With Sky Auction Done, Where Will Hulu Land?

Analysts speculate streamer could find home at Disney or Comcast
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Following last weekend’s auction in the U.K. that saw Comcast beat out 21st Century Fox for the remaining 61% stake in satellite-TV company Sky (see Agenda), speculation immediately began focusing on the fate of jointly owned streaming platform Hulu.

The Handmaid's Tale (resizedj)_0.jpg

Hulu's The Handmaid's Tale

Citing unnamed Comcast sources, CNBC reported that the cable company is willing to discuss a sale of its 30% stake in Hulu to The Walt Disney Co., which will control 60% of the streaming platform once it closes on its $71.3 billion purchase of 21st Century Fox’s entertainment studio and cable-network assets.

“The seemingly logical play here would be for Disney to buy out Comcast and AT&T and use Hulu as the base for their upcoming app geared to the 18-and-older market, folding ESPN+ into it as well, to create a more compelling offering,” wrote analyst Alan Wolk, co-founder of TV[R]EV.

For his part, Wolk suggested the conventional wisdom might actually be twisted — he thinks Comcast might be the company that ends up taking control of Hulu.

“Disney already has two OTT app products it needs to figure out (three, if you count ESPN+), but Comcast has none,” Wolk said. “They desperately need one, given the head start that both CBS and Disney have on them in that department. Hulu could be that app.”

Prior to Disney’s closing of its Fox purchase, Hulu is jointly owned by Disney, Fox and Comcast, which each control 30% of the venture. AT&T’s WarnerMedia division owns the remaining 10%.

According to the CNBC report, the business network’s parent company, Comcast, has little interest in continuing to partner on a joint venture for which it will have no control.

Hulu certainly isn’t cheap for any of its partners to run right now. Comcast made news in August by disclosing in a Securities & Exchange Commission filing that it lost $107 million on Hulu in just the second quarter. Hulu has said it has more than 20 million subscribers, more than 1 million of which get the Hulu With Live TV package.

Disney has an asset Comcast covets — the 39% of Sky that Comcast doesn’t control, just bequeathed to Disney by Fox.

However, as Wolk noted, Disney’s bigger incentive right now is to generate cash and pay down debt associated with its expensive Fox purchase. Buying more digital assets might not be part of its plan.

Further, there’s confusion as to how Disney will manage multiple OTT platforms.

In earlier investor events, Disney chief executive Bob Iger has said that the new OTT platforms currently being developed by Disney will be separate from Hulu.

What will be the differentiator between Disney’s adult-targeted app and Hulu, Wolk wondered?

“Will Hulu, as some have suggested, be the home of shows that are off-brand for Disney, like The Handmaid’s Tale and much of FX’s current programming? (e.g., Mayans M.C.),” Wolk asked. “Will it be a way for Disney to get into the vMVPD game (Hulu Live TV already has over 1 million subscribers, myself included) and use that as part of a bundle with the new OTT apps and ESPN+?”

Owning a range of cable networks, including Syfy, Oxygen, Bravo, USA Network, CNBC and NBCSN, not to mention broadcast networks NBC and Telemundo, Wolk said Comcast is the more logical home for Hulu. “That’s a lot of diverse programming that Hulu can draw from, especially if it’s bundled with Hulu Live TV,” he added.

Notably, Comcast had been forced to act as a silent partner on Hulu as a regulatory condition tied to its 2011 purchase of NBCU. With that condition having sunsetted, Comcast appointed three executives to Hulu’s board in September — Universal Filmed Entertainment Group chairman Jeff Shell, NBCU advertising and client partnerships chairman Linda Yaccarino and NBCU content distribution chairman Matt Bond.

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