AT&T Sale Of Hulu Stake Could Net It Nearly $1B After Two Years Of Gains

By Dawn C. Chmielewski, Dade Hayes

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Hulu, a streaming-video pioneer that has grown considerably despite an unwieldy ownership structure, is about to undergo significant change once Disney takes majority control of it in the new year.

In a meeting with Wall Street analysts on Thursday, AT&T revealed even more change is coming. John Stephens, CFO of AT&T, said the company was considering letting go of its 10% stake in the streaming giant as part of an overall effort to reduce its massive debt load.

Based on recent valuations, that stake is worth in the range of $930 million — not a life-changing figure for a company as large as AT&T but a worthwhile boost given the stake has never had much strategic purpose. It’s also been a profitable ride, given what Time Warner paid ($583 million) when it took the stake in 2016.

It makes sense that AT&T would look to shed WarnerMedia’s minority stake in Hulu as it looks to buy down debt. But such a sale wouldn’t dramatically reshape the ownership structure: Disney will continue to own a controlling interest in Hulu, once it completes its $71.3 billion acquisition of 21st Century Fox’s film and television assets. The other joint venture partner, Comcast’s NBCUniversal, will hold a minority interest.

“AT&T selling off its stake would simplify corporate governance for Disney, that’s for sure,” said media analyst Peter Csathy of Creatv Media. “Right now, Hulu is a jumbled mess of co-owners with fundamentally different strategies at stake and completely different horses in the race. Disney controls Hulu in these streaming video wars.  But, then, Comcast is a 30% owner and just lost out to Disney for control, so is Comcast really interested in helping Disney make Hulu a success?  And, then there’s AT&T with its 10% stake. But, AT&T competes directly with Hulu with DirecTV Now, and soon will compete with Disney and Hulu some more with its upcoming WarnerMedia subscription services.”

Csathy said AT&T has two choices: either sell its stake in Hulu or go along for Disney’s ride.

The decision to sell its ownership stake in Hulu might not necessarily impact WarnerMedia relationship on the content side.

Hulu has agreements to carry WarnerMedia’s networks — including CNN, TBS, TNT and Turner Classics — on its live TV service. It also carries offers programming via Hulu’s on-demand service, much of which is monetized through advertising.

These carriage agreements extend beyond next year. So, WarnerMedia content isn’t disappearing from Hulu anytime soon — if they go away at all. Hulu generates both licensing and advertising revenue for WarnerMedia that it might not be eager to shrug off.

During the analyst meeting, the sale of the Hulu stake came up in passing, but WarnerMedia chief John Stankey also described an effort to thin the herd after Time Warner had rolled out a large portfolio of streaming services.

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