Disney Considers Making Major Change to Hulu

But CEO Bob Iger still isn't sure what that change is going to be.

As the Bard famously didn’t say, “to sell Hulu, or to buy Hulu? That is the question.”

In recent months, Disney’s returning CEO Bob Iger has voiced a level of indecision that Hamlet would find frustrating over what to do with its streaming service Hulu. 

Don’t Miss: Cable and Pay TV Lost a Sickening Amount of Subscribers Last Year

In a February earnings call, Iger said Disney  (DIS) - Get Free Report “will take a very hard look at the cost of everything we make across television and film.” Disney has had its first major dip in subscribers last year, as 2.4 million subscribers chose not to renew their Disney+ membership in the final quarter of 2022.

It’s hard to say why exactly this happened, as it could be that inflation is forcing people to be choosier about their entertainment budget. But it’s also the case that last year Disney lost the streaming rights for Indian Premier League Cricket, one of the most popular sports in the world. 

The competition for eyeballs and subscribers amongst streaming services has heated up since 2020, as there are more options (arguably too many options) for customers than ever, even as those customers only have so many hours of viewing time in them.

In a recent interview with NBC’s Squawk on the Street, Iger told host David Faber that Disney’s strategy for making streaming “a growth business” by the end of 2024 will be a focus on revenue rather than subscriber numbers. This is usually an indication that spending might get tighter, and cuts might be on the way.

But as we’ve wondered before, does that mean Disney might get rid of Hulu? Even Iger seemingly can’t answer that question at the moment.

What Will Disney Do With Hulu?

After Disney purchased 21st Century Fox in 2019 for $71.3 billion, the company absorbed the majority of its streaming service Hulu. It currently uses the platform for its Fox content like “Bob’s Burgers”, as well as adult-leaning films such as last year’s buzzy indie titles “Fire Island” and “Good Luck to You, Leo Grande,” and last year’s breakout show “The Bear,” which was produced by the boutique label FX on Hulu.

Disney currently owns 75% of Hulu. As part of the deal signed in 2019, Comcast  (CMCSA) - Get Free Report, which was one of the companies that first invested in the streaming service, can be required to sell its remaining 25% stake to Disney, but Disney has to pay the higher of a guaranteed minimum. 

Many viewers get Hulu as part of a bundle that also includes Disney+ and ESPN+, but the number of people who only subscribe to Hulu was, in the fourth quarter of last year, 47.2 Million. 

While that doesn’t compare to the customers total for HBO Max or Netflix, we’ve previously argued that Hulu serves a purpose for Disney as a standalone, more general audience-skewing streaming platform, and that trying to put all of its movies and TV shows onto Disney+ would be a move that might alienate parents and confuse audiences.

Iger Is Still Thinking it Over

It seems that Iger is, understandably, still mulling his options. 

Speaking at the Morgan Stanley Tech, Media and Telecom conference, Iger indicated that he’s still figuring out the right course of action, as noted by The Hollywood Reporter. 

Iger called Hulu a strong platform, but one that features “undifferentiated” entertainment content, compared to what he sees as the highly differentiated content on Disney+, which seems like a way of indicating that Hulu skews so broadly it doesn’t have the strong, highly identifiably brand identity of Disney+. 

Iger said Disney have hired Goldman Sachs to explore strategic options for its stake in Hulu, which could result in a sale.

“What we’re doing right now — because we own two-thirds of Hulu, and we have an agreement with Comcast that may result in us owning 100 percent — is we’re really studying the business very, very carefully, all those competitive dynamics with an understanding that we have a good platform in Hulu,” Iger said. 

“We have very strong original programming, actually highly awarded original programming, some delivered by FX, which is a great not only producer but brand, and we also have a good library, so it’s a solid platform,” he added. “And it’s also a very attractive platform for advertisers. It’s already proven to be valuable for them and advertising is proven to be valuable for us. But the environment is very, very tricky right now and before we make any big decisions about our level of investment, our commitment to that business, we want to understand where it could go.”

Comcast CEO Brian Roberts has also expressed an interest in buying Disney out of Hulu. Iger has not indicated who Disney might sell Hulu to, if anyone. 

While it's been a tight marketplace for the streaming, he thinks it will soon become profitable, but some platforms might not be around in a few years if the industry begins to contract.

“Every one of them is going to be highly profitable in a couple of years, and grow subs by the tens of millions? Goodness, it can’t possibly happen,” he said. “There are six or seven, you know, basically well-funded, aggressive streaming businesses out there all seeking the same subscribers, in many cases competing for the same content. Not everybody’s going to win.”