×

Hulu Acquires AT&T’s 10% Stake in Streaming Venture for $1.43 Billion

AT&T has sold its 10% minority stake in Hulu — now majority owned by Disney, with the rest held by Comcast — back to the streaming-video joint venture for $1.43 billion.

The transaction values Hulu at $15 billion. According to the companies, the transaction didn’t require any governmental or other third-party approvals and was simultaneously signed and closed.

“We thank AT&T for their support and investment over the past two years and look forward to collaboration in the future,” Hulu CEO Randy Freer said in a statement Monday. “WarnerMedia will remain a valued partner to Hulu for years to come as we offer customers the best of TV, live and on demand, all in one place.”

AT&T is exiting Hulu as the telco’s WarnerMedia division gears up for a late 2019 launch of its own subscription streaming services — and could mean that WarnerMedia will at some point try to pull back content licensed to Hulu.

As reported by Variety in February, Disney had been in active discussions with AT&T about acquiring the telco’s minority stake in Hulu (technically 9.5%). Disney obtained 60% ownership of Hulu after it acquired the entertainment assets of 21st Century Fox for $71 billion, a deal that closed in March. The remaining 30% was held by Comcast/NBCUniversal. Earlier this year, NBCU chief Steve Burke signaled that he doesn’t want to exit Hulu in the near future.

“Disney would like to buy us out,” Burke told Variety in a January interview. “I don’t think anything’s going to happen in the near term.”

The fact that the AT&T/WarnerMedia stake in Hulu was sold to the JV — rather than to Disney — is further indication that NBCU wants to remain a key player in Hulu. NBCUniversal is cooking up its own streaming plans, slated to hit in 2020, that would be free to existing pay-TV customers or available for a fee to those without.

So what is Hulu’s ownership breakdown vis-a-vis Disney and Comcast at this point? According to a Hulu rep, “Hulu is the entity purchasing AT&T’s shares, and Hulu’s owners now have a window of time to allocate the shares.”

Disney and Comcast reps didn’t immediately respond to a request for more info. Assuming AT&T’s 9.5% stake is apportioned according to their previous ownership stakes, Disney would own two-thirds (67%) of Hulu, with Comcast/NBCU owning the remaining 33%.

The $15 billion valuation for Hulu that’s implied by the AT&T sale is a significant increase over its previous estimated worth: Disney last summer in a regulatory filing had projected Hulu’s fair value to be $9.3 billion after the 21st Century Fox deal closed.

And it’s more than 2.5 times the $5.8 billion valuation for Hulu when Time Warner originally made a $583 million investment in Hulu in August 2016. Following its acquisition of Time Warner, AT&T execs have said they were considering divesting the Hulu stake.

On Monday, AT&T said it will use proceeds from the transaction to reduce its debt — including the billions it accumulated through the Time Warner acquisition — along with additional planned sales of other “non-core assets.”

Disney sees Hulu as a key plank in its direct-to-consumer subscription VOD lineup, alongside Disney+ and ESPN+.

At last week’s Disney Investor Day, Disney CFO Christine McCarthy projected Hulu will have 40 million-60 million subscribers by end of fiscal year 2024. She said Hulu’s operating losses are expected to peak at $1.5 billion in Disney’s fiscal year 2019 (which ends in September), with Hulu achieving profitability in FY 2023 or 2024.

Hulu’s losses have increased with its investment in technology and programming. For 2018, Hulu lost around $1.5 billion, up from $920 million a year earlier, according to Comcast’s most recent 10-K filing (which reports Hulu’s losses as a portion of its equity).

Hulu said it ended 2018 with more than 25 million total subscribers, a net gain of 8 million for the year. (Hulu does not break out how many of its subscribers are only on subscription VOD plans versus how many have live TV packages.) Last year, according to Hulu, it grew ad revenue more than 45% in 2018, to nearly $1.5 billion, a company record.

Formed in 2007, Hulu was born as a three-way joint venture of Disney, NBCUniversal and Fox. Originally it was designed as a free, ad-supported service to catch up on broadcast TV shows. Today it offers a subscription VOD tier with ads at $5.99 per month, with some 85,000 episodes and movies; an SVOD tier with no ads for $11.99 per month; and a live TV package that includes over 50 channels and access to SVOD for $44.99 monthly.

With Disney assuming majority control Hulu, execs at the media conglomerate have said they’re exploring the launch of Hulu outside the U.S.

More Biz

  • Bert Salke and Jennifer Salke

    Feds Looked Into Amazon Studios Chief Jennifer Salke in College Admissions Scandal

    Federal investigators looked into Amazon Studios chief Jennifer Salke and her husband, Fox 21 Television Studios president Bert Salke, as they conducted a sprawling probe of cheating in elite college admissions, a source close to the case told Variety. It does not appear, however, that prosecutors will charge the Salkes in the case. The Salkes [...]

  • Variety Cord Cutting Placeholder Cable

    Big Blackout Looms as CBS, AT&T Go Down to Wire on Renewal Talks

    A blackout affecting CBS stations in major markets throughout the country looms as CBS and AT&T executives go down to the wire on negotiations for a retransmission consent deal covering 28 O&O stations. The sides have sparred publicly during the past few days as 11 p.m. PT Friday expiration of the previous contract approached. AT&T [...]

  • Contract Placeholder Business WGA ATA Agent

    ICM Responds to WGA Packaging Lawsuit: Claims are 'Baseless' and 'Absurd'

    ICM Partners has asked a judge to dismiss the lawsuit filed against four major talent agencies by the Writers Guild of America as part of the larger war between agencies and the guild over packaging fees on TV series and movies. The guild sued ICM, CAA, WME and UTA in California state court in April, [...]

  • New York City NYC Placeholder

    CityFM Podcast Takes a Deep Look at New York’s Music Scene (Listen)

    First among the many projects listed at the beginning of New York Music Month in June was a WNYE radio show and podcast called CityFM that promised to “explore the city’s music culture, emerging artists and trends, and upcoming events told through the lens of what’s happening around the city in Summer 2019.” And while [...]

  • Live Nation Logo. (PRNewsFoto/Live Nation)

    Live Nation Confirms Placing Tickets Directly on Secondary Market at Artists’ Request

    Representatives for Live Nation, the world’s largest live-entertainment company and owner of Ticketmaster, confirmed that it bypassed conventional channels and directly placed thousands of concert tickets on the secondary market upon artists’ request, in an article published in Billboard. In a statement shared with Variety, the company acknowledged that it has facilitated the transfer of [...]

  • Costume designer Michele Clapton

    Costume Designers Fashion a Plan to Fight for Pay Parity in Upcoming Contract Talks

    The Costume Designers Guild Local 892 is gearing up to fight for pay equity in its 2021 contract negotiations with the Alliance of Motion Picture and Television Producers, establishing a pay-equity committee to raise awareness of the scale disparity between the mostly female CDG membership and the mostly male membership of the Art Directors Guild Local [...]

More From Our Brands

Access exclusive content