CTV Market To Evolve As Disney, Comcast Settle Hulu Ownership

Smart people will tolerate “dead money” for only so long. In my June blog, entitled “Connected TV To Advance Mightily, Once Hulu Owerships Sorted,” I made clear that Hulu ownership — two thirds of which is owned by Disney and one third of which is ownd by Comcast — has created a problem for Disney, Comcast and, in fact, the Connected TV market, in general — and that problem resulted in an industrywide parallasis that has ushered in a period of “malaise.” At the time, I referred to all investments in Connected TV stocks as being dead money.

A January 2024 call/put deadline, where either company could trigger a sale or purchase of Comcast’s minority stake, hasn’t made matters any easier. I also made my admiration for Disney’s Bob Iger and Comcast’s Brian Roberts clear. I believe them to be two of the titans in the entertainment and media business and I deeply respect both as CEOs. I also made clear my belief that neither Iger nor Roberts were fans of dead money.

In a not so surprising move, on September 6th, Iger and Roberts announced they had agreed to push forward the call/put deadline from January 2024 to October 31, 2023. That means on November 1, 2023 Comcast can force or Disney can trigger a sale of Hulu.

In anticipation of this, both firms have hired investment bankers to represent them. Disney has hired JP Morgan Chase and Comcast has hired Morgan Stanley. JP Morgan Chase and Morgan Stanley are working on fair market valuations of Hulu as of the new valuation date of September 30, 2023. If the two valuations are withing 10% of each other, the firms will split the difference between the two valuations and the buyer will pay the seller. If the two valuations are not within 10% of each other, a third investment bank will be hired by the two companies. That third valuation would then be averaged against the original valuation that was closest to it.

Both Disney and Comcast have been preparing for the inevitable.

Disney will reportedly offer a new bundle deal for Hulu and Disney+ in 2024 and will reportedly merge the apps later this year. There has also been talk that Disney may opt to include ESPN+ into the bundle, which could mean a single app hosting all three services.

Earlier this year Comcast stopped providing financial backing to Hulu and more recently began removing its content from the streaming platform. It has been placing its content on Peacock, its streaming platform. Comcast executives have suggested that some of the proceeds from a sale of Hulu to Disney will be paid to shareholders, investing the cash into the company’s share buyback program.

In addition, Comcast is stepping up marketing efforts around Xumo, the video platform it owns with Charter Communications. The Xumo Stream Box is competing with Roku Streaming Devices — the 800 lbs gorilla in streaming. Xumo is also competing with technology from Amazon, Apple and others.

The Xumo Stream Box may be the ‘box of choice’ for cable companies looking to offer streaming to their customer base. Not only is Comcast the second largest cable operator in the world, much of Charter Communications DNA ties to Time Warner Cable which it bought in 2016. Xumo recently announced a partnership with Mediacom Communiations, the fifth largest cable television provider.

While both Disney and Comcast appear to be traveling along obvious, well-defined paths, anything can happen in the days ahead. Regardless of outcome, once Hulu ownership is determined, the Connected TV market will find its legs and the period of “malaise” will be behind us.