Disney Fiscal Q3 Reaction: The Case for Keeping Hulu
Everyone is always so focused on Disney’s flagship streaming service Disney+, but what about Hulu?
Following Disney’s fiscal Q3 earnings conference call Wednesday afternoon, Hulu’s position in Disney’s long-term streaming plan remained blurry.
Hulu does well. Not only has it more than doubled its subscribers since 2018, its current 46.2 million subscribers make more money per sub than Disney+ and ESPN+. Average revenue per user (ARPU) for Hulu SVOD fell slightly to $12.92 from $13.15 in the year-ago period. Still, that is significantly higher than domestic Disney+ ARPU of just $6.27 last quarter.
Disney has had a majority stake and full operational control of the general entertainment platform since 2019. Comcast still maintains its 33% stake until January 2024 when it can force Disney to buy out the remaining stake for a minimum valuation of $27.5 billion. That guarantees at least a $9 billion check to Comcast, and depending on the market value of Hulu at that time, the check could be larger.
Hulu is an OG in the streaming world. It’s been around since 2008, right around the time that Netflix began shifting from DVDs to streaming. In that time, Hulu developed brand recognition and value. However, its identity among the streaming services has begun to wane.
Part of that is because its identity at Disney has been confusing, and a lot of changes are coming this fall. ABC hit show “Dancing with the Stars,” which was available on Hulu after it aired on TV, will be exclusively available on Disney+. On top of that, Comcast will be pulling its 2022 and 2023 broadcast and cable lineup from Hulu, which include popular shows like “Saturday Night Live” and “The Voice.” Further proof that Comcast is more focused on its streaming service Peacock than it is on making licensing revenue from Hulu.
Hulu is still an integral part of the Disney bundle. And the newly announced price increases and bundling options sort of implies that Hulu is still an important aspect of Disney’s DTC strategy. Not to mention the billions in ad revenue the service generates. According to CFO Christine McCarthy, two-thirds of Hulu users are subscribed to the ad tier.
It’s definitely in Disney’s interest to keep Hulu, as we approach the January 2024 deadline. But the lower Hulu’s valuation, the smaller the check it has to write to Comcast. So why not just buy the rest of Comcast’s stake now when Hulu’s valuation is probably much lower than it was about a year ago?
Disney might as well speed up the process and consider eventually merging Disney+ and Hulu into one service, at least here in the U.S. After all, wouldn’t it make more sense to streamline everything into one destination? One place to get all of your beloved Disney franchise content as well as general entertainment. Then there’s always international expansion opportunities, too. If done well, that would be a real threat in the streaming space.
