When Disney finally closes its deal to acquire 21st Century Fox’s film and TV assets early next year, the company will gain — among many things — ownership of Hulu, which has never before had just one company hold a controlling stake.
But with Disney also readying the launch of its own Disney-branded streaming service next year, it will now have ownership of two competing streaming services, which begs the question: How will Disney be able to launch Disney+ while allowing Hulu to continue to grow?
Analysts and experts who spoke to TheWrap believe that it will be possible for Disney to capably maintain Hulu while getting Disney+ off the ground, but acknowledge there could be some choppy waters ahead if all companies involved — namely Disney and Comcast — don’t play nice with each other. WarnerMedia and Comcast, which collectively own 40 percent of Hulu, declined to comment for this story.
“Disney’s first priority must be to make Disney+ a winner right out of the gate,” said Todd Klein, partner at venture capitalist firm Revolution Growth. Disney is banking on five key brands for Disney+. They are Disney, Marvel, Lucasfilm, Pixar and National Geographic (which it’s getting from Fox).
“Any content — Disney, Fox, ABC, etc. — that more closely resembles the Fox brand and isn’t otherwise encumbered, will go to Hulu for the time being, so Hulu will actually get better,” Klein said.
During Disney’s fourth-quarter earnings call Nov. 8, CEO Bob Iger said Disney is committed to growing Hulu. “We aim to use the television production capabilities of the combined company to fuel Hulu with a lot more original programming, original programming that we feel will enable Hulu to compete even more aggressively in the marketplace,” he said.
Streaming video has become the next gold rush for media companies. Along with Disney and WarnerMedia, 2019 will see Apple and Walmart join a marketplace that is quickly filling up, as everyone is chasing Netflix. With so many more options, the battle for consumer dollars is only going to get more intense.
“If people are only going to subscribe to six services, if Hulu and Disney+ are two of those six, that’s a big win for them,” said Alan Wolk, co-founder and lead analyst at media consulting firm TV[R]EV.
But Wolk argues that Disney should have focused on expanding Hulu, which already has 20 million subscribers, rather than spending on a new service.
“If it was me, I would’ve probably put everything into Hulu,” he said.
Disney is betting that Hulu’s audience is different enough from Disney’s traditional audience to make both streaming services worthwhile. Hulu’s “The Handmaid’s Tale,” for example, doesn’t fit into the family friendly brand that Disney has cultivated for decades.
Klein said that owning 100 percent of its own streaming service is better for Disney than owning 60 percent of Hulu and sharing with a competitor.
“Standing up a streaming service isn’t easy, and if they could take 100 percent ownership of an operating business with 20 million subscribers already, they’d much prefer that path,” he said. “Knowing this, I’d be surprised if Comcast would let go so easily, especially given how badly they wanted Fox and didn’t get it.”
Disney and Comcast have engaged in multiple bidding wars, first for the 21st Century Fox assets, which Disney won, and then for European pay-TV company, Sky PLC, which Comcast eventually won.
But now Comcast, which still has its 30 percent stake in Hulu, will have to play nice with Disney. Iger appeared to offer an olive branch on the call. “Anything we do with Hulu will be done with an eye toward being fiscally responsible to the other shareholders, even though they’re minority shareholders,” he said.
In August, Iger hinted that Disney could offer Disney+, Hulu and its sports-themed ESPN+ for a discounted rate if subscribers buy all three.
Would Comcast and WarnerMedia be OK with Disney using Hulu to help funnel subscriptions into Disney+?
Klein argues that the data Comcast and Warner collect on Hulu consumers is valuable enough for them to stay on as minority shareholders — as long as Hulu isn’t burning a hole in their wallet.
“If the data is shared broadly and the burn rate is modest, Comcast and Warner are probably quite comfortable letting Disney build value in Hulu, because every dollar Disney invests benefits them disproportionately,” he said.
Plus, Comcast doesn’t have its own direct-to-consumer business yet. “Its going to be weird, they’ll have to figure it out,” said Wolk. “In the ideal world, Disney and Comcast should try and get along.”
16 Hollywood and Media Deals With Saudi Arabia - and Where They Now Stand (Gallery)
A growing number of Hollywood and U.S. media companies have backed out of business deals with Saudi Arabia and the crown prince, known by his initials MBS, after Turkish officials concluded that journalist Jamal Khashoggi was murdered by Saudi operatives inside the Saudi consulate in Istanbul on Oct. 2.
Here is a list of Hollywood and media deals with Saudi Arabia -- and where they stand now.
Richard Branson
British entrepreneur Richard Branson announced he would step down as chairman of Virgin Hyperloop, a planned supersonic transport system in the United Arab Emirates and other countries, CNBC reported.
The Harbour Group
Leading D.C. lobbying firm representing the Saudi government’s interests, the Harbour Group, announced on Oct. 11 it was terminating its $80,000-a-month contract with the kingdom.
Endeavor
WME parent company Endeavor, one of Hollywood's top talent agencies, said on Oct. 15 it was preparing to withdraw from its $400 million financing deal with the Saudi Arabian government.
Gerard Butler
Actor Gerard Butler pulled out of a trip to Saudi Arabia to promote his new movie "Hunter Killer" following Khashoggi's disappearance.
‘Davos in the Desert’
The New York Times, Bloomberg, CNN, CNBC, The Financial Times, Nikkei, The Los Angeles Times, Fox Business Channel, Viacom and The Economist are among the names that have withdrawn their sponsorship or canceled their appearances from the high-powered Future Investment Initiative conference in Riyadh, dubbed “Davos in the Desert,” to be hosted by the Crown Prince and the kingdom’s sovereign wealth fund in late October.
Uber
CEO Dara Khosrowshahi said he was "troubled by the reports" and would not attend the conference "unless a substantially different set of facts emerges."
AMC
The movie theater chain has plans to open 40 theaters in the kingdom within the next five years, with the aim to reach 100 locations by 2030.
AMC declined to comment when reached by TheWrap.
Penske Media Corp.
In February, Penske, which owns Hollywood trades Variety and Deadline, among other publications, received a $200 million investment from Saudi Arabia’s Public Investment Fund. The company declined to comment about whether it will reassess the investment.
World Wrestling Entertainment
WWE, which is due to return to Saudi Arabia on Nov. 2 for its "Crown Jewel" wrestling event, told TheWrap in statement that it’s "currently monitoring the situation." An insider also told TheWrap WWE talent have been instructed to promote the event -- but not its location -- for two weeks now.
IMAX
Plans for IMAX to build more movie theaters in the kingdom, which have been mired in red tape, will likely be put on “pause” following Khashoggi’s disappearance, according to a person with knowledge of the situation who spoke with TheWrap.
Vox Cinemas
This Dubai-based movie theater chain -- not to be confused with media outlet Vox -- often received revenue from rich Saudis who traveled to Dubai on weekends while KSA’s cinema ban was in effect. They, along with AMC, got the inside track on negotiations to build cineplexes in the country and are currently the only two chains with the license from the government to do so. Vox declined to comment.
Feld Entertainment
The company told TheWrap it had not signed any deals with the Saudis to bring international events, including “Disney on Ice,” “Disney Live,” “Marvel Experience” and “Monster Jam” to the kingdom, but that it was “still in conversation” with the kingdom. The company did not wish to comment further.
iPic
In March, the Florida-based luxury movie theater chain had announced it had partnered with Saudi firm BAS Global Investments Co. to develop cinemas and restaurants throughout the kingdom. An iPic rep told TheWrap Wednesday that it had “no further updates” on the deal.
Nat Geo
In April, National Geographic announced it was partnering with the General Entertainment Authority of Saudi Arabia to develop and launch several locations for its walk-through virtual-reality zoo.
Reps for Nat Geo told TheWrap they “don’t have an answer yet” on whether the partnership will continue.
Cirque du Soleil
The iconic live entertainment brand had its first performance in Saudi Arabia on Sept. 23, just before Khashoggi went missing. It is unclear whether the company has any more performances planned in Saudi Arabia. Reps for the company did not respond to a request for comment from TheWrap.
IMG Artists
The performing arts, social media, and festival and events management company signed a letter of intent to bring large-scale festivals to the kingdom.
A rep for IMG told TheWrap that the deal went “stale” shortly after it was signed, following “changes” in the monarchy’s 2030 Vision campaign.
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Death of dissident journalist Jamal Khashoggi threatens kingdom’s modernization plans
A growing number of Hollywood and U.S. media companies have backed out of business deals with Saudi Arabia and the crown prince, known by his initials MBS, after Turkish officials concluded that journalist Jamal Khashoggi was murdered by Saudi operatives inside the Saudi consulate in Istanbul on Oct. 2.
Here is a list of Hollywood and media deals with Saudi Arabia -- and where they stand now.