Disney's Deal With Fox Could Solve Hulu's Ownership Headache

(Bloomberg) -- Walt Disney Co. will become the majority owner of Hulu LLC as part of the $52.4 billion deal with 21st Century Fox Inc., bringing stable leadership to its competition with larger rivals Netflix Inc. and YouTube for the first time in years.

Hulu’s owners -- which also include Comcast Corp. and Time Warner Inc. -- have clashed repeatedly, exploring a sale twice and shuffling through four chief executives officers in the last five years. Putting control in the hands of one shareholder could streamline decision making, enabling Disney to steer the company’s efforts to grab a larger share of the booming market for online video.

“Managing Hulu becomes a little bit more clear, a little bit more efficient,” Disney CEO Bob Iger said on a conference call Thursday. He said he expected to “flow more content” to the direct-to-consumer service so it becomes “a more viable competitor to those already out there.”

Founded a decade ago as a way for people to catch up on last night’s TV, Hulu’s profile soared after its first hit original series, “The Handmaid’s Tale,” won five Emmy Awards in September. With more than 10 million subscribers, a large catalog of shows and movies, and a new live service, the company will be part of Disney’s strategy to build streaming offerings to offset declines in viewership and subscribers of its TV networks.

In addition to leading Hulu, Disney will introduce a paid online sports network, ESPN Plus, in the U.S. this spring and will debut a Disney-branded online video service in 2019. 

The Fox deal will double Disney’s stake in Hulu to 60 percent. Disney isn’t expected to make changes at the streaming service until regulators clear the deal with Fox, which Disney expects to close in 12 to 18 months. Hulu, available only in the U.S. right now, may be one of the assets Disney would agree to sell to gain regulatory approval, according to Rich Greenfield, an analyst with BTIG.

“Hulu is a less important piece than people think,” Greenfield said. 

Disney’s majority stake may not end all squabbles among Hulu’s owners. Comcast, with a 30 percent stake, has been barred from having any say over the streaming service as part of an antitrust agreement it accepted when acquiring NBCUniversal in 2011. That restriction will end next year.

“The whole foundation of Hulu was a mess,” said Brian Wieser, an analyst at Pivotal Research. “It did reasonably well in spite of itself.”

©2017 Bloomberg L.P.