Bob Iger has a big decision to make.
The once and future Disney CEO returned to the company at the end of last year, after initially leaving in 2020. Before his departure, Iger ran the company for 15 years, and developed a reputation as one of more talent-friendly CEOs in the entertainment industry, but also as a businessman who never met a franchise he didn’t want a sequel to.
Under Iger’s reign, Disney (DIS) both launched its streaming service Disney+ in 2019, and also acquired 21st Century Fox that year for $71.3 billion.
As part of that acquisition, Disney now owns 75% of Hulu, one of the oldest and most recognized names in streaming platforms. (It launching in 2007, around the time Netflix introduced streaming. Comcast (CMCSA) continues to own 25% of the company, though it’s been focusing more on its NBC streaming service Peacock.)
Disney+ is one of the most popular streaming services in the world, and has the built in advantage of having rights to Star Wars, Marvel and Pixar, three of the most recognized names in entertainment.
But for the first time ever, Disney+ actually lost ground last year, as Iger revealed in a recent earnings call that 2.4 million subscribers chose not to renew their Disney+ membership in the final quarter of 2022.
Iger largely returned to the CEO position after criticism that his successor Bob Chapek was mishandling Disney’s streaming services.
Iger has announced that he is looking to find $5.5 billion in cost savings for the company, and has indicated that he’s open to the idea of selling Hulu, but hasn’t made a firm decision.
Is Hulu For Sale?
Disney has the option to purchase Comcast’s remaining shares of Hulu, so it can own the company outright. But Iger has not ruled out the idea that Disney could sell the Hulu brand to another company.
Hulu had 47.2 Million subscribers in the fourth quarter of last year, but when combined with Disney+ and ESPN+ (there’s a discount bundle for customers who want all three), the total rises to 164.2 million. Would it make sense for Disney to just move all of its content onto Disney+ and find a buyer for the Hulu brand? It could be argued that Disney is spreading itself too thin by offering three streaming services.
Disney+ and Hulu have very different audiences, and even though Disney has introduced content moderation for some of its Marvel shows, parents might freak out to log on and see Disney+ offering the sort of films Hulu specialized in.
Last year Hulu earned raves for the indie hit “Good Luck to You, Leo Grande,” which featured Emma Thompson as a woman who hires a sex worker. The film won awards, but it would be, at best, an awkward fit next to the latest “Frozen” film.
Getty Images/TheStreet
Should Disney Sell Hulu?
Should Disney sell Hulu? According to one expert, that’s a no. They feel that Hulu is worth holding onto, and Iger should move to own it outright.
Seth Schachner is a former Sony executive who has worked in both music and film, including for 20th Century Fox, “largely in digital and deal-making roles,” he says. “I think Hulu is actually a critical part of the overall streaming mix for Disney--from both a programming and strategic point of view. I don't think they should sell it, and I think Iger will move to buy out Comcast's share, as that is an awkward position for Disney.”
Schachner is now the Managing Editor of Strat Americas, a business development and strategy enterprise. “Hulu brings a mix of content that’s different, more adult skewing, and complementary to Disney. I see it as closer to the television world,” he says, adding that “Hulu has always had a different background—it comes from broadcasters— from Fox, Disney, and NBC.”
While Hulu isn’t as big as Netflix, Schachner feels it still serves an important function for Disney. “Netflix is king, globally speaking,” he says. “Hulu is not available internationally, so it is much more limited in terms of audience size, but in the US, it does have a lot of content and programming you can’t find elsewhere.”
In an exclusive Q&A, Schachner weighed in one why Hulu remains important to Disney going forward.
Why do you think Hulu is valuable to Disney, and why should the company buy Comcast out?
Hulu is a different beast than Disney+. It comes from the broadcasting world, and has a nice mix of content that one might call “non – Disney,” so I see it as more of complementary interest to their overall streaming strategy and mix. It has lots of broadcast & cable content, some "next day" Hulu originals, and even some niche programming like FX. It's also part of the Disney / ESPN bundles, so it helps drive overall subs.
I know there's been debate about its role, but I see it is a complement to their overall strategy—and not so inconsistent with other major entertainment organizations.
(Major studios have “art house” labels like Sony Pictures Classics, for example, and major music conglomerates have mixes of label groups.). It doesn’t all have to “fit in one basket,” and from a creative perspective, sometimes some of the biggest hits come from unexpected places. So having a diverse basket of content from different sources is good.
If Disney believes streaming is a major part of their business over the next decade or so—which of course they do—I would say they shouldn’t offload or sell Hulu.
Does Disney strictly need an adult brand for its offerings? What would be the downside of offering everything through Disney+?
Probably….I don’t know if it is a “strict need,” but Disney + might be hard to see as a purely stand-alone product. I see Hulu & ESPN helping the overall content proposition. Remember that adults pay for the subscription — Disney + is likely not a parent’s first “go to” for streaming. Hulu is more of a “next level, adult skewing” type brand. The bundle is compelling, so it’s more enticing to many people with Hulu and ESPN + in it.
Would parents be upset if there were R-rated films on Disney+, or does the content control now take care of that?
Probably, yes, but I would think Disney could implement some controls. The Disney brand is so strong with families, so it would seem like Disney+ could put the brand at risk with that R-rated content. That probably risks some of the brand value, it runs against Disney’s family brand.
If Disney were to sell Hulu, who might want to own it? Would it be smart for a company to enter the streaming world now?
I would think NBCU Comcast would be the first stop in terms of potential owners. They could use it as a vehicle to complement Peacock, in the same way Paramount has Pluto TV. Some say NBCU’s ability to syndicate / sell is better than Disney, also. More broadly? Maybe Paramount, but not so likely to me, and not Sony either.
