Disney takes control of Hulu, to enter video streaming market

The Walt Disney Company on Tuesday announced that it will assume full operational control of Hulu, effective immediately, in return for Disney and Comcast entering into a “put/call” agreement regarding NBC Universal’s 33 per cent ownership interest in Hulu.

The agreement, which ascribes a minimum equity value to Hulu of $27.5 billion, allows either company to trigger a sale or purchase of Comcast’s 33 per cent stake to Disney as early as January 2024. Comcast has also agreed to fund Hulu’s recent buyout of AT&T’s 9.5 per cent interest in the company.

Hulu’s fair market value will be assessed by independent experts but Disney has guaranteed a sale price for Comcast that represents a minimum total equity value of Hulu at that time as $27.5 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. 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,” said Robert A Iger, chairman and chief executive officer, The Walt Disney Company, in a statement.

Disney and Comcast have agreed to fund Hulu’s recent purchase of AT&T Inc.’s 9.5% interest in Hulu, pro rata to their current two thirds/one third ownership interests and, going forward, Comcast will have the option but not the obligation to fund its proportionate share of Hulu’s future capital calls and will be diluted if it elects not to fund. Disney has agreed that only $1.5 billion of any year’s capital calls can be funded through further equity investments with any capital in excess of that annual amount being funded by non-diluting debt. Whether Comcast funds its share of those equity capital calls or not, Disney has agreed that Comcast’s ownership interest in Hulu will never be less than 21 per cent such that Comcast is guaranteed to receive at least $5.8 billion under the put/call agreement.

In addition to the put/call agreement, Comcast has agreed with Hulu to extend the Hulu licence of NBC Universal content and the Hulu Live carriage agreement for NBC Universal channels until late 2024 and to distribute Hulu on its Xfinity X1 platform. NBC Universal can terminate most of its content licence agreements with Hulu in three years’ time, and in one year’s time NBC Universal will have the right to exhibit on its own OTT service certain content that it currently licenses exclusively to Hulu in return for reducing the licence fee payable by Hulu.