Disney+, Hulu Content to Combine into One Streaming App

Disney will be combining Hulu content with Disney+ content into one app in the U.S., CEO Bob Iger announced Wednesday.

The company will begin to roll out the new app by the end of the calendar year. For now, this option will only be available to consumers who have subscribed to both services.

“While we continue to offer Disney+, Hulu and ESPN+ as standalone options, this is a logical progression of our DTC offerings that will provide greater opportunities for advertisers, while giving bundle subscribers access to more robust and streamlined content, resulting in greater audience engagement and ultimately leading to a more unified streaming experience,” Iger said on the earnings call.

“The advertising potential of this combined platform is incredibly exciting,” Iger added.

Iger added that Disney’s purchase of Comcast’s stake in Hulu still has not “been fully determined,” but that after studying the business potential, he now sees a benefit in retaining general entertainment content (as seen on Hulu) in combination with Disney.

“I mentioned on the first earnings call that I did after I came back that everything was on the table. And in fact, everything was on the table,” Iger said. “But I’ve now had another three months to really study this carefully and figure out what is the best path for us to grow this business and it’s clear that a combination of the content that is on Disney+ with general entertainment is a very strong combination from a subscriber perspective, from a subscriber acquisition-subscriber retention perspective and also from an advertiser perspective.”

“How that ultimately unfolds is to some extent in the hands of Comcast and in the hands of a basically a conversation or a negotiation that we have with them,” Iger said, adding that Disney had already had some “cordial” conversations with Comcast already.

Disney holds the majority stake in Hulu, while Comcast owns a third. Starting in January 2024, Comcast can use its put option to require Disney to buy its stake, or Disney can use its buy option to force Comcast to sell its stake.

The Disney exec had previously signaled a greater willingness to part with the streaming platform. Iger appeared on CNBC on Feb. 9, and spoke about Disney wanting to move away from “undifferentiated entertainment,” saying of Hulu: “Everything is on the table right now, so I am not going to speculate whether we are a buyer or a seller of it.”

The CEO doubled down on that at an investors conference in March, saying the company was continuing to evaluate the best options for Hulu.

“What we’re doing right now — because we own two-thirds of Hulu, and we have an agreement with Comcast that may result in us owning 100 percent — is we’re really studying the business very, very carefully, all those competitive dynamics with an understanding that we have a good platform in Hulu,” Iger said at the investors conference.

We have very strong original programming, actually highly awarded original programming, some delivered by FX, which is a great not only producer but brand, and we also have a good library, so it’s a solid platform. And it’s also a very attractive platform for advertisers. It’s already proven to be valuable for them and advertising is proven to be valuable for us. But the environment is very, very tricky right now and before we make any big decisions about our level of investment, our commitment to that business, we want to understand where it could go,” he continued.

Up until Iger’s comments this winter, Disney had appeared to be ready to buy out Comcast’s stake. However, in the fall, Comcast CEO Brian Roberts had also expressed an interest in taking over Hulu ownership — though many saw his comments as a move to drive up the price of his company’s stake.

On Wednesday, Iger appeared to making Hulu more of an inextricable part of Disney, while also touting its advertising prowess.

Hulu’s SVOD platform, as well as its SVOD and live TV package, is bringing in more per user than Disney makes on any other of its streaming offerings, even as segment results declined in the first quarter.

However, Iger said Disney also plans to increase prices on ad-free tier later this year, which he said will “better reflect the value of our content offerings.” This comes after the media and entertainment company had already raised prices in a move that Iger says has “proven successful.”

In the three months ended April 1, Hulu’s SVOD Only average monthly revenue per paid subscriber decreased to $11.73 from $12.46, which Disney said was “due to lower per-subscriber advertising revenue and a higher mix of subscribers to multi-product offerings, partially offset by an increase in average retail pricing.” The live TV+ SVOD package increased to $92.32 in average monthly revenue per paid subscriber up from $87.90 a year ago.

Within the direct-to-consumer segment, Hulu dragged down the total operating income, which Disney attributed to an increase in programming and production costs and lower advertising revenue for the quarter, which the company noted was “partially offset by subscription revenue growth and, to a lesser extent, lower marketing costs.”

In the three months ended April 1, Hulu’s number of paid subscribers (which includes both SVOD as well as the live TV and SVOD package) remained largely flat year-over-year, hitting 48.2 million, up from 48 million a year ago. These numbers are largely in line with Disney+’s domestic subscriber numbers of 46.3 million (which fell 1 percent from the prior year).

May 11, 2023