×
You will be redirected back to your article in seconds

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

  • Netflix-logo-N-icon

    Netflix Raises $2.2 Billion Through Junk-Bond Offering

    Netflix just went deeper into hock: The company announced the pricing of unsecured bonds in a transaction raising around $2.2 billion, giving it more cash to invest in content, real estate and infrastructure. The streamer had said Tuesday that it planned to raise $2 billion through a new debt offering, bringing its long-term debt to [...]

  • Ridiculous Six

    Netflix Benefits From Changes in New Mexico's Production Incentives

    When New Mexico’s new governor, Democrat Michelle Lujan Grisham, signed SB2 in late March, the headline was that it more than doubled the annual cap on the state’s 25%- to 30%-per-project refundable film and TV tax credit, from $50 million to $110 million.  Arguably more noteworthy, however, was the new law’s provision that the cap [...]

  • Gabrielle Union Marketing Summit

    Listen: How Gabrielle Union Bet on Herself and Changed Her Brand

    Actress Gabrielle Union said she was nearly 17 years past the expiration date of her mass appeal when she got the brand partnership of her dreams. “They tell you that after 26, ‘Honey, hang it up,'” Union said on the latest episode of the Variety podcast “Strictly Business.” The episode was recorded during a keynote [...]

  • Spotify logo is presented on a

    Spotify Sued by India’s Oldest Label, Will Remove Catalog From Platform

    Just weeks after Spotify launched in India without securing rights from Warner/Chappell Music Publishing, it is being sued by the country’s oldest record label, Saregama, and will remove that company’s 120,000-song catalog from its platform within 10 days, according to reports in Inc42 and Music Business Worldwide. The streaming giant had approached the label for [...]

  • DJ Mormile and Jeff Burroughs Def

    Def Jam Appoints DJ Mormile, Jeff Burroughs to Senior Posts

    Def Jam Recordings has appointed industry veterans DJ Mormile and Jeff Burroughs (pictured above, right and left, respectively) to senior executive roles in its Los Angeles and New York offices, respectively. The announcement was made today by label Chairman & CEO Paul Rosenberg. Mormile — the L.A.-based manager who counts producer Mike Will Made It and [...]

  • Mustard Signs With Sony/ATV Music Publishing

    Mustard Signs With Sony/ATV Music Publishing (EXCLUSIVE)

    Sony/ATV Music Publishing has signed Grammy-winning songwriter, artist and producer Mustard (formerly known as DJ Mustard) to a worldwide deal. The Los Angeles-based hitmaker has worked with artists including YG, Rihanna, 2 Chainz, Drake, Migos, Chris Brown, Nipsey Hussle, Big Sean and many others, and won Best R&B Song at this year’s Grammy Awards for [...]

  • NFL-Sunday-Ticket-DIRECTV

    AT&T CEO Expects DirecTV to Keep NFL Sunday Ticket Exclusively

    AT&T believes it will hang on to DirecTV’s exclusive rights for the NFL Sunday Ticket, even as the league has said it’s considering ending the satellite operator’s exclusivity to extend the out-of-home games package to streaming platforms. “The exclusivity [of Sunday Ticket] should remain as we go forward on DirecTV,” AT&T CEO and chairman Randall [...]

More From Our Brands

Access exclusive content