Nearly all of Hulu’s 2,000-plus employees learned about Disney’s deal to take full control of their company on Tuesday the same time the rest of the world did — when the Mouse House and Comcast announced details of their agreement around 9 a.m. ET.
Shortly after the official announcement, Hulu CEO Randy Freer sent an internal memo about the news and held calls with teams later in the day from New York.
The initial reaction among Hulu insiders: They’re bullish on coming fully under Disney’s wing, and optimistic that their sole corporate parent is fully committed to investing in Hulu’s success — both doubling down in the U.S. and setting a course for international expansion. Within the Disney direct-to-consumer streaming portfolio, Hulu will be the outlet for premium originals targeted at an adult audience, alongside Disney Plus and ESPN Plus. “We will immediately get to work with FX producing content for Hulu,” Disney CEO Bob Iger said Tuesday, speaking at the MoffettNathanson Media & Communications Summit.
Among Hulu personnel, there’s also a sense of relief at finally having a single owner to set strategic direction, after having a management-by-committee structure since its inception as a joint venture in 2006 by NBC and News Corp. (originally conceived as TV networks’ response to counter YouTube).
Of course, Disney’s full takeover of Hulu didn’t come as a shock. Hulu insiders expected that to eventually happen back in late 2017 when Disney announced its agreement to acquire major pieces of 21st Century Fox, and Disney had made it clear it wanted to buy out Comcast’s share.
Sources tell Variety that Hulu employees felt the Disney-Comcast deal was a vote of confidence — validating how valuable Hulu has become. They pointed to Disney’s pegging a minimum value for Hulu of $27.5 billion by 2024 (when the Comcast/NBCUniversal 33% stake is due to be sold back to Disney), up 83% from $15 billion when AT&T sold WarnerMedia’s stake earlier this year.
Recall that several years ago, Hulu’s future was deeply uncertain. In 2013, Hulu’s owners shopped the streaming venture to multiple bidders. Ultimately, the media companies decided to hold on to Hulu, but not before the exit of top execs including then-CEO Jason Kilar.
For now at Hulu, it’s still business as usual: Day-to-day, managers are more focused on the performance targets they’re expected to hit. Disney has already laid out an aggressive growth trajectory for Hulu, projecting that its paid subscriber base will hit 40 million-60 million by the end of fiscal year 2024. Hulu said it had 26.8 million paid subs earlier this month.
One of the main changes with the Disney-Comcast agreement: Hulu CEO Freer now reports directly to Kevin Mayer, chairman of Disney’s Direct-to-Consumer and International division, which was formed in a reorg a little over a year ago. Freer was said to be in all-day long-term planning meetings Wednesday with Mayer and other execs in New York.
Previously, Freer had reported to Hulu’s board of directors, which had comprised Disney, Fox and Comcast/NBCU representatives. With the deal, Comcast is relinquishing its three Hulu board seats, held since last September by Universal chairman Jeff Shell; Linda Yaccarino, chairman of NBCU advertising sales and client partnerships; and Matt Bond, NBCU’s chairman of content distribution.
The bigger picture for Disney is that operational control of Hulu will let it potentially better integrate or bundle Hulu’s three tiers — ad-supported VOD, ad-free VOD and live TV — with Disney Plus, coming this fall, and/or ESPN Plus, Morgan Stanley analyst Benjamin Swinburne wrote in a research note.
Another significant piece of the Disney-Comcast deal was that it locked in a programming deal with NBCU through 2024. Yes, NBCU has the option to bring titles previously licensed exclusively to Hulu — like “Saturday Night Live” — to its own service on a nonexclusive basis starting in 2020. And within three years, it has the right to claw back additional content. But the new agreement will provide more stability for next few years with NBC content specifically compared with where things stood previously, sources said.
“Access to NBC’s in-season rights and library content over the next 3-5 years increases our confidence in Disney’s ability to deliver on its Hulu FY24 guidance,” Swinburne wrote.
The details around Hulu’s deal with Fox Corp., the company that encompasses the former 21st Century Fox’s broadcasting, sports and Fox News businesses, are less clear. But the new Fox has a longstanding, wide-ranging content-licensing agreement with Hulu that is not expiring anytime soon, sources said.
Disney stands to gain operational synergies by pooling infrastructure that powers Hulu, Disney Plus and ESPN Plus with Disney Streaming Services (the group formerly known as BAMTech). The details on this front have yet to be fully fleshed out, but Hulu is expected to retain some level of its own technology stack going forward.
Meanwhile, one of the internal questions bouncing around among Hulu insiders in the wake of the news: Will employees now get perks like going to Disneyland for free (or at least a discount)? It’s sign of the positive mood at Hulu — especially in contrast to Disney’s film divisions, which were hit with a new round layoffs hit both Walt Disney Studios and 20th Century Fox.