Disney Now Owns All Of Hulu, The World Series Tanks
Disney Now Owns All Of Hulu
The history of Hulu can often sound a lot like the nursery rhyme “The House That Jack Built.”
It was initially started by four of the five major industry players—Comcast (NBC), Disney (ABC), Fox and Time Warner as a way to combat the TV Everywhere apps the MVPDs were proposing. Rather than let their sworn enemies have access to all those viewers who might want to watch first run series on demand, the Gang of Four started a paid-with-ads service that would give viewers access to those shows. (There was also a free ad-supported version with a very limited offering, arguably the first FAST.)
It was, in retrospect, a harbinger of the ill-fated decision they all eventually made to try and become “the next Netflix” and launch their own streaming service. Versus letting the MVPDs go ahead with their TV Everywhere apps, a decision that would have allowed them to retain the billions they make from carriage and retrans fees. I’ve done a full dissection of that mistake here.
Hulu underwent a number of transformations over the years—launching an ad-free version, moving into original content—but the biggest transformations were in ownership.
Disney bought out Fox, which gave them Fox’s share of the company. Time Warner became AT&T, which became Warner Bros. Discovery, and somewhere along the way they sold their share to Disney too.
Which left Comcast, and as part of another deal between Disney and Comcast, they were able to force Disney to buy their remaining 33 percent of Hulu for a minimum of $8.61 billion, a move they exercised this week.
Meaning Disney is now the sole owner of Hulu.
Why It Matters
Hulu has, in spite of itself, become quite the little player in the Not-Netflix streaming world.
As per Nielsen’s latest The Gauge measurement stats, Hulu is tied with Amazon Prime at 3.6 percent of streaming viewing, putting them well above the rest of the pack—Disney+, at just 1.9 percent is next on the list, followed by Tubi at 1.3 percent.
Hulu also has one of the more popular vMVPDs in Hulu Live TV, which currently has 4.3 million subscribers, making them the sixth largest pay TV provider (vMVPD or MVPD) in the US.
So it’s a valuable asset.
Sort of.
Hulu is a US-only service and Disney is a company with global ambitions.
So the question becomes, does Disney really need two streaming services—three, if you count ESPN+--and if not, how to combine them.
There’s an argument to be made that Disney needs to do what I suggested all of the streaming services do last week, which is to create a sub-brand for its more premium programming.
There’s also an argument that Disney has trapped Disney+ into a self-limiting audience of “parents with school-age kids” plus “people who like Disney’s superhero and other IP-based shows” and that a merger with Hulu would allow them to step out of that, while maintaining the Disney+ programming as sub-brands.
It’s part of a broader argument that in order to survive, all of the major SVOD services are going to have to become a version of a bundled pay TV service with news, sports and entertainment, the latter divided into multiple sub-brands by genre.
That will justify the higher prices they are going to have to charge, something we’d also talked about here early last month. It’s been gratifying to see a lot of other analysts writing about the inevitability of higher prices too, which would seem to indicate I’m not way out in left field. Well, at least on that one point, anyway.
There’s an argument to be made too for keeping Hulu and Disney+ separate and offering them individually or as a bundle. It creates more options for consumers and might help reduce the overall churn rate if subscribers need to sign up for a full year to take advantage of a discounted bundle.
Regardless, there is one thing that does seem certain though, which is that Disney will need to find a way to take Hulu, or some version of Hulu, or some version of Disney+ that includes Hulu programming, and launch it internationally.
That is going to be made somewhat trickier by the loss of all of those NBCU shows which will likely revert to Peacock. But it’s not as if Disney doesn’t have enough of a library on its own.
What You Need To Do About It
If you are Disney, remember that the US-version of Hulu has such a large percentage of ad-supported subscribers because that was the default and the ad-free version was the add-on. That’s not going to be the case as you roll out internationally, and so you are likely to run into the same struggles as your competitors in growing your ad-supported base.
Widening the price gap between ad-free and ad-supported seems to be the best way to remedy that.
If you are Disney’s competitors, pay attention to how they integrate their services—do they keep all three separate-but-bundled or do they attempt to merge them into a single service.
Also keep an eye on how Disney handles free. Do they launch their own FAST? Create a free tier for Hulu? Or just opt out of that business model altogether?
I am going to be on Scripps News this morning (Friday 11-3-23) at 8:45AM ET to discuss the Hulu-Disney deal.
2. The World Series Tanks
Granted, there is a lot going on in the world right now. (How’s that for understatement?)
And the two teams playing represented relatively small markets (Dallas and Phoenix) and do not have the decades long history of other smaller market teams like say the Cincinnati Reds.
Still, the dismal ratings for this year’s World Series were not a good look for the league, especially as live sports shifts to streaming and questions about the value of sports rights heats up.
To wit, Game 3 only had 8.13 million viewers, an all-time World Series low. Which looks even worse when put into perspective: The NFL game between the Detroit Lions and Las Vegas Raiders that ran opposite Game 3 reached 15.2 million viewers, 8.36 million on ABC alone.
Historical perspective does not make those numbers look prettier either: the 2022 World Series between the Philadelphia Phillies and the Houston Astros reached an average of 11.76 million viewers.
Why It Matters
Major League Baseball is aware it has an image problem.
The game is perceived as being old-fashioned, way too slow and way too long.
To combat this, the league has tried introducing changes, such as this year’s shifts around the amount of time pitchers could take between pitches.
This was generally well received and regular season ratings did in fact go up a whopping 26 percent this year.
So why the postseason drop?
That is a question that is sure to be debated up until October 2024 and beyond. Part of it has to be attributed to the current news cycle and part to the general unsexiness of the participating teams.
But is that all?
The NBA is routinely dinged for a playoff season that seems to last almost as long as the regular season. But they’ve been able to maintain interest, at least thus far.
It’s important because sports rights will be a major battle in the shift to streaming. If for no other reason than that they are one of the only ways to reach a certain subset of affluent, educated consumers who otherwise don’t see ads.
As in they subscribe to the ad-free versions of all their streaming services and deploy ad blockers on their browsers. So live sports are the only way to reach them, making those properties even more valuable than they are already.
Major League Baseball will need to prove that it is also an ideal vehicle to reach those fans if it wants to reap the benefits.
What You Need To Do About It
If you are MLB, you need to do a serious postmortem on why your postseasons ratings tanked while your regular season ratings soared. Was it just a case of bad timing or could you have marketed the World Series more effectively? How much did only having them available on broadcast work against you?
You have a lot to figure out these days in general—the whole RSN mess—but the World Series is a big deal and more than 8 million people should be watching.