Disney wants more control over Hulu: the company is actively discussing with AT & T to acquire WarnerMedia's 10% stake in the streaming joint venture, Variety has learned.
A knowledgeable source has confirmed the talks, which are taking place as Disney prepares to obtain regulatory approval for the purchase of 20th Century Fox. At the closing of this transaction, Disney would take over Fox's 30% stake in Hulu. Meanwhile, AT & T won Tuesday a court challenge from the Justice Department, which was trying to block its takeover of Time Warner.
Representatives of Hulu and AT & T declined to comment. Disney has not responded to a request for comment.
Disney currently holds a 30% stake in Hulu, as does Comcast / NBCUniversal – which is not ready to leave the joint venture yet. "Disney would like to buy us," said Steve Burke, CEO of NBCU Variety last month. "I do not think anything will happen in the short term."
The rumor that Disney is negotiating the buyout of WarnerMedia's stake in Hulu is not a surprise. AT & T executives said the company plans to sell the stake in Hulu, acquired by Time Warner in 2016.
AT & T chief financial officer John Stephens at the telecom analyst's day last November cited his minority investments "in projects such as Sky Mexico or Hulu" as potential assets she could sell to earn a working capital – as well as cash to reduce the debt it assumed. the agreement of Time Warner. Also note that WarnerMedia / Time Warner has never held a seat on the Hulu board.
The question is what Disney is willing to pay for the 10% stake. Last summer, Disney set Hulu's fair value at $ 9.296 billion after finalizing the transaction with 21st Century Fox, including an implicit control premium of $ 1.246 billion. The $ 930 million implicit value of WarnerMedia's interest represents a premium of 16% on Time Warner's initial investment of $ 583 million in Hulu in August 2016, plus its subsequent capital contributions of $ 200 million to the streamer.
AT & T is seeking to sell its minority stake in Hulu, with WarnerMedia preparing to launch its own subscription-based streaming service. The SVOD service, still unnamed, which will begin in the fourth quarter of 2019, will include three levels of service: one devoted to films; one with films and original programming; and a third level including the content of the first two, the content of the WarnerMedia library and licensed programming.
If Disney ended up controlling 70% of Hulu, the media conglomerate would be more and more urged to invest in Hulu and expand to international markets. Under Disney's control, Hulu will remain focused on the general adult entertainment fare, while the next Disney + subscription product will be in the family-owned wheelhouse, Disney General Manager Bob Iger told Wall analysts Street.
For Hulu, controlling a single owner could help accelerate growth despite strong competition in the streaming market. Hulu said it has finished the year 2018 with over 25 million subscribers, a net gain of $ 8 million for the year. (Hulu does not indicate how many of its subscribers subscribe only to subscription-based VOD packages compared to the number of live TV packages.) Last year, according to Hulu, its advertising revenues increased by more than 45% in 2018, reaching nearly $ 1.5 billion. business card.
Disney views Hulu as a key element of its SVOD lineup, although its losses are increasing due to its investments in technology and programming, including its live streaming service. In 2018, Hulu lost about $ 1.5 billion, up from $ 920 million a year earlier, according to Comcast's latest 10-page deposit (which reports Hulu's losses as a share of its equity).
According to Disney's 10-Q for the September 2018 quarter, WarnerMedia has until August 2019 the right to sell its shares to Hulu.