Potential Changes Coming for Hulu

By: Brandon McClure

Hulu is an American streaming service that specializes in television. It grew in popularity by being the only place where you could watch new episodes of your favorite television shows the night after they aired. Hulu is a joint venture between Disney (30%), NBC/Universal (30%), 20th Century Fox (30%), and Time Warner (10%).

Now offering live television and Showtime packages, Hulu has grown into a streaming giant to rival Netflix and Amazon. What started as a free service to catch up on last night’s episodes or binge watching your favorite shows, now has turned into a paid service that includes critically acclaimed original content.  Hulu has grown subscribers 48% every year with no sign of slowing down. Through all their growth, they never lost sight of their roots: A home for people to catch up on their favorite shows.

That could all change as the merger between The Walt Disney Company and 20th Century Fox looms ever closer. Disney is about to own a majority stake in Hulu with 60%.  With this 60% majority, Disney has made a plan to use the service to house all mature orientated content. Currently, Disney already uses the service to air their more mature Marvel content like Runaways, and the, in development, Howard the Duck animated series. Disney will continue this practice in order to differentiate itself from the upcoming Disney+ streaming service which will be home to more family orientated content.

With all the news of the Disney/Fox merger it’s easy to forget that another major merger is happening in the entertainment world. AT&T has started the process of merging with Time Warner giving it control of WarnerMedia and all its subsidiaries, including the 10% stake in Hulu. John Stephens, AT&T CFO, cited it’s investments “in things like Sky Mexico or Hulu” as assets they could sell to help offset the cost of a merger with a corporation like Time Warner. Stephens makes it clear that AT&T is not attached to the 10% stake in Hulu, probably due to Warner not having a seat on the board and their DirecTV- DirecTV Now investments, and therefore would be open to an offer from a rival company.

Disney seems very interested in that kind of deal as it would give them a 70% stake in Hulu leaving NBC/Universal as the remaining holdout with the remaining 30%. It’s not clear how long NBC/Universal would hold out to keep it’s 30% stake in the streaming giant, but the writing is on the wall, with CEO Steve Burke saying “Disney would like to buy us out... I don’t think anything’s going to happen in the near term.”

At an earnings call for Hulu’s fourth quarter in 2018, Bob Iger, CEO of Disney, refused to speak about any long term growth plans for Hulu until the Fox merger is complete. It isn’t a wild assumption to assume that Disney could help Hulu grow in foreign markets, allowing it to reach a wider audience. Currently Hulu is only offered in the United States, its territories and Japan. While most of Hulu’s programming is aired on channels such as Sky Atlantic in Britain, Hulu would be able to “cut out the middleman” as it were and offer it’s programming straight to the consumer.

The downside to something like this could mean NBC/Universal pulling all programming away from Hulu and onto another streamer, or, more likely, create their own. Creating streaming services isn’t easy in such a competitive market, but that won’t stop WarnerMedia from entering the streaming race by the end of this year. Even if Disney were to allow deals to be made so that NBC/Universal and Fox Entertainment could keep their programming on Hulu, they would have no reason to do so since they would be helping a direct competitor.

As the end of an era approaches, one can only speculate what long term effects the Disney/Fox merger will create. We can only wait and see how the landscape will change.

 

If you want more of Brandon T. McClure (@BTMcClure) listen to the Fake Nerd Podcast and Mythellaneous on iTunes or your favorite podcasting app.

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