Fate of Hulu Hangs in the Balance of Comcast-Disney War for Fox

Randy Freer speaks onstage during Hulu Upfront 2018 - May 2, 2018 - Getty-h 2018
Dia Dipasupil/Getty Images for Hulu

Both rival companies stand to benefit from the addition of the streaming service in the age of cord-cutting.

The showdown between Comcast and Disney to acquire 21st Century Fox will have a major effect on the future of Hulu.

Since each of the three companies currently owns a 30 percent stake, whichever wins Fox could take control of the over-the-top service, which on May 2 revealed that it had crossed the 20 million-subscriber mark. (AT&T's WarnerMedia holds the remaining 10 percent stake.)

Disney has been keen on rivaling Netflix by seizing command of Hulu in its Fox deal and using the acquisition to beef up the content for its own streaming service. Comcast, meanwhile, also stands to benefit from possibly controlling the video streamer in the age of cord-cutting.

"While only worth approximately $8 billion, or 9 percent of the total Fox/Sky transaction, [Hulu] may in fact be the
most important asset within it," said Macquarie Capital analyst Tim Nollen in a recent report. "Hulu is Comcast’s only direct-to-consumer option in the U.S., and seeing Disney gain majority control would weaken its hand in this further — it would be worse for Comcast to be a 30 percent minority owner of an asset with a majority owner than to be one of a consortium of minority owners."

"The combination of content of Hulu, Sky's Now TV and Hot Star in India would leave Comcast well positioned in the global OTT market," says Jefferies analyst John Janedis. Meanwhile, for Disney, "We think Hulu is also an 'important to have' if not a 'must-have' — for the same reason as it is for Comcast," Nollen argues.

So much is at stake in the showdown for Fox that would shape the streaming video future of the Hollywood giants bidding for it, but analysts say that the rights of minority owners of Hulu aren’t fully known, which could be a wildcard. Says Pivotal Research Group analyst Brian Wieser: “I think the minority owners may have some veto rights that we don’t know everything we might want to know about.”

Some reports have suggested that Comcast and Disney, if one of them wins Fox, could be willing to sell Fox's 30 percent share in Hulu while keeping its own stake to help seal a megadeal if regulators require it.

But analysts say the odds of that happening are slim unless their hand is forced — Hulu is just too valuable. Says Tuna Amobi of CFRA Research, "A potential controlling stakeholder in Hulu — either Disney or Comcast — is more likely to leverage the platform as an important component of its overall direct-to-consumer strategy."

A version of this story first appeared in the June 20 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.