The Future Ownership Structure of Hulu Is Now Clear

Jon C. Ogg

The future ownership structure of Hulu now looks quite clear. A press release from Walt Disney Co. (NYSE: DIS) and Comcast Corp. (NASDAQ: CMCSA) has indicated that Disney will assume full operational control of Hulu. The timing of the event: effective immediately!

Hulu’s future ownership structure had been in question after both Disney and Comcast made large transactions, and Comcast’s NBCUniversal was a minority shareholder in Hulu. The two companies have agreed to enter in a “put/call” agreement regarding NBCUniversal’s 33% ownership stake in Hulu. The deal also involves a stake transaction with AT&T Inc. (NYSE: T).

As far as how this put/call agreement will work, Comcast can require Disney to buy NBCUniversal’s interest in Hulu as early as January 2024. Disney also can require NBCUniversal to sell that interest to Disney for its fair market value at that future time.

Tuesday’s press release indicated that Hulu’s fair market value will be assessed by independent experts. That said, Disney has guaranteed a sale price for Comcast that represents a minimum total equity value of Hulu at that time of $27.5 billion.

More details of the carriage and terms were stated by the companies, including the AT&T stake, as follows:

Disney and Comcast have agreed to fund Hulu’s recent purchase of AT&T Inc.’s 9.5% interest in Hulu, pro rata to their current two thirds/one third ownership interests and, going forward, Comcast will have the option but not the obligation to fund its proportionate share of Hulu’s future capital calls and will be diluted if it elects not to fund. Disney has agreed that only $1.5 billion of any year’s capital calls can be funded through further equity investments with any capital in excess of that annual amount being funded by non-diluting debt. Whether Comcast funds its share of those equity capital calls or not, Disney has agreed that Comcast’s ownership interest in Hulu will never be less than 21% such that Comcast is guaranteed to receive at least $5.8 billion under the put/call agreement.

In addition to the put/call agreement, Comcast has agreed with Hulu to extend the Hulu license of NBCUniversal content and the Hulu Live carriage agreement for NBCUniversal channels until late 2024 and to distribute Hulu on its Xfinity X1 platform. NBCUniversal can terminate most of its content license agreements with Hulu in three years’ time, and in one year’s time NBCUniversal will have the right to exhibit on its own OTT service certain content that it currently licenses exclusively to Hulu in return for reducing the license fee payable by Hulu.

What matters here is that both Walt Disney and Comcast will get to consolidate and streamline their efforts and interest in Hulu in a manner that means nothing major has to change operationally and that vast sums of money do not have be handed over all at once nor immediately for Disney to secure full ownership of Hulu.

Shares of Disney were trading up fractionally at $132.33 Tuesday morning, but that was after a 2% drop on Monday after closing at $134.04 on Friday. Disney is now down from a 52-week high of $142.37.

Comcast was last seen trading up more than 1% at $42.80. Its share price was $43.15 as of Friday’s close, and Monday’s drop was 2% as well. Comcast shares are down just 3.5% from the recent high of $43.96.