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We can unpack this Disney-Fox deal for years because it remains infinitely interesting beyond the major implications, such as: you’ll be soon be sending Disney a bunch of your dollars earmarked for streaming, the Fox broadcast network might implode or be sold, etc. Also, if you can imagine Mickey Mouse as a fierce, beaten-but-unbowed combatant in an old-school Japanese B-movie, he’s currently staring down a wobbly, disoriented Godzilla. (In this scenario, Godzilla is Netflix, but you probably/hopefully knew that.)
But a more minor aspect of the merger that bears some examination is: What’s going to happen with Hulu, which Disney, in the pending deal, is set to acquire Fox’s 30 percent stake in, and — since it already owns 30 percent via Disney/ABC Television group — gain a controlling interest?
Hulu’s coming-out was one of the feel-good stories of 2017. Its subscribers were up, it increased how much it would spend on original programming to $2.5 billion — and that’s domestic, before you scoff about Netflix and Amazon — then went out and won an Emmy for best drama series with The Handmaid’s Tale, becoming the first streamer to do so (and tacked on outstanding lead actress, supporting actress and writing awards). Now it’s poised for an infusion of media empire money exactly when it’s blossoming.
Basically, Hulu just got a whole lot more dangerous.
But the weird part of this is nobody knows how Disney will use Hulu after the deal goes through. If Disney wanted to sell, there would be a few possibly eager buyers. You may have heard Apple has a lot of cash and people are confused about what they plan to do with it. Stranger things have happened — like Disney buying most of the better working parts of Fox. You never know.
Or maybe Disney would even sell to Comcast, which has started up its own streaming service, Xfinity Instant TV, an entity that is already limited in scope and overpriced before anyone has even heard of it. But don’t be distracted by that side venture.
NBCUniversal was a 30 percent owner and equal-rights voter in Hulu, but when Comcast bought it, the FCC demanded it give up its voting rights at Hulu — and it won’t get them back until September of this year. If Disney sells its post-merger 60 percent stake to Comcast, it would own 90 percent, immediately transforming the company into a real streaming player.
And yet, who is going to bet against that Apple money, when Apple desperately needs a back catalog of content to be relevant when it eventually goes live as a streaming service for TV series in its new iteration?
See? Hulu speculation is complicated. Oh, but it goes way beyond whether Disney sells it.
Pre-Fox deal, Disney had already announced two upcoming OTT streaming services, one for sports in 2018 under the ESPN banner, and another, more massive, direct-to-consumer Netflix-like offering in 2019 under the Disney brand, which would encompass its movie holdings (Disney Animation, Star Wars, Pixar, Marvel, etc.), plus other Disney/ABC television titles. Some suggested that Hulu would simply replace the as-yet-unbuilt Disney streaming service — a turnkey operation that would give Disney a large, established subscriber base, with some in the industry predicting it would take Disney’s new OTT offering years to scale up to the size of Hulu.
But that doesn’t really make sense to me because such a move would cut against Disney’s investment in what its execs have touted as the most revolutionary streaming technology, delivered by a company called BAMTech, the engine behind Major League Baseball and National Hockey League (and Major League Soccer) streaming services. Ask any sports fan who’s used it — or many tech folks — and they’d most likely tell you BAMTech is the bomb. That’s why Disney previously bought 33 percent of the company, with an option to buy another 42 percent.
Then, last summer, Disney exercised that option, bringing its stake in BAMTech up to 75 percent, right before announcing its twin streaming plans. So, yeah, it was always going to build its own service with the ace BAMTech technology.
Which leaves Hulu where?
If you discard the sell-it-off theory, how would Disney keeping it make sense? How many streaming services does one company need? Well, if you’re Disney and you’re worried about tainting the core family brand with sex and violence, then three could certainly work. Meaning, if Disney is hell bent on keeping the movie offerings on its new service more family friendly (the vast majority of Marvel movies top out at PG-13), it could make Hulu the destination for edgier, more adult offerings, along with all of the FX Networks series Disney will also acquire in the Fox deal (virtually all MA-rated), plus 20th Century Fox content from both the film and TV side. National Geographic, which Disney also gets, could go on either platform.
Also, if Disney decides to keep Hulu, despite the fact that it could likely offload it to Comcast or Apple at an extraordinary mark-up, its two nascent streaming competitors would have to scramble to launch and scale up their own streaming services, while Disney takes on Netflix, in a scene probably less exciting than the one described at the top.
Also in the keeping-Hulu-makes-sense ledger is this entry: Remember, before Disney announced plans to buy Fox, it had already made the decision to pull programming from Netflix, but decided to leave the Marvel TV series — likely because their violent, sometimes sexy content would not be a brand-fit for Disney’s new platform. That not only points to Disney ultimately keeping Hulu but raises the question of how long, once the deal goes through, Disney will keep parking Marvel TV content at Netflix before shifting it over to Hulu.
Some big — and fascinating — fallout still remains from this game-changing deal. And the decisions Disney makes after the deal, one way or the other, will create a domino situation elsewhere in the industry. Mickey is definitely mucking things up.
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