Disney acquired 21st Century Fox at a price of just over $71 billion after an extended bidding war with Comcast. In addition to Pixar Animation Studios and Marvel Entertainment, Disney gained ownership of “Titanic,” “The Simpsons” and “Avatar,” among other movies and TV shows. The deal also gave Disney the controlling stake in Hulu’s online streaming service.
Disney plans to gain full control of Hulu
Disney executives understand there is value both in production and distribution. Therefore, they will “acquire Comcast’s one-third stake in Hulu” and take full control of the streaming company over the next five years.
The acquisition comes at a minimum cost just below $6 million, but it could be higher depending on the determination of Hulu’s fair market value.
Plans to increase Hulu’s value
While Disney’s Chief Executive Officer (CEO) anticipates a Hulu loss greater than $1.5 billion this year, he believes the service’s subscriber base will top 40 million, and produce a profit, by the time they take control of the company around 2024.
While Hulu competes with Netflix’s 148 million subscribers, Hulu recently reduced the cost of ad-supported streaming to increase their subscriber base. They also have plans to grow their advertising revenue. While Americans prefer ad-free streaming, Hulu may become more competitive through their lower fees.
According to Hulu’s latest forecast:
- Hulu expects nearly 23% growth in ad revenue between this year and next
- Ad-supported subscriptions have increased by 40% since May 2018
- Over half of those involved in a recent study reported that if they are paying a reduced rate, they do not mind viewing ads
If mergers and acquisitions are in the future of your business, you may find encouragement in the fact that companies are willing to negotiate deals of this size. While you may not have billions to work with yet, you may be able to find innovative ways to reach your maximum growth potential.