Disney Will Compete With Sleep (Like Netflix)

Disney's Hulu Deal Is Part of Its Plant To Worry Less About Netflix


Disney has a plan that will help the company worry less about Netflix and more about Netflix’s “enemy”: sleep. And that plan includes acquiring a streaming business which was controlled like it was a divided city split between several media giants.

Disney will have full “operational control” of Hulu+, which had been jointly owned and controlled by Comcast, Time Warner, and 21st Century Fox* (*the latter of which recently merged with Disney).

Why does Disney care about Hulu+?

From my piece Disney in the Age of Netflix:

“When Disney made the Netflix deal in 2012, it may have been under the mistaken narrative that Netflix was just another distribution platform like cable. It would take nearly 5 years before their late 2017 awakening that the “chill” and binge-watch platform was a rival poised to eclipse their business model.”

Let’s assume that old media bought itself 3 to 5 years via its current model built on creativity and managing talent, atop a vertical money machine...”

Disney circa 2023–2025, for its survival’s sake, must by necessity look like a different kind of business under the surface.

“A tantalizing vision for the 2020s: The potential for a “DisneyFlix” horizontal juggernaut, with A+ content, on demand, not to mention merchandising, theme parks and special invitation only venues is enormous.

Why Hulu being taken over by Disney:

Hulu brings a grownup audience and helps Disney learn about building a streaming service. Via TVRev:

It gives them a place to put all that R-rated content, non-Disney library content, and to create a more adult-oriented originals network that occupies the name mindspace as HBO...It also gives them unfettered access to all of Hulu’s institutional knowledge, everything the team learned (often the hard way) about running a streaming TV service over the years.

Hulu, its 2,000 employees and 25+ million subscribers will join a user-base that is estimated to grow to 60 to 90+ million for Disney+ by 2024.

One interesting detail that makes it less risky for Disney:

Disney expects HULU to burn cash and won’t be profitable until 2023 BUT IT DOESN”T HAVE TO PAY FOR IT UNTIL 2024***.

The details for the cost: ***A $5.8B BILL (AT LEAST) FOR HULU COMES DUE in 2024

Comcast has the option of selling in January 2024 its 33% stake to Disney for no less than $5.8B USD** - even if Hulu ends up as a lemon and Comcast does not contribute more capital to Hulu. (**Hulu’s estimated value is about $15+B, based on AT&T April 2019 sale of its 9.5% stake.)

Long-term Disney investors are enjoying record high prices - there are reasons to expect more.