Disney bought Hulu. What’s it mean for cord cutters, binge watchers?
The Mouse House now has complete control of Hulu. The Walt Disney Co., which helped launch the video provider nearly 12 years ago, already owned two-thirds of the streaming and on-demand video service.
Disney had grown its share through its $71.3-billion acquisition of 21st Century Fox’s movie and TV studios , which closed in March, and its $1.43-billion deal for the 9.5% share that AT&T owned. AT&T got that in its own media merger last year, an $85-billion deal for Time Warner .
That left Comcast, which owns NBCUniversal, as the only remaining non-Disney Hulu stakeholder, holding one-third. (Comcast/NBCUniversal, Disney, Fox and Time Warner were early Hulu investors.)
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Disney now gets immediate complete control of Hulu, according to the deal the companies announced Tuesday , and will pay Comcast at least $5.8 billion for its Hulu stake in five years. It could receive more, depending on whether or how much Comcast invests in Hulu over the period.
What’s it all mean for binge-watchers? Perhaps the most important condition of the deal is that NBCUniversal parent Comcast will keep NBC shows such as “Saturday Night Live” and “The Office” on Hulu for five years. That’s good news for consumers, says Jim Nail, principal business to consumer marketing analyst for research firm Forrester.
The decision signals “no sudden disruption” of what subscribers expect from Hulu, he said. “It also shows that both NBCU – which, of course, plans to launch its own service early in 2020 – and Disney are being thoughtful about the consumer experience, and will approach future changes cautiously.”
Disney’s magic streaming kingdom With control of Hulu, Disney can eventually offer a customizable bundle of video services direct to homes. Remember, it has a Disney+ subscription service stocked with Disney and Pixar films, as well as Marvel and “Star Wars” movies, due to launch Nov. 12 for $6.99 ($69.99 annually). Current box office smash “Avengers: Endgame” hits the service Dec. 11 .
Coming to the soon-to-be-launched Disney+ new streaming service on Dec. 11: “Avengers: Endgame” with Captain Marvel (Brie Larson, far left), Black Widow (Scarlett Johansson), War Machine (Don Cheadle), Thor (Chris Hemsworth), Captain America (Chris Evans) and Rocket (voiced by Bradley Cooper). (Photo: MARVEL STUDIOS)
The company already has its own ESPN+ service, which is just more than a year old.
This video trifecta gives Disney the ability “to completely integrate Hulu into our direct-to-consumer business and leverage the full power of The Walt Disney Company’s brands and creative engines to make the service even more compelling and a greater value for consumers,” Disney CEO Robert Iger said in a statement Tuesday.
He delved more deeply into the potentials later Tuesday morning in an interview at an event hosted by tech research firm MoffettNathanson. The deal has “a lot of synergies involved with it,” Iger said. “We’ll be able to manage customers across all platforms … giving the consumer the ability to buy one, two or three of them.”
Disney video subscribers could also get special experiences and discounts at the company’s amusement parks, Iger suggested. Disney is opening new Star Wars: Galaxy’s Edge areas in Disneyland this summer and Disney World this fall, for instance.
The potential in connecting, say, Star Wars fans “to the broader experience Disney can offer through the theme parks, merchandise (and) not just the movies,” Nail said, “will be a far more interesting kind of ‘bundle’ to watch.”
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Advertising could be a way to grow a service’s subscriber base. Hulu already offers its lower-priced tier of on-demand video with advertising. But NBCUniversal earlier this week said its streaming service, due to launch next year, would be free and ad-supported.
“It seems to me advertising is going to become more prominent,” said CFRA Research analyst Tuna Amobi. “But it remains to be seen how much ad loads and formats we will see. Every service is different.”
Annie (Aidy Bryant) in “Shrill.” (Photo: Allyson Riggs/Hulu)
Signs of streaming changes coming Netflix is the current streaming leader, with 60.2 million paid U.S. subscribers and, according to research eMarketer, 157.3 million viewers. Hulu has the third-most viewers at 63.9 million, behind Amazon at 96.6 million, eMarketer estimates.
The Disney-Comcast deal, which places Hulu’s value at $27.5 billion or more in five years, foresees Hulu’s continued growth as a bigger player in the entertainment landscape. The service was valued at $15 billion when Disney bought AT&T’s stake last month.
Hulu recently announced it had surpassed 28 million subscribers, 26.8 million of which were monthly paid subscribers.
Hulu has multiple subscription tiers including a $5.99 monthly subscription to stream (with some ads) current series such as “This is Us” and its original programs such as “The Handmaid’s Tale” – and recent release “Shrill” starring SNL’s Aidy Bryant , and “Catch-22” directed by George Clooney , which begins Friday. An $11.99 tier comes with no ads. A $44.99 subscription also includes Hulu’s Live TV service with 60-plus channels including more than 800 local broadcast network affiliates across the U.S.
But the number of streaming services will continue to multiply. Beyond Disney’s new service coming later this year and NBC Universal’s in 2020, AT&T’s WarnerMedia also has its own subscription service, with a beta version to launch in the fourth quarter of 2019, AT&T CEO Randall Stephenson said Tuesday at a presentation hosted by J.P. Morgan Global Technology. (AT&T also owns satellite TV service DirecTV and live TV streaming service DirecTV Now.)
The service will include movies and TV series from HBO, Turner and Warner Bros. “Everything from ‘Casablanca’ to ‘Aquaman’ and ‘A Star is Born’ and so forth,” Stephenson said. Also in the Warner Bros. library: “Friends,” “Seinfeld,” and “The Big Bang Theory.”
WarnerMedia will be getting the licensing rights back to “put on our own (streaming) product,” Stephenson said.
Its service may even debut some of its shows on the streaming service before they hit regular TV, Nail says.
“You get the picture of an enormous shift in the entertainment industry toward streaming,” he said. “But streaming more importantly creates a direct relationship between content creators and consumers, which will open new possibilities.”
Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider .
Buy These 5 Stocks With Impressive Sales Growth Right Away
Investors often do not consider sales growth as a dependable metric when it comes to selecting stocks. However, solid sales are necessary to drive growth, and most companies look for a strong relationship between sales growth levels and the value of an enterprise.
Sales are income generated by a company through business activities. Though a company might not be profitable over a particular time period, it usually generates revenues.
In cases when companies tend to incur loss on a temporary basis, they are valued on the basis of revenues and not on earnings. This is because sales growth (or decline) is usually an early indicator of the company’s future earnings performance.
While sales growth is an important metric for growth projections and strategic decision-making, this in isolation doesn’t indicate too much about a company’s future performance. Though it provides investors an insight into product demand and pricing power, a huge sales number does not necessarily convert into profits.
Hence, a consideration of a company’s cash position along with its sales number can be a more dependable strategy. Substantial cash in hand and a steady cash flow give a company more flexibility with respect to business decisions and further potential investments. Most importantly, an adequate cash position suggests that revenues are being channelized in the right direction.
Selecting the Winning Stocks
In order to shortlist stocks that have witnessed impressive sales growth along with a high cash balance, we have selected 5-Year Historical Sales Growth (%) greater than X-Industry and Cash Flow more than $500 million as our main screening parameters.
But sales growth and cash strength are not the absolute criteria for selecting stocks. So, we added certain other factors to arrive at a winning strategy.
P/S Ratio less than X-Industry: This metric determines the value placed on each dollar of a company’s revenues. The lower the ratio, the better it is for picking a stock since the investor is paying less for each unit of sales.
% Change F1 Sales Estimate Revisions (four weeks) greater than X-Industry: Estimate revisions, better than the industry, are often seen to trigger an increase in stock price.
Operating Margin (average last five years) greater than 5%: Operating margin measures how much every dollar of a company’s sales translates into profits. A high ratio indicates that the company has good cost control and sales are increasing faster than costs – an optimal situation for it.
Return on Equity (ROE) greater than 5%: This metric will ensure that sales growth is translated into profits and the company is not hoarding cash. A high ROE means the company is spending wisely and is in all likelihood profitable.
Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment. You can see the complete list of today’s Zacks #1 Rank stocks here .
Here are five of the 21 stocks that qualified the screening:
BlackRock BLK is a publicly owned investment manager, which offers products that span the risk spectrum, including active, enhanced and index strategies. This New York-based company’s expected sales growth rate for 2019 is 1.3%, and it sports a Zacks Rank #1.
Based in Falls Church, VA, Northrop Grumman NOC provides products in the areas of autonomous systems, cyber, space, strikes, and logistics and modernizations. Expected sales growth rate for 2019 is 12.8%, and the stock carries a Zacks Rank #2.
The Progressive Corporation PGR , headquartered in Mayfield Village, OH, provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services. Its expected sales growth rate for 2019 is 16.9%, and the stock carries a Zacks Rank #2.
Headquartered in New York, The Interpublic Group of Companies, Inc. IPG provides advertising and marketing services. The company’s expected sales growth rate for 2019 is 2.7%, and it carries a Zacks Rank #2.
Bristol-Myers Squibb BMY discovers, develops, licenses, manufactures, markets, distributes and sells biopharmaceutical. This New York-based company’s sales are expected to increase at the rate of 6.9% for 2019.The stock sports a Zacks Rank #1.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance
Bristol-Myers Squibb Company (BMY): Free Stock Analysis Report
Interpublic Group of Companies, Inc. (The) (IPG): Free Stock Analysis Report
Northrop Grumman Corporation (NOC): Free Stock Analysis Report
The Progressive Corporation (PGR): Free Stock Analysis Report