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Disney Takes Control of HULU Tuesday

Posted Tuesday, May 14, 2019 - 11:02 am

(CNS) – The Walt Disney Co. took over operational control of Hulu Tuesday.

A part of the deal, Disney and Comcast Corp. entered into a put/call agreement regarding NBCUniversal’s 33% ownership interest in Hulu. Under the put/call agreement, Comcast can require Disney as early as January 2024 to buy NBCUniversal’s interest in Hulu and Disney can require NBCUniversal to sell that interest to Disney for its fair market value at that future time.

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 of $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 Disney Chairman and Chief Executive Officer Robert A. Iger.

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%, such that Comcast is guaranteed to receive at least $5.8 billion under the put/call agreement.

Comcast also agreed with Hulu to extend the Hulu license of NBCUniversal content and the Hulu Live carriage agreement for NBCUniversal channels until late 2024 and to distribute Hulu on its Xfinity X1 platform. NBCUniversal can terminate most of its content license agreements with Hulu in three years’ time, and in one year’s time NBCUniversal 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 license fee payable by Hulu.

The Disney-Compact deal reflects how much streaming video has changed in the last few years. Hulu was at one time a joint venture between Disney, 21st Century Fox, Comcast’s NBCUniversal and Time Warner, now WarnerMedia. None of those companies had majority control.

Now Hulu is effectively a Disney product. The company became the majority stakeholder in the streaming video service after it closed a deal for most of Fox’s assets in March. Last month, WarnerMedia — now owned by AT&T — agreed to sell its 9.5% interest back to Hulu.

CNS-05-14-2019 09:14

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