In June of 2017, The Walt Disney Company also known as Disney (DIS) gathered with its board of directors to discuss the growth of two new business segments: direct-to-consumer and international, particularly seeking to expand the distribution of new streaming products, services, and offerings.
A lot (not so quietly) has happened since then. Disney established a foothold in the direct-to-consumer marketplace by acquiring a 30% stake Hulu in 2009.
The prior year, Disney acquired a 33% stake in BAMTech. BAMTech is spinoff from Major League Baseball Advanced Media (BAM) that enables streaming games across all platforms. The spinoff occurred in 2015 after developing streaming technology for clients including the WWE, Fox Sports, Playstation Vue, Hulu. After successfully launching HBO Now just in time for the Season 5 premiere of “Game of Thrones”. Disney also has an option to buy a controlling interest, exercisable since Jan 1 of 2020.
Disney CEO Bob Iger knew in 2016 that BamTech could provide superior technology amidst the impending battle with Netflix. Without more original content, Disney could not rely upon existing programming through its subsidiaries and the content accessible via their ownership in Hulu.
In November of 2017, negotiations between Disney & Rupert Murdoch’s 21st Century Fox were made public. Disney wanted Fox’s filmed entertainment, cable entertainment, and direct broadcast satellite divisions. This included 20th Century Fox, FX Networks, and National Geographic Partners. The deal excluded the Fox Broadcasting Company, 20th Century Fox’s studio lot, Fox Televisions Stations, Fox News Group, and Fox Sports. These entities which would then form a new independent company run by the Murdoch family (are you feeling the HBO Succession energy?).
The deal included film & distribution rights to Fox franchises: X-men and Fantastic Four, the distribution rights to Star Wars: Episode IV –A New Hope none of which were actually owned by Marvel Studios and Lucasfilm when Disney acquired them for $4 billion a piece on separate occasions.
THE REAL MONEY STARTED FLYING
Enter Comcast stage-left, who drove Disney’s original $52.4 billion bid in December 2017 to $71.3 billion by June of 2018.
This deal was ultimately approved by Disney and Fox shareholders on July 27, 2018, and spent the next nine months gaining international regulatory approval before finalizing March 20, 2019.
It is important to note that 21st Century Fox owned a 30% stake in Hulu. When the deal closed, Disney’s stake in the streaming service rose to 60%! In April of 2019, AT&T agreed to sell its ~10% stake in Hulu back to Disney and Comcast, consolidating their ownership further.
THE HULU EXPANSION
May 2019, Disney and Comcast assumed full operational control of Hulu, pitting them toe-to-toe with Netflix. Subsequent deals around the launch place a minimum $27.5 billion valuation on Hulu.
Disney launched its namesake, Disney+, a streaming platform which attracted 10 million subscribers within its first 24 hours of launching. This figure rose to 26.5 million subscribers by then end of its first fiscal quarter, December 28, 2019. In contrast, Netflix has 158 million global subscribers and 62 million in the US, but Disney+’s reach is limited with plans to rollout globally over the next two years.
THE BOTTOM LINE
Investors are valuing Disney’s streaming services at more than $100 billion. This leads many analysts to believe that the acquisition of Hulu with 30.4 million subscribers, in combination with the content acquired from Fox, the technology from BAMTech, and the launch of ESPN+ with 6.6million subscribers has made Disney+ a formidable force in the streaming wars.
Lets see if Disney is able to demonstrate more of its magic as it rolls out Aladdin’s flying carpet internationally.
In case you missed it, check out our recent post about how Bezos & Musk play tax games to gain concessions for their companies.
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