When Bad News for Comcast is Bad News for Disney

 by Ray Keating

Analysis

July 23, 2024 

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Yes, Comcast and Disney are rivals in the theme park, resorts, and movie businesses. But sometimes bad news for your competitor is bad news for you as well.

 

Read the full article at DisneyBizJournal.substack.com.

Disney and Comcast Accelerating Hulu Negotiations

 by Ray Keating

News

DisneyBizJournal.com

September 6, 2023

 

Comcast and Disney have agreed to accelerate matters when it comes to finalizing their deal for Disney to purchase the remaining 33 percent of Hulu that Comcast owns. 

According to The Wall Street Journal: 

 

Last week, Disney and Comcast decided to move up the date on which either company can force a sale of the cable company’s Hulu stake to Sept. 30, Roberts told investors at Goldman Sachs’s Communacopia and Technology investor conference in San Francisco. Doing so will provide investors of both companies better clarity of what it will mean for them, he said.

 

As DisneyBizJournal has reported, “Comcast still owns 33 percent of Hulu, with Disney controlling the rest, gaining Fox’s 33 percent Hulu stake in the 2019 acquisition of Fox. As it stands now, Comcast has a passive role in Hulu and has agreed to hold that position until 2024. After that, Comcast can force a buyout by Disney based on a total valuation of $27.5 billion – with Comcast then getting more than $9 billion from Disney – or Disney could choose to execute the buyout. That price tag, however, could go higher if an independent party determines that the fair market value is, in fact, higher.”

 

Roberts, of course, is publicly pushing that the value of Hulu is far higher than that $27.5 billion. CNBC reported:

 

“We are excited to get this resolved,” Roberts said Wednesday at Goldman Sachs’ Communacopia and Technology conference. “And the minimum $27.5 billion that people have bandied about, that was a hypothetical that we picked five years ago because Disney has control of the company. The company is way more valuable today than it was then.”

 

It also was noted in the report, “The deal between Disney and Comcast has set up, in essence, the first-ever sale of a streaming service of this magnitude, Roberts said Wednesday. The two companies will each have their own appraiser, and if their valuations are far apart, a third will likely be brought in.”

 

As noted by the Journal, it’s unclear how long such an appraisal process might take.

 

In its most recent earnings report, Disney reported that Hulu had 48.3 million subscribers.

 

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Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, the Alliance of Saint Michael novels, and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right? (Keating is a Disney shareholder.)

 

Consider books by Ray Keating, including…

 

• The Pastor Stephen Grant thrillers and mysteries. Here are 18 books in the series now with the latest being Under the Golden Dome: A Pastor Stephen Grant Novel and For Better, For Worse: A Pastor Stephen Grant Short Story.

 

• Order The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist. Kindle editions and paperbacks via Amazon here and signed books here. And don’t forget the first book in this growing series, i.e., The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.

 

• Cathedral: An Alliance of Saint Michael Novel. Signed paperbacks and/or paperbacks, hardcovers and the Kindle edition at Amazon. 

 

• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

Iger on Rationalization, Curating and … Hulu

 by Ray Keating

News/Analysis

DisneyBizJournal.com

March 9, 2023

 

Disney CEO Bob Iger was interviewed at The Morgan Stanley Technology, Media And Telecom Conference on Thursday, March 9, and he raised more questions than answers about the future of Hulu.

Iger noted that he was “extremely bullish” on streaming in general, including Disney+ and ESPN, but when it came to Hulu, he spoke of “studying it carefully.” He declared that it was a “good platform” that had a “good library,” as well as it being “attractive” for advertisers. But Iger added that he and the company were still trying to figure it out regarding Hulu within a “tricky environment.”

 

As we noted in July of last year, “Comcast still owns 33 percent of Hulu, with Disney controlling the rest, gaining Fox’s 33 percent Hulu stake in the 2019 acquisition of Fox. As it stands now, Comcast has a passive role in Hulu and has agreed to hold that position until 2024. After that, Comcast can force a buyout by Disney based on a total valuation of $27.5 billion – with Comcast then getting more than $9 billion from Disney – or Disney could choose to execute the buyout. That price tag, however, could go higher if an independent party determines that the fair market value is, in fact, higher.” 

 

We also noted that, at the time, Hulu was viewed either as “a leader and an opportunity for Disney, or a potential financial burden.” The fact that Disney is still trying to figure out Hulu speaks to it being more burden than opportunity – but as we’ve seen over the last few years, views on streaming can change quickly.

 

Overall, Iger’s streaming emphasis was on establishing a “pricing strategy that makes sense,” as part of a “rationalization” process. That is, while subs need to grow, what Iger sees as “skyrocketed” costs must be, and are being, dealt with. He noted a need to do more marketing of programs, rather than the platforms.

 

Along these lines, he spoke of curating, that is, being more judicious in terms of how much to spend, on what, and making quality the differentiator, rather than volume.

 

As for particular brands within the Disney universe, Iger raised the question of how many times should Marvel do sequels, as opposed to tapping into more of the “7,000 characters” that it purchased in the Marvel acquisition.

 

And on the Star Wars front, he reiterated being “careful” in developing both streaming shows and movies.

 

As for the theme parks, Iger clearly was bullish, saying it was a “great” and “resilient” business. He noted the need, again, to be smarter on pricing, that is, balancing making it accessible to families, while also limiting the number of people in the parks at any time to ensure a quality experience and to maintain profitability. That’s no easy task, and one of the reasons that CEOs get paid the big dollars.

 

Disney fans, no doubt, will be pleased by Iger mentioning that creating new attractions means being able to expand attendance by giving people more things to do. He also mentioned that Disney had more opportunity to expand in California’s Disneyland than many might assume.

 

As for economic challenges, Iger seemed confident in the company’s ability to deal with both recession and cost pressures.

 

Finally, regarding a successor, Iger noted the process is ongoing, and it was his wish to leave the company on “a trajectory that is optimistic and positive.”

 

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Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and the Alliance of Saint Michael novels; and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right? 

 

Consider books by Ray Keating…

 

• The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.

 

• Cathedral: An Alliance of Saint Michael Novel. Signed paperbacks and/or paperbacks, hardcovers and the Kindle edition at Amazon. 

 

• The Pastor Stephen Grant thrillers and mysteries. The latest in the series is Persecution: A Pastor Stephen Grant Novel. Get the signed books here, or paperbacks and Kindle editions right here.

 

• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.

 

• Behind Enemy Lines: Conservative Communiques from Left-Wing New York  –  signed books  or at  Amazon.

 

•  Free Trade Rocks! 10 Points on International Trade Everyone Should Know is available at  Amazon  in paperback or for the Kindle edition, and signed books at  www.raykeatingonline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

Different Takes on Disney’s Hulu

 by Ray Keating

News/Analysis

DisneyBizJournal.com

July 19, 2022

 

Depending on who one turns to for an assessment, Hulu is either a leader and an opportunity for Disney, or a potential financial burden.

Comcast still owns 33 percent of Hulu, with Disney controlling the rest, gaining Fox’s 33 percent Hulu stake in the 2019 acquisition of Fox. As it stands now, Comcast has a passive role in Hulu and has agreed to hold that position until 2024. After that, Comcast can force a buyout by Disney based on a total valuation of $27.5 billion – with Comcast then getting more than $9 billion from Disney – or Disney could choose to execute the buyout. That price tag, however, could go higher if an independent party determines that the fair market value is, in fact, higher. This is one of the big-dollar unknowns left behind by Bob Iger.

 

If you read a recent take at CNBC, Hulu is a problem child for Disney, not really fitting in and Disney not offering a clear vision for the service. Indeed, it was emphasized that perhaps Hulu could be sold to Comcast, as opposed to Disney completing its purchase of Hulu from Comcast. However, it’s hard to see how the possible challenges laid out for Hulu with Disney, if accurate, of course, wouldn’t turn out to be much the same for Comcast, which already has the Peacock streaming service.

 

Meanwhile, a recent Hollywood Reporter story offered the following: “At the very least, Disney will be forced to strike a deal with Comcast over the future of Hulu, with the cable giant able to force Disney to buy out its 33 percent stake in 2024 for market value. Given Chapek’s ambitions in streaming, an early buyout could give Disney more optionality in its plans.” An early buyout? Wow. That’s quite a different take.

 

And then there’s a Wall Street Journal article published on July 18 that, based on an analysis done by Antenna, reported Hulu subscriptions growing faster than Disney+ subs. It was noted: “New subscriptions to Hulu have outpaced those of Disney’s flagship streaming platform, Disney+, in 18 of the past 24 months, and total new subscriptions to Hulu have exceeded those to Disney+ in each of the last six quarters…”

 

Indeed, it also was noted in the CNBC story: “Hulu has doubled its total subscribers since 2018. The streaming service continues to churn out critically acclaimed series, including ‘Pen15,’ ‘Dopesick’ and ‘The Dropout.’” 

 

According to the reporting, Disney basically confirmed the data presented in the Journal analysis. So, the assertions that Disney might sell Hulu to Comcast appear pretty absurd.

 

Analysts do seem to be unified in looking for greater convergence between Disney+ and Hulu. Maybe, and it’s unclear as to what that would mean exactly. That question also goes to how distinct Chapek views the Disney brand. He has indicated a willingness to be more expansive, beyond the strictest family-friendly-fare criteria. Yet, there remains plenty of material that is hard to imagine fitting on Disney+, and those also are opportunity-rich areas, which further strengthens Hulu as part of the Disney portfolio.

 

Looking ahead for the near term at least, it’s hard to deny that the Disney bundle – Disney+, ESPN+ and Hulu at one price – will help the company gain or keep subscribers across all three streaming services in a tougher economy.

 

Is Hulu a problem child or a valuable asset that’s aiding Disney’s streaming dreams? I strongly lean toward the latter, but the company would benefit from more explicitly showing where it plans to take Hulu, and how it fits in with or alongside Disney+.

 

__________

 

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and the Alliance of Saint Michael novels; and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

 

Two great ways to order Cathedral: An Alliance of Saint Michael Novel, which is Ray’s sixteenth work of fiction, and the first in the Alliance of Saint Michael series. Signed paperbacks here and the Kindle edition here. 

 

Two great ways to order Ray Keating’s new nonfiction book – The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks here, and paperbacks, hardcovers and Kindle editions here.  

 

Get all of Ray Keating Pastor Stephen Grant thrillers and mysteries in paperback and for the Kindle at Amazon.com and signed books at www.RayKeatingOnline.com. 

 

Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.

Disneynomics: Universal Orlando Ticket Offer – Come for a Day, Stay Through Christmas Eve

by Ray Keating

Disneynomics Column

DisneyBizJournal.com

August 20, 2020

How do you get people to come to your theme parks during a pandemic? 

That’s obviously a difficult question that companies like Disney and Comcast (owner of the Universal parks) wrestle with on a daily basis.

Before the pandemic, theme park pricing actually was focused on “date-based tickets.” We economists call this peak-load pricing or congestion pricing. That is, adjust pricing according to dates and times of the day in order to control crowds, enhance the guest experience, and maximize profits. This pricing model is used by hotels, movie theaters, utility companies, toll roads, and so on. It’s straightforward economics in that consumers react to price changes, so businesses can better manage resources by adjusting prices to reallocate consumption from periods of high demand to times of low demand.

In fact, even in the current period of COVID-19 and a brutal economy, date-based pricing made an appearance in the news in recent days with Universal Orlando announcing that it was following Disney’s lead in implementing this model. Disney went in on date-based pricing starting in 2018. Universal now will vary ticket prices based on when people visit their parks.

Fair enough. Makes sense. 

But far more interesting was a pricing option Universal Orlando served up to Florida residents earlier this month. Actually, I’m not sure if you can really call this a pricing option; it’s more like a giveaway.

What’s the deal? Florida residents can purchase a 2-Park, 1-Day Park-to-Park Ticket, and come back every day through December 24 with no blockout dates. That’s right, for $164, a Universal guest gets to visit both parks – Universal Studios Florida and Universal’s Islands of Adventure – each and every day, if they choose to do so, through Christmas Eve. That one-time, $164 payment covers it all. And you can toss in Volcano Bay for another $29. Florida residents have this option through September 30. If you love Universal, this is an awesome deal. Heck, if you just like Universal, it’s a great deal.

The question in coming days and weeks is: Will this incredible offer for Florida residents by Universal affect Disney’s pricing decisions? Well, don’t be surprised if Disney follows suit in some way. But in the end that will depend, of course, on multiple factors, especially the direction of the pandemic, the economy, and therefore, park attendance. 

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Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels. He can be contacted at  raykeating@keatingreports.com.

Also, get the paperback or Kindle edition of Ray Keating’s new book Behind Enemy Lines: Conservative Communiques from Left-Wing New York.

Streaming Wars Going Hot – No Netflix Ads on Disney Networks

by Ray Keating

News

DisneyBizJournal.com

October 4, 2019

Ever since Disney announced that it would be launching its own streaming service, the company, unsurprisingly, become engaged in a kind of Cold War with the largest competitor, Netflix. So, we saw Marvel shows on Netflix, like “Daredevil,” become casualties, unfortunately. But now, based on a report from The Wall Street Journal, it’s safe to say that the war is going hot as the November 12 launch date for Disney+ fast approaches.

Today, the Journal reported that The Walt Disney Company was banning advertising from Netflix, Inc. across Disney-owned television networks. According to the report, Disney had decided to ban ads from competing streaming services earlier this year, but then reversed course and came to agreements with everyone – except Netflix.

The Journal noted: “Netflix spent $99.2 million on U.S. TV ads during 2018, with some 13% going to Disney-owned entertainment networks, according to estimates from ad-measurement firm iSpot.TV.”

Toss Amazon, Apple, Comcast, AT&T and others into the streaming providers mix, and let the war rage – all to the eventual benefit of consumers who will decide who succeeds and who fails.

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels. He can be contacted at  raykeating@keatingreports.com.

Disney Expanding, Not Limiting, Epic Competition and Choices

by Ray Keating

Analysis/Commentary

DisneyBizJournal.com

August 7, 2019

After the recent Fox merger, the Walt Disney Company has been called (for example, in an IGN.com article) “the most powerful movie studio that has ever existed.” Wow. 

That phrase, of course, strikes fear into the hearts of many, including people who assume that consumers and creators will suffer under a “monopoly” or some kind of tremendous economic power, with competition and choice being lost. Nothing could be further from the truth.

First, a little history. Big does not guarantee success in the competitive marketplace. The history of business are strewn with companies that once dominated or were major players in their respective industries, and went on to be wiped out. Think Sears, Pan Am, Kodak, Borders, Blockbuster, Burger Chef – the list goes on and on. 

Second, a little economics. The term “monopoly” means a single seller of a product for which there are few good substitutes, and the industry has high barriers to entry. The Walt Disney Company stands as a major player – but far from the only player – in the broad entertainment industry. Consumers have seemingly countless and multiplying entertainment products and services on which they can spend their hard earned dollars. High barriers to entry, especially when considering the dramatic advancements in technology in terms of producing and distributing content, certainly don’t exist. 

For good measure, monopolies in the free market are more about the over-active imaginations of politicians, the media and assorted economists, rather than economic reality. Monopolies usually come about due to government (for example, public schools) or government protection (for example, back in the day, Ma Bell), not market competition. Sure, significant market share can be gained in the market. But that is accomplished by serving customers well, and that market share can and often does disappear due to competition and innovation. 

Talk of Disney being a monopoly or wielding some kind of overwhelming economic power amounts to economic fiction. In fact, Disney’s products, services and investments serve to expand rather than limit competition and choice.

Consider Disney’s announcement on August 6^ththat it’s going to bundle three streaming services – Disney+, ESPN+ and Hulu – into one affordable package of $12.99 per month. The bundle will be available on November 12 with Disney+ coming online that day.

In the company’s August 6^thearnings call, CEO Bob Iger spoke about the long-term value of the Fox acquisition; the volume and variety of content scheduled for Disney+; flexibility among platforms; the need to maintain a flow of quality for its more traditional television networks like ABC, FX and Freeform; and the need “to be more resilient than any of our competitors.”

Low prices, and emphasis on investment in platforms and content are not signs of monopoly, but instead, they signal a company fighting for profits and market share in a competitive arena. Disney is taking on Netflix, Amazon, YouTube and others in the online video market.

In addition, a recent announcement points to the competitive nature of another major part of the overall entertainment industry where Disney is a leading player, i.e., theme parks. But it wasn’t an announcement from Disney, but rather from a major competitor – Comcast.

On August 1, Comcast’s Universal Orlando Resorts announced that it would be opening a new park – its fourth – called “Universal’s Epic Universe.” The details are pretty vague at this point, except that this promises to be a major investment by a major competitor to Walt Disney World in Orlando. 

In the Comcast statement, it was noted, “Universal’s Epic Universe will take guests on a journey where beloved stories expand into vibrant lands – and where that journey is as much a part of their adventure as the ultimate destination.” Brian L. Roberts, chairman and CEO of Comcast, said, “Our new park represents the single-largest investment Comcast NBCUniversal has made in its theme park business and in Florida overall.”

According to Universal Orlando:

“Universal’s Epic Universe will offer an entirely new level of experiences that will forever redefine theme park entertainment. Guests will venture beyond their wildest imagination, traveling into beloved stories and through vibrant lands on adventures where the journey is as astounding as the destination. The new location will feature a theme park, an entertainment center, hotels, shops, restaurants and more. Ultimately, this expansion will create more space and freedom to let loose and create lasting memories with the people you love.”

Universal’s Epic Universe sends a clear signal that Disney both faces and spurs competition from rivals. It certainly is not the case of other businesses throwing up their arms in a surrender to a monopoly. 

Of course, a new theme park coming from Universal, along with Disney’s Galaxy’s Edge, or the Disney streaming package taking on Netflix and Amazon, serve as examples of competition that can be easily seen. But there’s much more going on among entrepreneurs, innovators and inventors that is hidden from the public, if you will, because it’s just getting started or in early development stages. These entrepreneurs are working to come up with the next big leap forward, whether it be related to content, technology or simply improved service. 

In the end, a company like Disney spurs competition, and must itself invest and innovate in the face of current and future competitors. The real economic power lies with consumers, and entrepreneurs and businesses must work and compete to provide new and/or improved products and services in order to succeed – and remain successful.

For consumers, such competition is, to borrow a word, epic.

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels. He can be contacted at  raykeating@keatingreports.com.

If you enjoyed this article, and since I am the author of the Pastor Stephen Grant novels and short stories, can I ask you to take at least one (preferably more) of the following steps?

1) The new Pastor Stephen Grant novel – DEEP ROUGH – has arrived! You can order the Kindle edition, the paperback, or the signed book.

2) Please join the Pastor Stephen Grant novels and short stories email list, and get the upcoming short story, THE TRAITOR, for free! Sign up here.

3) Buy one of the other Pastor Stephen Grant novels or short stories at Amazon.comor signed books at www.raykeatingonline.com. 

4) Become a member of the Pastor Stephen Grant Fellowship, and get all kinds of FREE stuff, including each new book in the Pastor Stephen Grant series. Check out the levels and benefits here.

Disney Taking Full Control of Hulu

by Ray Keating

News/Analysis

DisneyBizJournal.com

May 14, 2019

The Walt Disney Company and Comcast have announced that they’ve arrived at a deal for Disney to take full control of Hulu.

Disney will immediately be calling all of the shots at Hulu, while Comcast’s 33 percent ownership in Hulu will be sold as early as January 2024 for fair market value independently assessed, with Disney guaranteeing a minimum value for all of Hulu being $27.5 billion. That would put Comcast's share at a minimum of just over $9 billion.

Recently, AT&T sold its share the streaming service back to Hulu.

Comcast’s NBCUniversal content and channels will continue on Hulu until late 2024, with NBCUniversal able to terminate its content agreement in three years’ time, and in one year’s time, NBCUniversal will able to run its own streaming service including certain content licensed to Hulu in exchange for a reduced fee paid by Hulu.

As DisneyBizJournal noted in November 2018and again in February of this year, this fits with Disney’s overall streaming strategy: “And then there’s the fact that Disney will own 60 percent of Hulu once the Fox deal is completed, and the company has made it known that it’s open to a deal with AT&T and Comcast to acquire the rest of Hulu. As DisneyBizJournal.com has noted before, it looks like Hulu will be home for Disney’s R or more R-like fare.”

This was further confirmed when Disney recently announced that live-action series “Ghost Rider” and “Helstrom” will be coming to Hulu.

And by the way, consider the monthly price points for Disney’s Disney+ and Hulu - $6.99 and $5.99 (with ads), respectively – versus the monthly cost of the most popular Netflix package being $12.99. Hmmm, a subscriber will be able to purchase both Disney+ and Hulu for a penny less per month than the price of Netflix’s most popular package. Ah, the joys of competition for consumers.

(Correction: An earlier version of this article mistakenly had the value of Comcast's share of Hulu stated at a minimum of $27.5 billion, while in reality, that is the minimum value for Hulu in total agreed to by Disney.)

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels. He can be contacted at  raykeating@keatingreports.com.

If you enjoyed this article, and since I'm the author of the Pastor Stephen Grant novels and short stories, can I ask you to take at least one (preferably more) of the following steps?

1) Please join the Pastor Stephen Grant novels and short stories email list, and get the upcoming short story, THE TRAITOR, for free! Sign up here.

2) Buy one of my Pastor Stephen Grant novels or short stories at Amazon.comor signed books at www.raykeatingonline.com. 

3) Become a member of the Pastor Stephen Grant Fellowship, and get all kinds of FREE stuff, including each new book in the Pastor Stephen Grant series. Check out the levels and benefits here.