Disney+ subscribers are likely to see some big changes in their streaming experience soon, as the future of Hulu content is suddenly up in the air.
In late 2023, it was announced that The Walt Disney Company was taking full ownership of Hulu, the popular streaming service. Up to that point, it had been jointly owned with NBCUniversal, the media company owned by cable and tech giant Comcast.
However, Disney CEO Bob Iger‘s obsession with creating a super-expensive streaming service that includes all of the Mouse’s content seems to have pushed the company into what is now becoming a dangerously untenable business deal.
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Disney and NBCUniversal are in conflict over how much Hulu is worth and how much more the Mouse House will have to pay the Comcast company to have The Bear streaming on Disney+. In 2023, the iconic media company paid NBCUniversal $8.6 billion to buy out the latter’s 33% stake in the streaming service; that was based on a valuation of $27.5 billion for Hulu (per Yahoo Finance).
Both companies have hired third-party appraisers to confirm the value of Hulu, and, surprise, surprise, Disney thinks it paid enough money, and NBCUniversal thinks it needs to pay a lot more. In fact, according to it, the $27.5 billion valuation was far below what the streaming service is actually worth. Now, a third appraiser has been hired and has filed a report with the SEC that does not look great for Disney.
The new SEC filing reports, “In November 2023, NBCUniversal exercised its right to require Disney to purchase its 33% interest in Hulu at a redemption value based on NBCU’s equity ownership percentage of the greater of Hulu’s equity fair value or a guaranteed floor value of $27.5 billion.
It continues, confirming that if the appraiser values Hulu at more than was previously estimated, Disney will be on the hook for a whole lot more money.
The report says, “If Hulu’s equity fair value is determined pursuant to a contractual appraisal process to be higher than the guaranteed floor value, the Company is required to pay NBCU its share of the difference between the equity fair value and the guaranteed floor value…If the third appraiser’s equity fair value determination were between the valuations of the Company’s and NBCU’s appraisers, the incremental amount would likewise be between zero and approximately $5 billion.”
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At a distance, this seems to be just paperwork between two massive corporations. In reality, this is a huge deal that directly affects consumers, specifically subscribers of Disney+ and Hulu. The Mouse is already trying to disguise the fact that both Disney+ and Hulu continue to lose money by using ESPN+ revenue to bail them out and is raising the price of all its streaming services for the second year in a row.
The company just released a quarterly earnings report that is doing everything it can to reassure shareholders that it is taking good care of its money, so what is going to happen if it has to reveal that it actually spent $5 billion more than it thought it was going to have to?
It is unclear whether Disney would have any legal mechanism to back out of purchasing Hulu at this late stage in the game, but it is unlikely. What is far more likely is that the Mouse will take further action to try to make its streaming services profitable, which means that it will continue jacking up the cost of subscriptions as much as it expects consumers will tolerate and will begin removing more and more TV shows and movies to cut costs.
If Disney is forced to pay even more for Hulu, subscribers will be losing money and content accordingly.
How much do you pay for Disney streaming?