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Disney to take full control of Hulu

AP file photo

The Hulu logo is seen on a window at the Milk Studios space in New York in June 2015.

BloombergNEW YORK (Bloomberg) — Walt Disney Co. will take full control of Hulu in a deal with co-owner Comcast Corp. that envisions the value of the streaming service soaring to more than $27 billion in five years.

The accord announced Tuesday represents a big bet by Disney on continued rapid growth for Hulu, home of original hits such as “The Handmaid’s Tale.” Under the terms, Comcast is guaranteed a $5.8 billion windfall by early 2024, when the cable giant can sell its stake to Disney.

Hulu will be a key weapon in Disney’s growing online fight with Netflix Inc., and the deal gives the service access to programming from Comcast’s NBCUniversal division for at least three more years. Disney expects Hulu to have as many as 60 million subscribers by fiscal 2024, up from 25 million last year, and is counting on it to complement the new Disney+ streaming service launching in November.

“We are now able to completely integrate Hulu into our direct-to-consumer business,” Disney Chief Executive Officer Bob Iger said in a statement.

Investors in both companies seemed pleased. Disney shares rose as much as 2.1 percent, and Comcast gained as much as 2.3 percent.

The transaction, leaving Hulu run by just one media company for the first time, marks the end of one of the most complicated ownership sagas in entertainment.

NBC and Fox founded Hulu more than a decade ago as a way for TV viewers to watch last night’s TV online. Disney acquired a stake later, and the three media giants argued over the direction of Hulu as Netflix lapped it in size. Netflix now has a market capitalization of $152 billion, 10 times Hulu’s most recent valuation.

Disney acquired majority ownership of Hulu this year by buying Fox’s stake as part of its $71 billion purchase of Rupert Murdoch’s entertainment empire. Just a month ago, Hulu was valued at $15 billion, when Disney engineered the purchase of AT&T Inc.’s 9.5 percent stake.

Disney will split its TV shows and movies between two entertainment streaming services, Disney+ and Hulu. Disney+ will offer programming from Marvel, Pixar and Star Wars. Shows from FX, which has aired “Sons of Anarchy” will be on Hulu, said FX CEO John Landgraf. Disney and Comcast will enter a “put/call” agreement regarding NBC’s 33 percent ownership interest in Hulu, promising the cable giant a minimum of $5.8 billion even if its stake dwindles over the next five years. Disney agreed to limit future equity infusions in Hulu to $1.5 billion a year and said any needs beyond that would be funded by debt.

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