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

[Slpy3270]

Just a side note to above, who has the distribution rights to the first 4 Indy films? I assumed Paramount but would imagine that Disney will want those eventually

Disney made a deal in 2013 where Disney got the rights to future Indiana Jones films and merchandising rights in exchange for Paramount retaining distribution to previous movies in perpetuity and "financial participation" for future Indy films. Given that Disney's already milking Indy for all he's worth the theme parks and are busy with Indy 5 (assuming that Harrison doesn't pass on by then), I don't think those films will be changing hands anytime soon.

 

[Indy_UK]

That maybe why then on Disney+ they are having a Star Wars section rather than Lucasfilm because the older films are unlikely to appear there

 

[Rodan75]

That maybe why then on Disney+ they are having a Star Wars section rather than Lucasfilm because the older films are unlikely to appear there

Paramount is licensing those films to anyone and everyone. So I'm assuming they will be on D+ as well.

 

[AnotherDayAnotherDollar]

Disney made a deal in 2013 where Disney got the rights to future Indiana Jones films and merchandising rights in exchange for Paramount retaining distribution to previous movies in perpetuity and "financial participation" for future Indy films. Given that Disney's already milking Indy for all he's worth the theme parks and are busy with Indy 5 (assuming that Harrison doesn't pass on by then), I don't think those films will be changing hands anytime soon.

Lucas always had the merch rights. The deal was to buy out the RoFR that Paramount had.

Regarding Indy 1-4 it depends if Iger and co feel it's worth to pony up the cash to buy those or not.

That maybe why then on Disney+ they are having a Star Wars section rather than Lucasfilm because the older films are unlikely to appear there

Disney's valuation of Lucas was strictly Star Wars. They did not account for Indy, other franchises they own, LucasArts, ILM, Skywalker Sound and pretty much got those for "free". Star Wars was always going to be its own thing within Disney. George Lucas really sold Lucas for cheap.

 

[happycamperuni]

https://pdl-iphone-cnbc-com.akamaized.net/VCPS/Y2019/M05D15/7000079921/1557930700333-190515SOTSrogersondisney_L.mp4

Interesting Video with Tom Rogers, former Tivo CEO and NBCU executive. He asks a good question as to why Comcast did the deal now. One has to wonder, because he is right, their leverage would do nothing but grow over time.... Wonder if it is the debt they are having to pay down, or their own plans with streaming which does not include a brand like Hulu.....

It's pretty simple, Comcast execs are bearish on the whole streaming ecosystem and wanted to lock in a good price on Hulu in case there was any kind of devaluation in the next couple of years. They see Netflix as trading at bubble valuations and were concerned that possibly Hulu might be as well.

Comcast execs (and NBC execs) have said that they believe streaming is a low margin, high cost proposition. That's why they're focused on an AVOD service where ads will cover the whole cost of video, but they won't be trying as hard as others to make exclusive content and make the service their main money-maker for content distribution.

Only time will tell whether they're right or wrong. Nobody really knows what will happen yet as all these new services come online the next couple of years.

 

[seascape]

It's pretty simple, Comcast execs are bearish on the whole streaming ecosystem and wanted to lock in a good price on Hulu in case there was any kind of devaluation in the next couple of years. They see Netflix as trading at bubble valuations and were concerned that possibly Hulu might be as well.

Comcast execs (and NBC execs) have said that they believe streaming is a low margin, high cost proposition. That's why they're focused on an AVOD service where ads will cover the whole cost of video, but they won't be trying as hard as others to make exclusive content and make the service their main money-maker for content distribution.

Only time will tell whether they're right or wrong. Nobody really knows what will happen yet as all these new services come online the next couple of years.

I completely disagree with you. Comcast is only guaranteed 5.775 billion for their share of Hulu
In order to keep their 33% and get 9 billion, they need to continue to make yearly payments of 500 million to cover shortfalls. If they were really bearish on Hulu, they would have insisted on 5 billion today, after all the 5.775 billion is only 15% above the 5 billion over 4 years and 8 months. That is not a good rate of return.

On the otherhand, putting in the 500 million a year and getting 1/3 of what Hulu will in 2024 after being expanded internationally, they should get at least 1/3 of what Hulu will be worth, which will be in excess of 50 billion or 16.67 billion.

 

[bartholomr4]

I completely disagree with you. Comcast is only guaranteed 5.775 billion for their share of Hulu
In order to keep their 33% and get 9 billion, they need to continue to make yearly payments of 500 million to cover shortfalls. If they were really bearish on Hulu, they would have insisted on 5 billion today, after all the 5.775 billion is only 15% above the 5 billion over 4 years and 8 months. That is not a good rate of return.

On the otherhand, putting in the 500 million a year and getting 1/3 of what Hulu will in 2024 after being expanded internationally, they should get at least 1/3 of what Hulu will be worth, which will be in excess of 50 billion or 16.67 billion.

I would agree with everything but the value of Hulu at $50 billion. The cost (in my opinion) of international expansion will be more than the $1.5 billion equity injection ($1.0 Billion from Disney and 500 million from Comcast), and so I expect Disney to leverage up the Hulu balance sheet with debt. The cost of migrating Hulu to Bam-Tech and enhancing that technical infrastructure will be put on the Hulu cost structure, and then the need to create local content to support the international expansion will also magically find its way to the Hulu books. With the money Netflix is throwing at content creation outside of the US, it wouldn't be a stretch to think Hulu will have to do the same.

Magically, I put the value of Hulu in January 2024 at $27.5 Billion (give or take $100 million) with Disney using the debt throttle to reduce/manage the actual net asset value to hit the overall target. My cynical point of view says after Comcast is gone, the debt will be paid off and your $50 Billion valuation will show up.

 

[Rodan75]

My cynical point of view says after Comcast is gone, the debt will be paid off and your $50 Billion valuation will show up.

Probably not cynical. If we hadn't just seen that happened with DLP, then you would be cynical.

 

[seascape]

Probably not cynical. If we hadn't just seen that happened with DLP, then you would be cynical.

I think Disney made a great deal but so did Comcast. I also think Hulu will be worth more than the 50 billion number I used after it goes international. I also don't think Disney and Comcast will put in more cash per year than the 1.5 billion but anything above that will be debt.

As for the 2024 Hulu valuation, I can say Netflix was woth 155.2 billion as of yesterday's close and by 2024 including international customers Hulu should be as large or larger then as Netflix is today. So what does that make Hulu worth in 2024? Netflix has a trailing PE of 122.35 but still has a negative cashflow. Hulu will not have the cost structure Netflix has because the vast majority of its shows will not be original. Hulu also unlike Netflix has a live TV version and contracts in place for all the channels. Therefore in the long run I strongly believe Hulu will be worth more than Netflix, I do not expect that to be in 2024 but I have to believe a 50 valuation of Hulu even with its debt is underestimating it's value.

Finally, what makes Disney's direct to consumer offerings better than any other companies is the bundle. Consumers will be able to choose many options. Think of all the options available with Hulu, Hulu with Live TV, Disney Plus. ESPN plus and Hotstar. I would also expect them to start an OTT service directed towards Latin America. So with the options they can provide everything a Cable Television Service provides at a lower cost with more options.

 

[Indy_UK]

I can see Disney+, ESPN+ and Hulu having more subscribers combined over Netflix but I can't see Hulu touching that number alone.

Disney+ is the only streaming service that I believe could eclipse Netflix on its own one day.

Hulu needs to go international but where it's a crowded market, they are going to have to work on the content big time.

 

[bartholomr4]

I think Disney made a great deal but so did Comcast. I also think Hulu will be worth more than the 50 billion number I used after it goes international. I also don't think Disney and Comcast will put in more cash per year than the 1.5 billion but anything above that will be debt.

As for the 2024 Hulu valuation, I can say Netflix was woth 155.2 billion as of yesterday's close and by 2024 including international customers Hulu should be as large or larger then as Netflix is today. So what does that make Hulu worth in 2024? Netflix has a trailing PE of 122.35 but still has a negative cashflow. Hulu will not have the cost structure Netflix has because the vast majority of its shows will not be original. Hulu also unlike Netflix has a live TV version and contracts in place for all the channels. Therefore in the long run I strongly believe Hulu will be worth more than Netflix, I do not expect that to be in 2024 but I have to believe a 50 valuation of Hulu even with its debt is underestimating it's value.

Finally, what makes Disney's direct to consumer offerings better than any other companies is the bundle. Consumers will be able to choose many options. Think of all the options available with Hulu, Hulu with Live TV, Disney Plus. ESPN plus and Hotstar. I would also expect them to start an OTT service directed towards Latin America. So with the options they can provide everything a Cable Television Service provides at a lower cost with more options.

Netflix is trading at 122 times earnings, with a value of $155 Billion when it earned $2 Billion last year. It is spending $8 billion a year on content, and its debt has risen from $2.5 Billion in 2015 to $10.6 Billion last year. Its value is derived by market forces, and (my opinion) reflects its prior growth rate (mostly international).

I don't think Netflix can sustain a revenue growth rate of 67% a year and is overpriced. Applying that multiple to Hulu is (in my opinion only) is not the correct analysis to forecast the value of Hulu at 2024. The market is applying a frothy valuation to Netflix, which would not occur when Hulu is not being traded on an open market. If you reduce their revenue growth rate to 20% (may still be too optimistic as its current revenue growth rate is 18.6%) and the PE ratio comes down to something closer to a market level, my back of the napkin cash-flow - discounted EBITDA For Netflix currently of about $93 Billion.

I suspect when Disney and Comcast settle up, they will use a discounted cash-flow method (like AT&T did when it sold Its stake). But who knows at this point..... we will see.... some time in January 2024

 

[seascape]

Netflix is trading at 122 times earnings, with a value of $155 Billion when it earned $2 Billion last year. It is spending $8 billion a year on content, and its debt has risen from $2.5 Billion in 2015 to $10.6 Billion last year. Its value is derived by market forces, and (my opinion) reflects its prior growth rate (mostly international).

I don't think Netflix can sustain a revenue growth rate of 67% a year and is overpriced. Applying that multiple to Hulu is (in my opinion only) is not the correct analysis to forecast the value of Hulu at 2024. The market is applying a frothy valuation to Netflix, which would not occur when Hulu is not being traded on an open market. If you reduce their revenue growth rate to 20% (may still be too optimistic as its current revenue growth rate is 18.6%) and the PE ratio comes down to something closer to a market level, my back of the napkin cash-flow - discounted EBITDA For Netflix currently of about $93 Billion.

I suspect when Disney and Comcast settle up, they will use a discounted cash-flow method (like AT&T did when it sold Its stake). But who knows at this point..... we will see.... some time in January 2024

We agree that Netflix's current market cap is over valued. That is why I never said Hulu would be worth 155 billion in 2024. You believe Netflix is worth 93 billion. I still believe that Hulu after being taken international beginning in 2020 will by 2024 be bigger than Netflix today. Domestically today Hulu has over 28 million. Netflix has 60 million. Hulu will more than double its none live TV customer base to over 60 million. It is their Hulu with live TV that everyone is ignoring. Cord cutting from cable packages is surging. But look at the package of live TV that Disney owns and don't forget that includes channels from all over the world. Disney's direct to the consumer option are unbeatable. Then think that by being over the internet that commercials can be directly aimed towards specific customers. Having all the information Disney can get, aim specific adds yo their customers and offer rewards for using a Disney Rewards Credit Card.

 

[happycamperuni]

I completely disagree with you. Comcast is only guaranteed 5.775 billion for their share of Hulu
In order to keep their 33% and get 9 billion, they need to continue to make yearly payments of 500 million to cover shortfalls. If they were really bearish on Hulu, they would have insisted on 5 billion today, after all the 5.775 billion is only 15% above the 5 billion over 4 years and 8 months. That is not a good rate of return.

On the otherhand, putting in the 500 million a year and getting 1/3 of what Hulu will in 2024 after being expanded internationally, they should get at least 1/3 of what Hulu will be worth, which will be in excess of 50 billion or 16.67 billion.

It's possible you're right, but I was talking about Comcast execs POVs. They've said repeatedly that they're skeptical that Netflix-style streaming will work for most companies going that route; that's why they're not going that route and just doing an NBC/Sky AVOD service that will be free to people that already subscribe to Pay TV. They don't want to compete with everybody else in trying to get tons of subscribers that are locked into monthly payments.

Only really Disney is "guaranteed" of being able to target massive subscriber numbers with Disney+ and Hulu internationally.

Hence, my point was that Comcast wanted to lock in a minimum price on Hulu while still having potential upside. They're skeptical that Netflix-style valuations will persist in the sector for these services after a bunch more come out (Warner and the rest).

 

[mikejs78]

I suspect that the market can probably bear 3-4 major streaming platforms.. So now announced and current: Disney and it's services, Netflix, HBO, CBS, WB, Amazon, and NBCU. So if you treat the Disney services as one that's 7 major streaming services. Amazon will survive because it's part of free shipping. Disney will win because of the major content franchises it has are unparalleled, + sports. That leaves NBCU, WB, Netflix, HBO, and CBS to duke it out for the other one or two platforms (and yes, I think Netflix is very vulnerable). The ones that won't survive will end up shopping their content onto the ones that do.

 

[mab7689]

I suspect that the market can probably bear 3-4 major streaming platforms.. So now announced and current: Disney and it's services, Netflix, HBO, CBS, WB, Amazon, and NBCU. So if you treat the Disney services as one that's 7 major streaming services. Amazon will survive because it's part of free shipping. Disney will win because of the major content franchises it has are unparalleled, + sports. That leaves NBCU, WB, Netflix, HBO, and CBS to duke it out for the other one or two platforms (and yes, I think Netflix is very vulnerable). The ones that won't survive will end up shopping their content onto the ones that do.

I'm in the UK so am interested to see what happens over here. I already have Netflix and Amazon and will get NBCU for free once it launches in Europe as I'm a Sky user.

Firstly I am keen to see what happens regarding Disney. Disney+ will no doubt replace Disney Life over here and I imagine now they have full control Hulu will roll out. I think it's pretty much a given I'll get Disney+ once it's here but no guarantees over Hulu.

Secondly I wonder if the Warner Media one will come to Europe. Seems WB and HBO have common ownership is there a possibility in the USA that HBO Go will close and all HBO content will be consolidated with WB onto one platform?

Thirdly there will be Apple TV+ too. I don't see myself getting that but it's another competitor.

 

[happycamperuni]

I suspect that the market can probably bear 3-4 major streaming platforms.. So now announced and current: Disney and it's services, Netflix, HBO, CBS, WB, Amazon, and NBCU. So if you treat the Disney services as one that's 7 major streaming services. Amazon will survive because it's part of free shipping. Disney will win because of the major content franchises it has are unparalleled, + sports. That leaves NBCU, WB, Netflix, HBO, and CBS to duke it out for the other one or two platforms (and yes, I think Netflix is very vulnerable). The ones that won't survive will end up shopping their content onto the ones that do.

I think all of that is why NBCU is going for a free AVOD service that anybody with a pay tv subscription can use. They're just focused on making it a free ad supported service for those who remain in the pay tv ecosystem as I doubt they'll have many paid subs.


Disney will be a market leader with Disney+, Hulu, ESPN+, and Hotstar.

Amazon Prime Video will be a market leader given its tie in to their other prime services.

Netflix will probably lead the remainder given their first mover advantage and just how much they're spending on content. I'm not sure the rest will be that viable. There's going to have to be more mergers at some point; I just don't see why there needs to be 10+ services; I doubt most consumers pay for more than 3-4. Disney's bundle and Amazon Prime will be must have's, the rest will be fighting for the same remaining dollars.


Youtube is doing the right thing by making their premium shows free/ad-supported on Youtube. I think they're thinking the same thing as NBCU that fighting Disney/Amazon Prime/Netflix/etc. for subscriptions is futile in the long run and just getting eyeballs with ads is a viable alternative.

HBO/WB is the strongest of the rest in terms of content, but it's just not clear they can differentiate themselves enough to get to 100-200 million worldwide subscribers at the price point they're likely aiming for ($10-15 a month). I don't see how Apple TV or CBS or Starz or Epix or the rest are viable long-term. We likely need to see a lot more content mergers.

 

[Quinnmac000]

The most successful streaming service is going to be the one that picks up the best international programming. Library doesn't r ally matter unless there are direct tie to the population.

Why is Star India so popular? Because 90% of all Bollywood content and cricket games are on there. Why does Sky remain success in Europe? Because the content they produce is what Europeans like. Etc Etc.

When it comes down to it, this is I think will happen and I think none of the services will actually have universal success everywhere but have their own key markets.

USA And Canada: Disney+ and Hulu will beat out Netflix
Mexico: Netflix willl be El Rey however NBCU will move on in thanks to their ownership of Telemundo and increased production.
Central and South America: Warner Bros and Netflix.
Caribbean: Disney+ and Hulu

UK: FTA Television and more Hulu. Disney+ will likely be third
France: StudioCanal streaming service
Germany, Italy, Spain: NBCUniversal Streaming Service (integrating with Sky and their ownership of local properties within those regions and relationships with Content partners give them a large leg up)
Rest of Europe: Disney+

Africa: Netflix as they are the only ones focused on local content and penetrating that market.

Middle East: Netflix and Disney+. All other content may be too graphic for that community without serious modifying it to be approved by censored which Netflix already does but Disney+ is light enough to make restrictions.

China: Warner Bros and NBCUniversal due to WB relationship with Legendary and Comcast relations with the CCP who is very much riding on the success of Universal Studios Beijing.

Japan: Warner Bros...They essentially have a monopoly on locally produced anime blockbuster films as well as a decent library of Japanese dramas and anime.

Korea: None...they already get free streaming content online from all the major content providers in Korea and IP protection is not a thing so they would just torrent films.

India: Star/Hulu/Disney this is self explanatory.

Rest of East Asia: NBCuniversal and Star (NBC has already integrated their content heavily in Taiwan, Singapore, Indonesia with Dreamworks hours and NBCUniversal programming hours on multiple networks while the large indian migrant population in those countries will help boost start)

Australia: NBCUniversal (Universal owns Matchbox Pictures who produces a lot of Australia's wildly popular television programs)
------------------------------------------------------------
The real winners of the streaming wars however is the ISP and cellular phone service providers. They can view some data at the traffic to certain streaming sites, they control the speeds in countries that now do not have net neutrality, they control data caps. So while things are moving to internet based television new headaches will form for consumers. At least back then, when your cable went out many people have a library of media (television shows, etc they could watch). Now thanks to streaming, Home videos sales are down yet if the wifi or something happened that knocked out service, a lot of people would flip out not having content readily available.

 

[seascape]

The most successful streaming service is going to be the one that picks up the best international programming. Library doesn't r ally matter unless there are direct tie to the population.

Why is Star India so popular? Because 90% of all Bollywood content and cricket games are on there. Why does Sky remain success in Europe? Because the content they produce is what Europeans like. Etc Etc.

When it comes down to it, this is I think will happen and I think none of the services will actually have universal success everywhere but have their own key markets.

USA And Canada: Disney+ and Hulu will beat out Netflix
Mexico: Netflix willl be El Rey however NBCU will move on in thanks to their ownership of Telemundo and increased production.
Central and South America: Warner Bros and Netflix.
Caribbean: Disney+ and Hulu

UK: FTA Television and more Hulu. Disney+ will likely be third
France: StudioCanal streaming service
Germany, Italy, Spain: NBCUniversal Streaming Service (integrating with Sky and their ownership of local properties within those regions and relationships with Content partners give them a large leg up)
Rest of Europe: Disney+

Africa: Netflix as they are the only ones focused on local content and penetrating that market.

Middle East: Netflix and Disney+. All other content may be too graphic for that community without serious modifying it to be approved by censored which Netflix already does but Disney+ is light enough to make restrictions.

China: Warner Bros and NBCUniversal due to WB relationship with Legendary and Comcast relations with the CCP who is very much riding on the success of Universal Studios Beijing.

Japan: Warner Bros...They essentially have a monopoly on locally produced anime blockbuster films as well as a decent library of Japanese dramas and anime.

Korea: None...they already get free streaming content online from all the major content providers in Korea and IP protection is not a thing so they would just torrent films.

India: Star/Hulu/Disney this is self explanatory.

Rest of East Asia: NBCuniversal and Star (NBC has already integrated their content heavily in Taiwan, Singapore, Indonesia with Dreamworks hours and NBCUniversal programming hours on multiple networks while the large indian migrant population in those countries will help boost start)

Australia: NBCUniversal (Universal owns Matchbox Pictures who produces a lot of Australia's wildly popular television programs)

You completely missed all the Fox assets in Latin America that Disney now owns. I think Disney will wind up number 1 in Central and South America. They will also do much better in the EU than you think. Sky may stay number 1 but they will shrink as more and more customers switch to streaming.

 

[Darkprime]

I think all of that is why NBCU is going for a free AVOD service that anybody with a pay tv subscription can use. They're just focused on making it a free ad supported service for those who remain in the pay tv ecosystem as I doubt they'll have many paid subs.


Disney will be a market leader with Disney+, Hulu, ESPN+, and Hotstar.

Amazon Prime Video will be a market leader given its tie in to their other prime services.

Netflix will probably lead the remainder given their first mover advantage and just how much they're spending on content. I'm not sure the rest will be that viable. There's going to have to be more mergers at some point; I just don't see why there needs to be 10+ services; I doubt most consumers pay for more than 3-4. Disney's bundle and Amazon Prime will be must have's, the rest will be fighting for the same remaining dollars.


Youtube is doing the right thing by making their premium shows free/ad-supported on Youtube. I think they're thinking the same thing as NBCU that fighting Disney/Amazon Prime/Netflix/etc. for subscriptions is futile in the long run and just getting eyeballs with ads is a viable alternative.

HBO/WB is the strongest of the rest in terms of content, but it's just not clear they can differentiate themselves enough to get to 100-200 million worldwide subscribers at the price point they're likely aiming for ($10-15 a month). I don't see how Apple TV or CBS or Starz or Epix or the rest are viable long-term. We likely need to see a lot more content mergers.

Not sure I agree with your list their. I see Disney+ as more a complimentary service to your Netflix/Amazon Prime sub. I dont see many people subbing just specifically to Disney+. The most common combination will most likely be Disney+/Hulu and Netflix and or Amazon Prime.

 

[Darkprime]

Sky may stay number 1 but they will shrink as more and more customers switch to streaming.

Yep I reckon Sky will regret not getting acquired by Disney in the near term. Disney owning Sky would have really elevated the company. They would have had access to all that Disney content. Could helped them stay afloat in the streaming era.