Disney to Assume Full Operational Control of Hulu

Comcast's NBCUniversal is staying invested in the streaming service but can require Disney to buy its stake in 2024.

Disney is taking over full control of Hulu.

The majority owner of Hulu said Tuesday morning that it has entered into an agreement with Comcast that will allow it to be the controlling shareholder of the streaming service. As part of the agreement, Comcast can require Disney to buy NBCUniversal's interest in Hulu as early as January 2024.

Disney has guaranteed a sale price that would value Hulu at no less than $27.5 billion. That means NBCU's stake would be worth at least $9 billion.

"Hulu represents the best of television with its incredible array of award-winning original content, rich library of popular series and movies, and live TV offerings," Disney CEO Bob Iger said in a statement. "We are now able to completely integrate Hulu into our direct-to-consumer business and leverage the full power of the Walt Disney Company’s brands and creative engines to make the service even more compelling and a greater value for consumers."

In a statement, NBCU CEO Steve Burke called the deal "a perfect outcome" for the company. He added, "Significantly, this transaction also affirms the value of our stake, provides a path to liquidity and ensures our continued equity participation in Hulu's success."

The deal spells the end of a long, complex corporate history for Hulu, which launched in 2008 as a joint venture of News Corp. and NBC Universal. Disney didn't buy into Hulu until 2009. With Disney's acquisition of the Fox assets earlier this year, it became the major owner of Hulu. But because NBCU was a founding stakeholder, it retained certain control over major decisions about the fundamentals of the business. It also held three board seats that will be vacated as part of this new deal with Disney.

Now, Disney and Comcast have laid out a path for the future of their ownership in Hulu. Through the deal, Comcast can remain an owner for another five years, during which time it is expected to launch a stand-alone ad-supported streaming service. Disney, meanwhile, can now invest in the future of Hulu unencumbered, likely bundling the service with its other direct-to-consumer offerings and staging an international expansion.

Iger, speaking at the MoffettNathanson Media & Communications Summit on Tuesday morning, said that the deal would allow Disney to truly make Hulu the third prong in its direct-to-consumer strategy, which includes ESPN+ and soon-to-launch Disney+. The plan, per Iger, is to integrate Hulu into Disney's ad sales operations and technology infrastructure, which will give Disney the ability to bundle the three platforms for consumers. He also suggested that content not available on family-friendly Disney+ from Fox's film and TV studios, FX and ABC News would be a fit for the Hulu platform. Hulu, he explained, gives Disney "a lot of advantages and something really important to us in terms of the direction we are taking the company."

Hulu, which relies heavily on next-day and library programming from a number of networks, has a new deal to license NBCU programming for both its on-demand and live services through late 2024. But NBCU can terminate most of its content licensing agreements with Hulu in three years. And after NBCU launches its own streaming service, it has the right to stream programming it currently licenses exclusively to Hulu on that offering in exchange for reducing Hulu's license fee.

"We believe strongly in the direct-to-consumer space and our content is a key driver of that ecosystem," Burke also noted in his statement. "The extension of the content-licensing agreement will generate significant cash flow for us, while giving us maximum flexibility to program and distribute to our own direct-to-consumer platform, as we build that business."

Hulu has seen a lot of change to its ownership over the last few months. Following Disney's acquisition of the Fox interest, AT&T announced that it was selling its nearly 10 percent stake back to Hulu in a deal that valued the streamer at $15 billion. Disney and Comcast have agreed to fund that buyback proportionate to their current stakes, meaning that Disney now owns 67 percent of Hulu and Comcast owns 33 percent. In the future, Comcast will have the option, but will not be obligated, to fund its share of future Hulu investments. If it does not, its share will be diluted.

Comcast CFO Michael Cavanagh, speaking at the J.P. Morgan Global Technology, Media and Communications Conference in Boston on Tuesday morning, called the deal "good for both parties, because neither side had to do this deal." He added, "We didn't want to be sellers at today's price" of $15 billion.

May 14, 6:55 a.m. Updated with Bob Iger's statement.

May 14, 8:15 a.m. Updated with additional comments from Steve Burke and Michael Cavanagh.

May 14, 8:53 a.m. Updated with additional comments from Iger.