Disney/Comcast: tug of war for Hulu ropes in House of Mouse

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For years, Disney and Comcast have been locked in a battle over Hulu. The video streaming service is one of the most popular in the US, with hit shows like The Bear and Only Murders in the Building helping the platform amass over 48mn subscribers. 

That makes it a valuable asset to own in the battle for streaming supremacy, one that has already cost these two a lot of money. Disney which owns two-thirds of Hulu, wants to buy out Comcast’s remaining 33 per cent stake. The move makes sense for both sides. 

Combining Hulu’s more adult-oriented content with Disney+’s family friendly shows would give Disney a stronger product to compete with against Netflix. Comcast, whose own streaming service Peacock has struggled to gain viewers, frankly could use the cash.

Hammering out a price is tricky. Under the original 2019 agreement, both companies agreed that either side could initiate a sale or purchase of all of Hulu from January 2024 at a minimum equity valuation of $27.5bn 

At that level, Disney would have to spend around $9bn to buy Comcast out of Hulu. Boss Bob Iger would be loath to spend more than that, given the sharp drop in valuations for streaming companies over the past two years. Shares in Netflix currently trade at around 55 per cent of their peak in 2021.

Moreover the entertainment giant is stuck with nearly $45bn of debt. Its broadcast and cable TV network business grapples with falling ad revenue and a shrinking subscriber base.

Comcast however believes Hulu is worth much more. Subscriber numbers have increased by 61 per cent since 2019. It argues Disney should pay a premium given the significant potential cost and revenue benefits it could generate from integrating Hulu directly into Disney+.

How much could Hulu be worth? Disney’s streaming services could bring in around $22bn in revenue this year. Hulu probably accounts for about a third of that amount. Its average monthly revenue per paid subscriber is about twice that for Disney+. Using Netflix’s current sales multiple of around 5 times that implies a $33bn valuation for Hulu.

Rumoured asset sales by Disney could help raise the cash to do the deal. An asset swap in the form of a minority stake in ESPN could be another solution. In any tug of war, there can only be one winner. The same applies in the fight for Hulu.