This morning, Disney (DIS) announced an important deal that gives it more control of its direct-to-consumer (DTC) strategy.
Last month, AT&T (T) sold its 9.5% stake in Hulu to Disney, valuing the streaming leader at $15 bln, giving Disney a two-thirds stake.
Two weeks ago, Hulu announced that it had 28 mln paid subscribers, up 3 mln in just one quarter.
This morning, Comcast (CMCSA) agreed to relinquish control of its 33% stake in Hulu, effective immediately. Comcast still owns 33% of Hulu, but the companies agreed to a put/call arrangement where Disney can acquire Comcast's stake as early as 2024. Disney guaranteed that Hulu would be worth at least $27.5 bln by then, making Comcast's stake worth just over $9 bln.
Comcast will have the option to contribute necessary capital to Hulu in the meantime, and its stake could fall as low as 21% if they choose not to fund the business.
Comcast also extended its license agreement for NBCUniversal content to Hulu through 2024, although it could be terminated in 2022. Comcast secured the right to launch its own streaming service next year including content that exclusively licensed to Hulu currently for a lower fee.
For Disney, this is big news because it now has tons of optionality regarding its DTC strategy.
ESPN+ launched last year -- the supplement to its flagship cable channel that has been losing subscribers. Disney+ will be an instant classic when it launches on November 12 featuring Disney's iconic brands. Hulu is already a big hit among cord-cutters. That means Disney will quickly become a streaming powerhouse.
Total ownership will allow Disney to integrate Hulu and better leverage its best in class intellectual property.
Disney will be able to bundle its three OTT services, share data among them, and even improve ad sales. Importantly, this also opens up international markets for Hulu.
The deal seems like a win-win for both parties, because it allows Disney to go full steam ahead with its direct-to-consumer strategy, while allowing Comcast to pursue its own streaming endeavor but still participating in Hulu's upside over the intermediate term.