Disney is taking full control of Hulu from Comcast, as both companies prepare to start their own streaming services in response to declining audiences for traditional TV.
The companies said Tuesday that Comcast, which owns a third of Hulu, can sell its stake to Disney starting in 2024, for a minimum of $5.8 billion. Until then, Comcast will be a silent investor.
Hulu was formed more than a decade ago as the major entertainment companies dealt with the rise of digital media. While YouTube became a home for digital video, Netflix built up a streaming library of back seasons of popular TV shows and movies, and Hulu made TV episodes from networks such as ABC, NBC and Fox available online after they aired on TV.
Hulu still shows network TV episodes and original series for $6 a month. It has a newer, cable-like service with live TV channels for $45 a month.
In the past few years, other streaming services have emerged, helping more people drop their cable subscriptions. These include ones from AT&T and Google that, like Hulu’s live-TV service, compete with the traditional cable bundle. Others are more focused, like HBO Now.
Meanwhile, big media companies that own TV networks are looking to launch still more streaming services as a way to make up for revenue lost from fewer cable subscriptions.
Disney had already become the majority owner of Hulu when it absorbed Fox’s stake as part of its purchase of Fox’s entertainment businesses.
Having total control of Hulu gives Disney more power to support its own streaming efforts. The company is starting a new kids-focused streaming service called Disney Plus this year for $7 a month, and is expected to offer discounted bundles with Hulu and its sports service, ESPN Plus.
Comcast’s NBCUniversal will release its streaming service in 2020. And AT&T’s WarnerMedia is creating a streaming service with a focus on HBO and other shows and movies owned by the company. There’s also a new one from Apple, with original content.
This could fragment much of the services’ content. Viewers may have to pay for more streaming services to keep watching the same stuff.
Disney plans to take back its library, which includes Pixar, Marvel and “Star Wars” movies, from Netflix. Other popular shows on Netflix, including “Friends” and “The Office,” are owned by the big entertainment companies, and they may want to have them back for their services.
If entertainment companies pull shows from Hulu, Netflix or Amazon, however, they miss out on lucrative licensing revenue — a hard decision to make when their fledging services have to compete with so many others.
Hulu’s ownership has contracted as a wave of mergers consolidated the industry: Walt Disney Co. absorbed 21st Century Fox’s stake as it bought up Fox’s studio and many of its networks, while AT&T sold the share it inherited with the purchase of Time Warner, now renamed WarnerMedia.
AT&T’s sale valued the unprofitable Hulu at $15 billion. The agreement with Disney and Comcast values Hulu at a minimum of $27.5 billion in 2024. Disney has forecast that Hulu will turn a profit around then.
Tali Arbel is an Associated Press writer.