Disney Picks Another Fight With A Cable Company With Billions and Hulu’s Future at Stake

Disney is having a bit of a public relations problem. On the weekend college football started, they pulled ESPN from the 14.5 million households with Charter Communications, causing them to miss the entire weekend of games. With the NFL about to start, the Walt Disney Company and Spectrum are no closer to a deal, and customers are angry with both sides. Although, angry is a bit of an understatement.

But after picking a fight with America’s second-largest cable provider, Disney now turns its sites to the largest. Disney and Comcast are currently embroiled in a feud over the future of Hulu, and both sides have dug in with no possible solution in sight.

Comcast is America’s largest cable company, with over 31 million subscribers, and one of Disney’s biggest rivals. Comcast also owns NBC/Universal, which runs Universal Studios Theme Parks and made one of the year’s biggest movies, The Super Mario Bros Movie. So, it’s easy to say that the relationship between the two companies is tense.

The Walt Disney Company owns two-thirds of Hulu and provides most of the content for the streaming service. Comcast owns the final third of the company, and Disney can purchase the remainder in early 2024. But there is a major sticking point between the two sides: money.

But then today, Comcast threw another wrench into this negotiation. It announced that they had moved the date to complete the purchase to September 30. So rather than having the remainder of the year to continue negotiating, Disney and Comcast must come up with a price by the end of the month. Like everyone else, Comcast sees that Disney is vulnerable and fights battles on several fronts. This allows them to develop a number when Disney needs some good press.

When the sides struck their deal, they set a floor valuation of Hulu at $27.5 billion, meaning Disney would have to pay a little over $9 billion to purchase Comcast’s shares. And here’s where the sticking point comes in: Comcast has now decided that Hulu is worth at least double that amount and would like Disney to pay nearly double the original price of $9 billion.

Several analysts who spoke with Business Insider believe that Hulu’s value is around $34 billion, not the outrageous number Comcast is seeking, but slightly more than Disney’s floor number. However, nearly all of them agreed that the animosity on the two sides doesn’t make a settlement easy, and this will most likely end up before an arbiter, which would only add to the risk that Disney is facing.

No matter what the arbiter decides, Disney will be on the hook for that amount and will most likely have to borrow to pay Comcast. This leads to Disney CEO Bob Iger’s greatest fear: a decline in earnings.

Jason Bazinet, an analyst for Citigroup, told Business Insider:

Your earnings are going down because now you’re going to have to pay interest on $10 billion of debt, and you’re going to own 100 percent of something that doesn’t generate profits or very little profits. So, if you’re a Disney shareholder, you’re like ‘What did I just get? I got nothing.’

Disney needs Hulu’s content and ability to generate money through ad sales. Disney recently raised the price of a Hulu subscription without ads but kept the ad service the same price. There is also Hulu Live TV, which Disney has been promoting as a replacement for Spectrum.

Disney also needs a landing spot for its 20th Century Fox content, which Hulu gives them. Disney also offers the Disney bundle with Hulu, Disney Plus, and ESPN Plus, which allows subscribers to get all three for a low price.

All analysts seemed to agree that Disney would complete the purchase of the streaming service, but the cost is still in question. If Comcast CEO Brian Roberts and Disney CEO Bob Iger can get over their mutual loathing and do what’s best for their companies, perhaps a deal could be imminent, but probably not.

And if it comes down to it, Comcast can simply force Disney to purchase its stake in Hulu, and it will come down to the arbiter’s decision, which might not end the way Disney wants it.

Either way, Disney cannot afford another public relations nightmare. They’ve had enough of those recently.

We will continue to update this story at Disney Fanatic.