Hulu Buys AT&T’s Stake in the Joint Venture with Disney and Comcast
In an announcement from Businesswire Hulu announced they have acquired AT&T’s minority stake from the company for $1.43 billion.
Hulu originally launched in 2008 and has undergone many different changes over the years to arrive at the current state the company is in including phasing out their free offerings and adding live TV as an option. Previously the company was 60% owned by Disney, 30% owned by Comcast and the remaining roughly 10% by AT&T (NYSE:T). The news is interesting for two reasons: First Walt Disney Co. (Disney) (NYSE:DIS) recently acquired 30% of the company with the purchase of 21st Century Fox, which already gave them the majority stake in the venture. Secondly having fewer partners now means that Disney has more control over the company, giving them roughly 2/3 stake compared to Comcast’s 1/3.
The price Hulu paid for the 9.5% stake was $1.43 billion, giving Hulu a valuation of around $15 billion, but as CNBC reported earlier today, Disney itself valued the platform at $9.26 billion in November in a regulatory filing. To completely remove a partner you typically have to pay a premium, but an extra 50% is not common at all. The questions that remain then are if Hulu’s value has increased in the last few months, and if so the amount; or if Disney was undervaluing the company when acquiring 21st Century Fox or possibly some combination of both.
Other Streaming Implications
Disney announced the details of Disney+ last week at their investor’s day which raised the stock roughly 10% on the day. Before the announcement of Disney+ they spent a long time focusing on Hulu and the number of users (25 million) and content on the platform being licensed and originally created. But a key announcement was the pricing of the service at $6.99 a month, which is $1 more expensive than the cheapest Hulu offering which includes advertisements, and $5 less than the ad-free version of Hulu. It has been speculated that Disney will be offering a bundled package with variants of Hulu, ESPN, and Disney+ but nothing has been officially announced. Hulu also offers a live TV version for $44.99 a month which includes ESPN and if bundled with Disney+ could be a strong offering to consumers.
AT&T also owns WarnerMedia, which offers their own streaming services including HBO, Turner and Warner Bros. which itself has a strong catalogue of content to offer. AT&T notes the proceeds from the sale will be used to pay down debt taken for the purchase of Time Warner Inc. for $85 billion.
Netflix Inc. (NASDAQ:NFLX) is publishing their earnings tonight which will give a clear picture of subscriber comparison between themselves and Hulu, and with the increased value of Hulu, it may positively affect their stock value temporarily. The competition for streaming services is steadily growing, but like any industry, there can only be so many different services being run before the market gets too crowded. Disney publicly stated they will take a loss over the next few years on both Hulu and Disney+ which may hurt the long term value of Netflix.
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