mention Disney+ has already proven that it can be more than just a family-friendly service. When Disney+ first released, I assumed Disney+ would be the home for PG, and at most PG-13, content, and Hulu would serve as their HBO, where the more adult-oriented content, R-rated Marvel, and eventually Fox stuff would live. Disney had had a history of not associating the mouse brand with non-family-friendly things, which is why Touchstone Pictures was created. That sort of sits in the back of my mind that Disney is a bit more guarded about their brand, but with the success of the Pirates of the Carribean movies being PG-13, I think that ended that. Plus, with The Beatles documentary, The Simpsons, and more R-rated content appearing on Disney+, I don’t think anyone really minds. And look at the Disney-owned content on Hulu. It’s the Hulu originals, ABC, FX, and a few odds and ends from the Fox-owned library. That could all fit within an ABC and FX-themed hub on Disney+ and they could easily and justifiably charge more for Disney+ with all of it.
However, Comcast has far more to gain from a full Hulu ownership than Disney. First off, if they merge Peacock into Hulu, they’ll go from 18 million to at least nearly 50 million. Disney+ has over 100 million subscribers and a greater brand recognition which equals greater retention than Hulu for Disney. Plus, I would imagine there’s a lot of overlapping customers for Disney+ and Hulu, so there probably isn’t much for Disney to gain with the numbers. Second, Comcast’s single service would get all the deals in place on Peacock as well as Hulu, the latter of which has a decent amount in place. Third, I would imagine Comcast would very much like a vMVPD for its Xfinity brand, and Hulu + Live TV would make Comcast the top MVPD and vMVPD. Maybe that’s not so good for consumers, but pay TV isn’t exactly consumer friendly to begin with, and it doesn’t remove a service in the marketplace. Hulu + Live TV customers may even get more channels out of the deal as Comcast has more deals in place. Plus, I would imagine Disney would prefer to be on the content side of pay TV rather than the operator end (carriage fee negotiations are only fun for one side). And Hulu charges more than Peacock, so it can instantly charge more for its new acquisition, something Disney could get away with regardless because they’re Disney. Not to mention, it would eliminate one service (likely the Peacock name) from the competition. While less isn’t generally the best for consumers, it would certainly keep the retention for Hulu higher seeing as there’s one less service for consumers to pay for, and subscription fatigue is a real concern.
We know that NBCUniversal intends to be all in on streaming being the future. CEO Jeff Shell has even spoken about being indifferent on if shows air on linear or streaming, which is more than other companies can say. Comcast certainly has the cash to spend, so I don’t think it’s too far off that they would want to acquire all of Hulu, if it can pass regulatory approval. Again, as far as competition goes, consolidation is rarely a good thing, but in this case, combining two services with no real identities and removing a paid service at a time where people are less likely to want to spend on another service might not be so bad. Hulu is only known for being one of the first services, and Peacock is only known for its funny name. If Disney is having a financial struggle with streaming anyway, why not just hand the keys to Comcast for tens of billions of dollars?
