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Hulu sidelined in Disney's global streaming ambitions; Star wins

Disney's public explanation for choosing Star over Hulu overseas focused on a marketing issue

Disney streaming service | Walt Disney

Lucas Shaw | Bloomberg 

Under Hulu’s proposal, the overseas expansion would have cost at least $4 billion

Toward the end of 2019, Hulu delivered a proposal to Walt Disney, its controlling shareholder, outlining a strategy to expand the popular streaming service outside the US. After watching rivals Netflix and Amazon set up shop all over the globe, Hulu executives had spent the past couple of years drafting a plan to catch up.

At first, Disney Chief Executive Officer Bob Iger and Chief Financial Officer Christine McCarthy expressed support and pledged to present the plan at a board meeting in January 2020, according to people familiar with the matter. But, ultimately, that didn’t happen. Instead, Disney announced in August that it will create a new general entertainment service outside the US under the umbrella of Star, the company’s Indian media subsidiary.

Disney’s public explanation for choosing Star over Hulu overseas focused on a marketing issue — specifically that Hulu has limited name recognition outside the US, while Star is a major brand in South Asia. But Disney had other reasons for limiting Hulu to the US, according to the people, who asked not to be identified because the conversations were private.

Under Hulu’s proposal, the overseas expansion would have cost at least $4 billion. Even before the coronavirus, such a big, additional investment in Hulu was a tough sell inside Disney since the streaming service was already losing more than $1 billion a year and Disney was committing major resources to the expansion of Disney+. Then the pandemic hit.

At the same time, Disney was concerned about an additional cost looming on the horizon in January 2024. A little over a year ago, Disney agreed to buy out Comcast’s one-third ownership share in Hulu at a price to be determined later. At the time, that stake was worth about $9 billion, a sum that could shrink if Disney invested more money for programming and diluted Comcast’s stake. But Comcast is guaranteed at least $5.8 billion, and an expansion would boost Hulu’s overall value — and, as a result, increase Disney’s final bill to Comcast, said the people.

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First Published: Sat, October 17 2020. 01:09 IST