News Disney and Fox come to terms -- announcement soon; huge IP acquisition

[Rodan75]

I think we also possibly underestimated that maybe Disney wants Comcast as a partner in Hulu for the short/medium-term at least:

Yes both companies compete vigorously in all content areas, but Hulu is currently burning through cash and in the short term having NBC's content helps sell the service. Maybe when Hulu is more stable in terms of cash flows, we'll see a deal on Hulu. (Or they may just may just make a deal over the next 12-15 months).


Also, even though Disney is taking 60% of Hulu, Hulu's setup gives Comcast a lot of protections: NBC has carriage deals for its content that typically give about as much money to Comcast as Hulu's loses (i.e. from one pocket to the other), and Comcast has 3 board seats on Hulu and some say in how Hulu is run.

So I don't necessarily think that Comcast minds being a junior partner while Hulu is losing a significant amount of money per year. At best it just means that Disney will be giving 2x as much to cover Hulu's losses as Comcast while Hulu is unprofitable.

I think this is a good alternative take. I wonder if they can change the board rules with Disney having control though...currently everyone on the board has the ability to stop any new programming or strategy decision. It isn't a simple majority. That is the weirdness of the current board make up.

 

[Indy_UK]

So do we feel Disney are doing all the right things? Get Fox to sell the 39% and bring their cost of Fox down?

Hopefully Comcast will show good faith and allow Disney any rights they want from Comcast

 

[AnotherDayAnotherDollar]

I think this is a good alternative take. I wonder if they can change the board rules with Disney having control though...currently everyone on the board has the ability to stop any new programming or strategy decision. It isn't a simple majority. That is the weirdness of the current board make up.

This is a good point. AFAIK any voting member (9 total, ATT is not a voting member IIRC) can block any content creation or strategy decision.

Disney said today,

"Disney will expand its considerable investment in the Disney-branded direct-to-consumer offering launching in late 2019 and the new ESPN+ sports streaming service, and will seek to increase investment in Hulu's content offerings and international distribution. Disney and 21st Century Fox each currently hold 30% stakes in Hulu," the company said.

Unless my understanding is wrong and all they require is a simple majority then they won't be able to increase content and especially expand internationally. Imagine the board going, allright let's expand Hulu to the EU starting with the UK. I see 3 nays right away and that will be that.

 

[bartholomr4]

This is a good point. AFAIK any voting member (9 total, ATT is not a voting member IIRC) can block any content creation or strategy decision.

Disney said today,

Unless my understanding is wrong and all they require is a simple majority then they won't be able to increase content and especially expand internationally. Imagine the board going, allright let's expand Hulu to the EU starting with the UK. I see 3 nays right away and that will be that.

Can anyone point me to the Hulu ownership agreement, or board of directors voting procedures?

 

[happycamperuni]

I think this is a good alternative take. I wonder if they can change the board rules with Disney having control though...currently everyone on the board has the ability to stop any new programming or strategy decision. It isn't a simple majority. That is the weirdness of the current board make up.

Yeah, this whole thing was why many in the media/tech industries were so skeptical of Hulu in the beginning (and why Disney/Fox/Comcast almost cashed out early and off-loaded it back when it only had a few million subscribers).

Granted Hulu has come a long way and is now a pretty legitimate streaming option in the US with 20+ million subscribers for its main streaming product and over 1 million for Live TV.

@bartholomr4
I don't believe it's ever been made public, just stated by media/telecom analysts that Hulu needs unanimous board approval for major decisions (like launching into new markets).

 

[AnotherDayAnotherDollar]

Yeah, no one here has seen the contract or anything like that. It's just been reported that it's rather limited. That's why Hulu has struggled so much.

https://www.wsj.com/articles/hulus-fate-hinges-on-outcome-of-fox-bidding-war-1530193930

"The loser between Disney and Comcast, each of whom also own 30% of Hulu, will be a large minority owner, which could lead to tense moments in discussions over the streaming service's financing and content. The minority player will wield some power on the board, because Hulu has depended on its corporate parents to supply prime-time network programming and finance a business with increasing losses that totaled $920 million last year

The controlling and minority partners will still have to agree on how much money to spend on original programming and its live TV-streaming service and whether to expand overseas to keep up with Netflix Inc."

The wording from Disney today was also telling.

"Disney will expand its considerable investment in the Disney-branded direct-to-consumer offering launching in late 2019 and the new ESPN+ sports streaming service" - That suggests they are doing it.

"and will seek to increase investment in Hulu's content offerings and international distribution." - That suggests they will seek to do those things either by convincing or buying out Comcast's share because right now Comcast can block it.

 

[bartholomr4]

Yeah, this whole thing was why many in the media/tech industries were so skeptical of Hulu in the beginning (and why Disney/Fox/Comcast almost cashed out early and off-loaded it back when it only had a few million subscribers).

Granted Hulu has come a long way and is now a pretty legitimate streaming option in the US with 20+ million subscribers for its main streaming product and over 1 million for Live TV.

@bartholomr4
I don't believe it's ever been made public, just stated by media/telecom analysts that Hulu needs unanimous board approval for major decisions (like launching into new markets).

Ya... I tried to find it but couldn't find anything about the arrangement between the Hulu Partners. I did see overtime, that the % of Hulu Owned by individual partners changed a great deal. At one time I read an article, where the author has Disney owning 22%, another article later had them owning 27% and then right before the AT&T purchase Disney owned 34%...... I wonder if the way the firm raises money is by getting infusions from its owners who are given more or less equity as a result..... If true, Disney's ownership could naturally grow (so could AT&T's or Comcast) if they contribute more to the partnership to cover the ongoing losses the firm is racking up...... Just a thought.

 

[happycamperuni]

Yeah, no one here has seen the contract or anything like that. It's just been reported that it's rather limited. That's why Hulu has struggled so much.

https://www.wsj.com/articles/hulus-fate-hinges-on-outcome-of-fox-bidding-war-1530193930



The wording from Disney today was also telling.

"Disney will expand its considerable investment in the Disney-branded direct-to-consumer offering launching in late 2019 and the new ESPN+ sports streaming service" - That suggests they are doing it.

"and will seek to increase investment in Hulu's content offerings and international distribution." - That suggests they will seek to do those things either by convincing or buying out Comcast's share because right now Comcast can block it.

I think there's room for compromise here, and Comcast getting 100% of Sky may actually help pave the road for Hulu to go international:

Disney is going to want to create bundles for Hulu in the US, while Comcast is going to want to protect Sky's PayTV and streaming services in Europe. There's room for something to be worked out where Hulu is sold separately in Europe with the only bundling being provided through Disney's OTT services or Sky's OTT services.

Outside of Europe, I don't think Comcast will care too much. Sky needs a lot of work in markets like Germany/Italy (which may require further mergers/acquisitions by Comcast), so Comcast is really not going to care much about Hulu expanding into the rest of the Americas (minus US) or Asia or other markets.

Comcast is likely to have its hands full working on acquiring cable/fiber systems across Europe to merge with Sky to strengthen its operations (as Sky has done in the UK but not in mainland Europe). That will likely take billions in capital for Comcast and be its primary focus.

 

[Crossfire]

Interesting, seems like Disney plans to expand Hulu to other countries.

 

[JoeCamel]

So someone do quick math that knows the actual numbers. With the assumption of this sale for cash only, and if the RSNs sold for (lets say 15 billion for arguments sake, since someone said 15 to 20 billion), what is the final "pricetag" that they paid for what is left of Fox.

About 15 billion more than they wanted to pay....

 

[Quinnmac000]

Hulu is already in Japan however it’s licensed to another company.

Biggest issue for Hulu is international rights for a lot of popular shows are already licensed out to other Entities and they will have to wait for the rights to revert

 

[BrianLo]

Well look at that! It was money after all.

I'm not saying Disney, with 30 less billion of debt won't do a little shopping from Comcast coffers. But money is the leverage, not the resource itself.

 

[bartholomr4]

Comcast said Thursday that it has increased its stake in Sky and welcomed the withdrawal of 21st Century Fox competing bid, after winning a bidding war for the British media group with a $38.8-billion offer.

The U.S. cable giant said it now holds a 37.72% stake in Sky. Comcast has bought a total of 648.6 million shares in Sky at 17.28 pounds ($22.72), the same price as its final bid in the auction for the pay-TV company that British regulators held between Comcast and Fox, which was backed by Walt Disney.

Comcast said it welcomes Wednesday's announcement that Fox intends to withdraw its offer for Sky. Fox said it would sell its 39% stake to Comcast at the offer price, valuing its interest at over $15 billion. News Corp, Dow Jones's parent company, and Fox have common ownership.

Comcast said it doesn't currently intend to make any further market purchases of Sky shares and urged shareholders to accept its offer.

 

[Indy_UK]

Makes sense. Comcast will have over 60% of the shares after taking on Fox's. I guess that case is done and dusted. Apparently Comcast want to run SKY separately for the time being but we'll see what changes if anything.

Maybe keeping Comcast on board with Hulu does help with content and the losses it's happening.

I like that they are just heavily investing in original content for the streaming service. That's what's going to get people to sign up.

 

[bartholomr4]

Really great article by Forbes (informative) about Hulu and what's next for them?

https://t.co/O03lQeIrSD

Suggests Comcast may be more interested in Hulu than Disney.

The Comcast Angle

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

NBCU has a lot of content because NBCU owns a lot of networks. (What they actually have rights to is another story, but for purposes of this argument, let’s assume they have rights to a lot of what they show.) SyFy, Oxygen, Bravo, Telemundo, USA Network and Cloo are all NBCU channels, along with CNBC, MSNBC, NBC and NBC Sports. Then there's Universal Kids (formerly known as Sprout) and, of course, Universal Pictures, which also includes DreamWorks.

That’s a lot of diverse programming that Hulu can draw from, especially if it’s bundled with Hulu Live TV.
And that’s not even the main reason Hulu makes so much sense for Comcast.

No, the main reason is that Comcast is one of the nation’s premier providers of broadband internet with more than 25 million customers.
Combine that base with a solid vMVPD offering (and Hulu Live TV is very solid), throw in double play (TV + broadband) packages to increase stickiness along with high quality original programming like Handmaid’s Tale and Castle Rock, and you’ve got what could be a very winning combination.

The sort of very winning combination you could, if you wanted, move to Europe and combine with Now TV (Sky’s existing vMVPD) to create an even stronger offering. One that could offer up a real challenge to Netflix. So there’s all of that, and it’s pretty compelling, especially if you're got global ambitions.

The real question then, is where is Disney’s head at in terms of this whole equation? Are they thinking that letting Comcast have Hulu could turn them into a serious threat? Or are they thinking that letting Comcast pay billions for Hulu could seriously help resolve their cash flow issues?

Either is possible, along with some combination of the two, but the ultimate fate of Hulu will be the final and most important twist to what is already one of the industry’s biggest and most unpredictable stories."

 

[mikejs78]

Really great article by Forbes (informative) about Hulu and what's next for them?

https://t.co/O03lQeIrSD

Suggests Comcast may be more interested in Hulu than Disney.

The Comcast Angle

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

NBCU has a lot of content because NBCU owns a lot of networks. (What they actually have rights to is another story, but for purposes of this argument, let’s assume they have rights to a lot of what they show.) SyFy, Oxygen, Bravo, Telemundo, USA Network and Cloo are all NBCU channels, along with CNBC, MSNBC, NBC and NBC Sports. Then there's Universal Kids (formerly known as Sprout) and, of course, Universal Pictures, which also includes DreamWorks.

That’s a lot of diverse programming that Hulu can draw from, especially if it’s bundled with Hulu Live TV.
And that’s not even the main reason Hulu makes so much sense for Comcast.

No, the main reason is that Comcast is one of the nation’s premier providers of broadband internet with more than 25 million customers.
Combine that base with a solid vMVPD offering (and Hulu Live TV is very solid), throw in double play (TV + broadband) packages to increase stickiness along with high quality original programming like Handmaid’s Tale and Castle Rock, and you’ve got what could be a very winning combination.

The sort of very winning combination you could, if you wanted, move to Europe and combine with Now TV (Sky’s existing vMVPD) to create an even stronger offering. One that could offer up a real challenge to Netflix. So there’s all of that, and it’s pretty compelling, especially if you're got global ambitions.

The real question then, is where is Disney’s head at in terms of this whole equation? Are they thinking that letting Comcast have Hulu could turn them into a serious threat? Or are they thinking that letting Comcast pay billions for Hulu could seriously help resolve their cash flow issues?

Either is possible, along with some combination of the two, but the ultimate fate of Hulu will be the final and most important twist to what is already one of the industry’s biggest and most unpredictable stories."

This is intriguing. If Disney sells its 60% to Comcast, they could end up in the situation where their purchase of Fox results in very little debt. And I'd wager that Comcast cares a lot more about Hulu than about Marvel rights in the parks, as Hulu goes to bolster it's core business against the disruption of cord cutting. If Disney sells Hulu to Comcast and doesn't get the Marvel rights back, then they don't really want them at all.

My guess is - if this comes to pass - Disney sells Hulu for just under market value, gets the Marvel rights back (but allows Comcast to keep what they have and continue to collect royalties), and walks away with Fox's content without much debt. At the end of the day, that would be a major legacy for Iger, and a really smart deal for TWDC.

 

[Indy_UK]

Surely Disney will want Hulu as that’s where a lot of the Fox content is going isn’t it?

 

[happycamperuni]

I think Disney and Comcast would both want all of Hulu, but Disney having 60% gets them much closer to that than Comcast with 30%.

I also think we should wait and see what Comcast's future strategy for Sky is..., if Comcast wants to build Sky into a European Comcast, then they may need to spend tens of billions on cable systems across Europe (UK/Germany/Austria/Italy/Spain etc.).

In that case, they'll probably want to offload Hulu at some point so they stop paying into Hulu's losses. But it's not really clear yet what Comcast's strategy is, we'll see in the next 12-18 months probably.

 

[bartholomr4]

I think Disney and Comcast would both want all of Hulu, but Disney having 60% gets them much closer to that than Comcast with 30%.

I also think we should wait and see what Comcast's future strategy for Sky is..., if Comcast wants to build Sky into a European Comcast, then they may need to spend tens of billions on cable systems across Europe (UK/Germany/Austria/Italy/Spain etc.).

In that case, they'll probably want to offload Hulu at some point so they stop paying into Hulu's losses. But it's not really clear yet what Comcast's strategy is, we'll see in the next 12-18 months probably.

I don’t know how Virgin Media is in Europe, but I saw an interview with their CEO on Bloomberg talking about how they will react to Sky/Comcast. He said Virgin has 50% market share and their broadband speed is 300 vs Sky at 75 bps. He said Sky/Comcast will have to invest a great deal of money to catch-up. Virgin is about to sell a huge stake they have in another company (which will give them 15 Billion Euros to spend) and will be ratcheting up the pressure on Sky/Comcast.... With Comcast in big debt now (The dog caught the Car but now doesn’t know what to do with it), they are going to have to spend some money on their new trophy.... Will be interesting to watch for sure...

 

[Rodan75]

This is intriguing. If Disney sells its 60% to Comcast, they could end up in the situation where their purchase of Fox results in very little debt. And I'd wager that Comcast cares a lot more about Hulu than about Marvel rights in the parks, as Hulu goes to bolster it's core business against the disruption of cord cutting. If Disney sells Hulu to Comcast and doesn't get the Marvel rights back, then they don't really want them at all.

My guess is - if this comes to pass - Disney sells Hulu for just under market value, gets the Marvel rights back (but allows Comcast to keep what they have and continue to collect royalties), and walks away with Fox's content without much debt. At the end of the day, that would be a major legacy for Iger, and a really smart deal for TWDC.

I find this scenario a little less likely. I can’t imagine that Disney will happily give up a DTCplay with 20M customers.