There are many ways to look at the hulu deal. However, lets look back at Hulu prior to the AT&T deal. Comcast had 30% ownership. After paying 1/3 of the cost Hulu paid to buy AT&T out, they owned 1/3. That was worth 5 billion based on the 15 billion valuation.
Now lets look at their deal with Disney. If they put nothing in they will own 21.7% with a guaranteed valuation of 27.5 billion. If they sell at that basis they would get 5.775 billion in 4 years 8 months. That is actually not that high an interest rate but 15.5% in less than 5 years guaranteed is not bad but still less than normal corporate interest rates.
So why did Comcast agree to this? The obvious answer is that they expect a nuch higher valuation. Provided Comcast agrees to put in 500 million a year to cover Hulu's negative cash flow, they will keep yheir 1/3 ownership and be guaranteed 9 billion plus. However, if Disney takes Hulu international and bundles it with Disney plus and ESPN plus it may lose more money in 2021 and 2022 but be worth much more even with added debt to cover cash flow losses above 1.5 billion. (Disney will not put in more than 1 billion a year unless Comcast doesn't put in their 500 million. and even if Comcast doesn't puts in the money they wont put in more than 1.5 billion)
So what is a reasonable expectation of Hulu's actual value in January 2024. Netflix is worth 151.1 billion after yesterday's close. Taking Hulu international and bundling it with other services should make it worth a minimum of 50 billion and most likely more. Comcast made a great deal because of the guaranteed money and let Disney take on the real risks. BTW, I actually believe that by 2024 Hulu will have more international customers than Netflix and be close to the number of Domestic subscribers.
Now lets look at their deal with Disney. If they put nothing in they will own 21.7% with a guaranteed valuation of 27.5 billion. If they sell at that basis they would get 5.775 billion in 4 years 8 months. That is actually not that high an interest rate but 15.5% in less than 5 years guaranteed is not bad but still less than normal corporate interest rates.
So why did Comcast agree to this? The obvious answer is that they expect a nuch higher valuation. Provided Comcast agrees to put in 500 million a year to cover Hulu's negative cash flow, they will keep yheir 1/3 ownership and be guaranteed 9 billion plus. However, if Disney takes Hulu international and bundles it with Disney plus and ESPN plus it may lose more money in 2021 and 2022 but be worth much more even with added debt to cover cash flow losses above 1.5 billion. (Disney will not put in more than 1 billion a year unless Comcast doesn't put in their 500 million. and even if Comcast doesn't puts in the money they wont put in more than 1.5 billion)
So what is a reasonable expectation of Hulu's actual value in January 2024. Netflix is worth 151.1 billion after yesterday's close. Taking Hulu international and bundling it with other services should make it worth a minimum of 50 billion and most likely more. Comcast made a great deal because of the guaranteed money and let Disney take on the real risks. BTW, I actually believe that by 2024 Hulu will have more international customers than Netflix and be close to the number of Domestic subscribers.