Bob Iger signals a change in Disney Hulu strategy

Disney CEO Bob Iger’s apparent openness to selling Hulu marks a dramatic shift in the company’s strategy – and an even more surprising shift if Iger sells the streaming service. Comcast.

Iger said in an exclusive CNBC interview with David Faber Thursday that “everything is decided” regarding the future of Hulu.

“We intend to reduce our debt,” Iger said. “I was talking about the non-differentiation of conventional entertainment. I’m not going to speculate whether we are their buyer or seller. But what worries me is the lack of differentiation in common entertainment. We will look at it very objectively. .”

Disney currently owns 66% of Hulu and Comcast owns the rest. The two companies entered into a deal in 2019 whereby Comcast could force Disney to buy (or Disney could require Comcast to sell) the remaining 33% in January 2024, with a guaranteed minimum total equity value of $27.5 billion, or about 9. $2 billion per share. .

Just five months ago, then-Disney CEO Bob Chapek said he’d like to own all of Hulu “tomorrow” if he could. Čapek’s strategy was to eventually link Hulu with Disney+ to give consumers “hard beam”, in which viewers could watch programs from both family-friendly Disney+ and adult-oriented Hulu. Comcast’s stake in Hulu prevented Disney from realizing its plans.

“I would like nothing more than to find a solution for an early agreement,” Chapek said in a September interview with CNBC. “But it takes two sides to come up with something mutually acceptable.”

Watch the full CNBC interview with Disney CEO Bob Chapek.

In 2021, Chapek had a conversation with Comcast CEO Brian Roberts to try to expedite the sale of Hulu, according to people familiar with the matter. Roberts came up with a number of possible ideas, including selling Disney ESPN to Comcast, said the people, who asked not to be named because the discussions were private. According to people, since then there have been no substantive conversations.

Despite shrinking pay TV subscriber bases, ESPN and many cable networks are still making big profits, which Disney didn’t want to give up, especially as it helps fund the streaming business, people said. Iger said this week that while a spinoff was being considered in his absence, it was decided that ESPN should stay with Disney. He said there was no talk of a sale.

Another offer made by Disney was for Comcast to buy out Hulu. Comcast executives believe Hulu can outdo its streaming efforts beyond Peacock, the company’s flagship streaming service, according to people familiar with the matter. People say they stay open to a lot of possibilities with Hulu. Peacock has about 20 million paying subscribers. Hulu has about 48 million subscribers. Both services are only available in the US and within the US.

Representatives for Comcast and Disney declined to comment.

Comcast executives balked at those discussions, resigned to the fact that in 2024 they will get Disney money rather than full ownership of Hulu, CNBC reported in September.

Eiger change

These circumstances may have changed with Aiger’s return. Perhaps Iger’s comments on Thursday were just posturing. The threat of being a seller of Hulu rather than a buyer could lower the price of the streaming asset, which Disney would need if it did buy a 33% stake from Comcast.

Iger has previously championed Hulu as part of Disney’s strategy to offer three relatively inexpensive services (Disney+, Hulu and ESPN+) rather than a single mega product that would likely be the most expensive streaming service. He believed that giving subscribers too much content in one product could lead to what happened with cable television: consumers begin to feel like they’re paying too much money for content they don’t watch.

Selling Hulu would undermine that strategy and could also lead to the cancellation of Disney+ and ESPN+. Disney promoted their three-pack for $12.99 per month (with ads). That’s roughly a 50% discount if you buy the three services separately, which will cost you almost $26.

However, publicly admitting that Disney may be selling Hulu is a bold move. This puts Hulu employees on high alert and adds uncertainty to Iger’s own company. Eiger’s comments could also be designed to elicit a reaction from shareholders.

Competitive dynamics

Iger’s comment for Hulu also defies one of his longstanding edicts: not to reinforce Comcast at Disney’s behest.

When Iger acquired most of Fox’s assets for $71 billion in 2019, one of his main motivating factors was to make sure Comcast didn’t take a majority stake in Hulu. Activist investor Nelson Peltz, who abandoned his fight for a seat on the Disney board of directors on Thursday, was argue that Iger dramatically overpaid for Fox. According to people familiar with his mindset, Iger defended the deal, saying it would strengthen Comcast and weaken Disney in the streaming wars.

Competitive tensions between Comcast and Disney are not new. Roberts made a hostile bet to acquire Disney for $54 billion in 2004. Previous NBCUniversal CEO Steve Burke left Disney to work for Roberts in 1998. In the streaming environment, Disney products rob Peacock of attention and subscription revenue, and vice versa.

Still, Iger and Roberts have a strong working relationship, according to people familiar with the matter. Iger even performed at an NBCUniversal internal event last year.

The two companies will need to work closely together to reach an agreement on any solution for Hulu. Even if Disney buys the remaining Hulu stake, the parties must agree on a fair market value. Eiger’s comments on Thursday could be the starting point for negotiations that could drag on for months.

WATCH: Watch the full CNBC interview with Disney CEO Bob Iger

Watch the full CNBC interview with Disney CEO Bob Iger

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

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