While he concedes there's "no indication" that Disney and Comcast will use ongoing pay TV carriage renewal talks to also settle their negotiation over the buyout of the latter's stake in Hulu, MoffettNathanson analyst Craig Moffett lays out a compelling reason for why Disney should consider pressing the additional topic.
In short, Moffett has pretty bullish growth projections for Hulu. He predicts the subscription streaming joint venture to grow from a current 43 million subscribers to 65 million by 2024. Annual revenue, Moffett believes, will expand to nearly $15.7 billion at that time.
Comcast owns a non-controlling 33% stake in Hulu. And starting in January 2024, either Comcast or Disney can demand that Comcast be bought out of its one-third share, with a floor value set at $27.5 billion.
Despite guidance from Disney that Hulu won't achieve profitability until 2023, Moffett estimates the that the streaming service has been profitable for the last two quarters, generating $2.5 billion in the last quarter alone, fueled by subscription price increases and ad sales on the service's popular ad-supported base tier.
Of course, the bigger and more profitable Hulu is, the more Comcast's price tag swells beyond a mere $9 billion.
Conducting speculative calculations based on the growing values of Hulu's respective subscription video on demand and virtual MVPD businesses, Moffett postulates that the streaming service's combined value could reach $57 billion by 2024. Depending on how much equity Comcast continues to contribute to the JV at that time, Disney could owe as much as $18.8 billion to buy Comcast out.
Currently, the two companies are having what appear to be amicable talks about renewing a 10-year deal to keep channels including ABC and ESPN on the No. 1 U.S. cable TV service.
"Talk of an all-encompassing deal that wraps the industry's most important network-distributor relationship and sends Comcast home with a multibillion check is likely wishful thinking," Moffett wrote in his Thursday note to investors.
