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The Hulu/Disney/Comcast divorce, explained

All the big media companies want their own streaming service. Big question: Do you want to subscribe to lots of streaming services?

Steven Carrell in “The Office.”
NBC’s The Office.
Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

The giant media companies are consolidating and getting bigger so they can take on the giant tech companies. The result for consumers: You’re going to need to work harder to find your favorite TV shows.

Today’s example of this phenomenon comes from Disney and Comcast*, which announced that Comcast’s NBCUniversal will be breaking away from Hulu, the streaming video service, over the next few years. We can break down the details in a bit, but for normal people, that means:

  • All of NBCUniversal’s shows that are currently on Hulu will stay on Hulu, for now.
  • In a year, NBCUniversal can also put its shows like Saturday Night Live and This Is Us** on its own streaming video service, which hasn’t launched yet but is supposed to be up and running in 2020.
  • In three years, NBCUniversal can pull its shows from Hulu completely and put them on its own service.
  • The Comcast/Hulu divorce will be complete by 2024.
  • (All of this is separate from Hulu’s deal to license NBCU’s programming for its Hulu Live service, which essentially works like a cable TV bundle that you get online. All of that stays in place and probably will for a long time.)

Shorter: In a few years, the NBCUniversal shows you used to watch on Hulu will have moved to another service. You’ll have to either have a pay TV subscription to watch that service or subscribe to it separately.

Not coincidentally: Yesterday, NBCUniversal also announced that The Office, its hit show that has become one of the most popular offerings on Netflix, will show up on NBCU’s yet-to-launch service, too. We don’t know yet whether it will move to NBCU’s service exclusively or whether it will also run on Netflix at the same time.

Also not coincidentally: AT&T’s WarnerMedia, which is launching its own streaming service later this year, has also extracted itself from Hulu. And it is also starting to grab programming it had currently licensed to other services for itself — like the $100 million deal it has done that will allow Netflix to run Friends for a bit but also gives AT&T the ability to run the show exclusively.

And, not coincidentally, Disney is pulling almost all of its movies and TV shows from Netflix and will run those on Disney+, a streaming service it will launch in November.

Which means that while today it’s pretty easy to find most of TV’s biggest hits by subscribing to Netflix and Hulu, in a few years, many of those shows will be scattered to rival services: If you want everything, you’ll need to get Netflix and Hulu and NBCUniversal’s thing and AT&T’s thing and Disney’s other streaming service.

And all of that is happening as — and because — the media business is consolidating, as big programmers get bought by bigger programmers (or phone companies), so they can compete with Netflix, Apple, Amazon, and other tech companies.

The reason, for instance, that Comcast is leaving Hulu is that Disney now controls Hulu, because it bought much of Rupert Murdoch’s 21st Century Fox; prior to that deal, Comcast, Disney, and Fox each owned 30 percent of Hulu, with AT&T’s WarnerMedia owning the rest.

In an earlier version of the world, WarnerMedia and Comcast were happy to be part of Hulu; the streaming service generated near-term revenue for them by buying their shows, and also meant they didn’t have to spend money creating their own service. But now the conventional wisdom is that the big media conglomerates all need to own their own services, which they will market directly to consumers, just like Netflix.

That’s why Comcast was always going to split from Hulu once Disney bought Fox and announced that Hulu was going to be a big part of its streaming strategy. NBCUniversal sources say the company had contemplated sticking with Hulu if it would have been possible for them to be more active managers, instead of minority owners without much say about what happens to Hulu. But once it became clear that this wasn’t going to happen, this was the inevitable outcome.

If you care about corporate media balance sheets, you’ll note that Comcast appears to have gotten a pretty good deal here. The Disney divorce guarantees that Disney will buy out Comcast’s Hulu stake by valuing Hulu at least $27.5 billion — a huge leap up from the $15 billion that Hulu was valued at earlier this year when AT&T worked out its Hulu divorce terms. The deal also allows Comcast to earn money from its TV shows on Hulu at the same time that it’s investing to build up its own, rival service.

The Comcast/Disney divorce also has upside for Disney: It allows the company to do whatever it wants, more or less, with Hulu, which it has said it intends to keep separate from its family-focused Disney+ service and its ESPN+ service. But it will also be offering those services in some sort of bundle, as Hulu CEO Randy Freer told me recently; Freer also said the service will eventually be offered outside the US.

It’s hard to see how any of this is good for consumers, as they’ll be asked to either pay for more services than they are paying for now or, at a minimum, to pay attention to multiple services and watch those services’ ads.

But just because the big media players think this is the way to go doesn’t mean that consumers have to play along: You might be someone who thinks it makes sense to subscribe to Netflix and Hulu and WarnerMedia and NBCUniversal and Amazon Prime and whatever Apple eventually launches — along with other services from CBS, HBO, Showtime, etc.

But it’s also quite likely that you will pay for a few services you really care about and ignore the rest (or substitute it with free stuff from YouTube, Facebook, and the rest of the internet). That is: As the big players try to get bigger, they’re giving you more incentive to break the TV bundle.

* Comcast is an investor in Vox Media, which owns this site.

** This Is Us is an interesting example of what happens when big TV companies license their stuff to other big TV companies and how that can get very complicated in a streaming world: The hit show was made by 21st Century Fox, and NBC has paid a license fee to air it. Since NBC was (and is) a Hulu owner, Hulu currently has the rights to air the most recent episodes of the show, as well as all the old episodes. But under the terms of NBC’s recent renewal of the show, NBC will have the rights to bring all the new episodes it is airing to its own, yet-to-be-launched streaming service, in three years. That is: In a few years, older episodes of This Is Us will run on Hulu, while every episode that is airing now, and over the next three years, could go to NBCU’s service.

Recode and Vox have joined forces to uncover and explain how our digital world is changing — and changing us. Subscribe to Recode podcasts to hear Kara Swisher and Peter Kafka lead the tough conversations the technology industry needs today.