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Comcast Mulling Sale of Hulu Stake to Disney (Report)

Comcast is holding talks with Disney to see if they can hammer out a deal to sell Comcast’s one-third stake in Hulu to the Mouse House — which would give Disney full control over Hulu, CNBC reported.

The report comes a little over a week after AT&T sold its 9.5% stake in Hulu to the joint venture’s two remaining owners, Disney and NBCUniversal, for $1.43 billion. That deal valued Hulu at $15 billion.

On Comcast’s first quarter 2019 earnings call Thursday, chairman and CEO Brian Roberts didn’t shed any light on whether the company was considering exiting Hulu but signaled that Comcast was sitting tight for now.

“On Hulu, the relationship with NBC, that is very much in everybody’s interest to maintain,” Roberts said on the call. “And we’re… have no new news today on it, other than it’s really valuable. And we’re really glad we own a large piece of it.”

A Comcast rep declined to comment on the CNBC report, referring to Roberts’ comments. Hulu declined to comment. A rep for Disney didn’t respond to a request for comment.

The CNBC report, citing anonymous sources, said Comcast is “weighing the pros and cons of doing a deal now rather than later” but added that it’s unclear if the companies will consummate a deal.

Earlier this year, NBCUniversal chief Steve Burke told Variety in an interview that no deal was imminent with regard to selling the Hulu stake. “Disney would like to buy us out,” he said. “I don’t think anything’s going to happen in the near term.”

Disney secured 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. 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%.

AT&T sold WarnerMedia’s stake in Hulu to help pay down its debt and, given Hulu’s ongoing losses and the fact that WarnerMedia had no board seats, the telco was a ready seller. Note that the WarnerMedia stake was sold to both Disney and Comcast — rather than to Disney alone — which suggested NBCU wants to remain a player in Hulu.

NBCUniversal is developing its own ad-supported streaming service, slated to hit in 2020, that would be free to existing pay-TV customers or available for a fee to those without.

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

At the Disney Investor Day on April 11, Disney CFO Christine McCarthy projected Hulu will have 40 million-60 million subscribers by the 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 doesn’t 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.

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