Here's What Disney Should Do with Hulu
Disney is set to pay Comcast for its remaining stake in Hulu soon. Here's what should happen next.
Welcome:
First, a personal note. I’m happy to share that the community pool has been absolutely popping off. If you’re a personal friend of mine and you’re reading this, you simply must “come through”. Shout out to Lane Swim Club.
Next, a programming note. I’m planning to examine the major streamers and what purposes they serve their parent companies over the next few editions of State of Play. I had to kick that off with my favorite streamer.
One Big Trend: Hulu will finally know love. Maybe.
Photo by Wengang Zhai on Unsplash
Hulu has had such a journey. Throughout its entire existence it has had multiple owners with competing priorities who have never given it the attention it deserves. Somehow, in a highly competitive environment littered with failures, that has not stopped the service from becoming one of the most successful streamers around. It has earned revenue and acclaim. Hulu + Live TV is the second most successful “skinny bundle” offering behind only YouTube TV. How has this happened?
That is a tough question to answer! Despite my obsession with Hulu over the years (here’s a piece from 2020 and here’s one from 2018) I’ve never been able to completely understand why the service does so well. It’s not the inclusion in the Disney Bundle, it was doing well far before that. It’s not just the edgy work from FX or playful new hits like “Only Murders”, because that work spans years and includes different leadership teams. It’s not just “The Handmaid’s Tale” but oh man, did you even remember that Hulu made “The Handmaid’s Tale”?
My best guess? Culture! Hulu has always been an overachieving underdog, a place no one expected much from that has consistently delivered in an exceptional way. Don’t forget that while ownership groups and top floor executive teams matter, all these companies are made up of hundreds of folks who are kicking around on floors 1 - second-to-the-top. I’m betting that at Hulu there is a whole lot of grit and determination to excel.
Whatever it may be, Hulu finds itself at another turning point. Disney has had full control of the company for a while now. However, it has also known that it has to pay Comcast for the 30% of Hulu it still owns. Disney would deny this, but many have suspected that Disney has slow played some of its plans for Hulu, worrying that too much success would result in too much of a payday for Comcast.
Currently, the companies are in a very intense arbitration. Disney’s bank of choice valued Hulu at $30 billion, while Comcast’s valued it at $40 billion. The terms of their deal say that gap is too wide to average, and so they need to go find a third bank to help them reach a deal. It’s insanity!
(As a side note, what a strange coincidence that each company’s chosen bank ended up with a valuation each client desperately wanted! I’m sure everything was done very officially and with no meddling at all.)
At the end of the day, though, Disney is going to cut Comcast a check and then be in sole control of Hulu with no reason to hold back. For the first time ever, Hulu will have one owner that has a clear goal of growing the service. So, what will Disney do with Hulu?
The obvious play is to continue bundling Hulu with Disney+ and ESPN+ for those who are interested. As The Great Rebundling continues, I’d also consider pairing Hulu up with other services that provide general entertainment. While those are truly boring decisions, they should be done. That’s table stakes.
Where it gets fun is when you start to think of Hulu + Live TV and how that offering could intermingle not with streamers, but with connectivity services. Internet providers, whether they be cable, Fiber, Fixed Wireless, or even just mobile, should partner with Hulu + Live TV to bring a wide variety of entertainment to customers. This is the perfect proposition in The Great Rebundling. You could, of course, pair this with ESPN+ and Disney+, but you can go far beyond that. The only other skinny bundle that competes with Hulu + Live TV is YouTube TV, which has been growing by leaps and bounds. Some of that growth, I truly believe, is because of a lack of awareness about what other options there are. I think Disney has been holding back on promoting Hulu + Live TV, and that once their deal with Comcast is in the past, they should and will lean in on this.
If I were Disney, I’d also look to be a buyer for other small services you can package up or simply fold into Hulu. Don’t just buy anything, people don’t want to return to the days of cable where there’s a ton of junk of TV. Even the FAST providers are seeing customers start to migrate from random nonsense to their originals or their more premium programming. There are plenty of smaller streamers that would be low cost acquisitions yet offer quality to a new bundle, with Hulu + Live TV sitting in the middle.
This would be a bold move for Disney. That being said, it would allow for a clear distinction between it’s flagship service, Disney+, and Hulu. It would take advantage of what Hulu has built and allow it to excel into the future. It would give it a real meaning and purpose.
Why should you care?: Hulu has always survived despite the odds. What if a company like Disney put some force behind it. Could it be the next entertainment success story? In my mind, there is no doubt.
Wrestling Fact of the Week:
For the past few years, WWE has been focused on expanding internationally. That effort has gone into overdrive this year, as the company has hosted multiple Premium Live Events (major shows that used to be called Pay Per Views) overseas. This has sold a lot of tickets and gotten international fans really excited. There are even rumors of an event like WrestleMania or SummerSlam being held in London.
My take on this is that while it is really great to see, I wonder if it is sustainable in the long term. Fans will shell out to go to one or two major events when they don’t happen that often, sure. But is it something they can rely on long term? A well they can keep going back to? Additionally, these events are pulling major events from the US. At some point, will that lead to too much scarcity here? I’m all for enjoying the ride right now, but I am curious to see where it leads.
Have a great rest of your week.