With This Move, Comcast Indicates That It's Coming for Disney

A long-standing content-sharing relationship between Comcast's (CMCSA -0.37%) NBCUniversal and Hulu, which is controlled by Disney (DIS 0.18%), is coming to an end. For many years, NBCUniversal shows including Saturday Night Live and The Voice have debuted on linear TV and then moved to Hulu the day after. However, starting on Sept. 19, NBCUniversal's next-day content will transfer over to Comcast's Peacock rather than Hulu. The move represents the latest stage in Comcast's breakup with Hulu, and signals an even bigger push by the company to take on Disney in the streaming space.

From partners to rivals

Hulu launched in 2007 and over the years it attracted a consortium of owners that have included Disney, 21st Century Fox, Time Warner, and Comcast. Through a series of mergers and stock sales, Walt Disney established itself as the majority stakeholder with 67% ownership, while Comcast owns the rest. Although the two entertainment businesses haven't agreed on a price, Comcast intends to sell its 33% share of Hulu to Disney by January 2024. 

As the minority stakeholder in Hulu, Comcast's decision to focus on its own Peacock platform should come as no surprise. And it's got room to build. Hulu has 46.2 million paid customers, which comprise a decent portion of Walt Disney's collective 221 million subscriptions. By contrast, Peacock has 28 million monthly active accounts, 13 million of which are paid, premium subscriptions.

Disney is spending big

When sizing up the streaming competition between Walt Disney and Comcast, it's also important to look at how much the companies are spending on content. Walt Disney intends to spend $32 billion on films and TV shows in fiscal 2022, which ends in early October. Some analysts expect that of this $32 billion, roughly $15 billion will go to streaming programming. On the other hand, Comcast has committed $3 billion to Peacock content this year, up from $1.5 billion in 2021.

Hulu spent the relatively small sum of $210 million on exclusive content in 2021. (This makes sense considering a majority of what it offers is second-day programming from linear TV networks.) Of course, it's possible that, with the exodus of NBCUniversal shows, Disney may increase Hulu's budget for original content.

Considering the $3 billion Comcast has already earmarked -- along with the addition of more day-two NBCUniversal shows -- it's reasonable to believe that Peacock has begun its march against Hulu.

Comcast is making Peacock a big part of its future

But is Disney worried? It's possible that Disney is more concerned about the long-term prospects of Disney+ than it is Hulu, so it may not be overly concerned with how Comcast is building out Peacock. After all, Disney+ is the home of marquee franchises like Marvel and Star Wars. Meanwhile, Hulu has lesser-known properties such as The Bear and Reservation Dogs. That's not to say the service doesn't matter to Disney -- 46 million customers is a significant number for any business -- but it's not the centerpiece of the company's streaming operations.

Over the next few years, Comcast plans to increase annual spending on Peacock content to $5 billion. The company notes some of that investment will be a reallocation of broadcast TV budgets, which suggests Comcast expects the trend of consumers choosing streaming over linear will continue. Furthermore, it looks like 2023 will be Comcast's peak investment year. As such, the company might be setting up Peacock to be in its best possible shape when it fully exits Hulu.

There is a risk that Comcast is devaluing Hulu somewhat while it still holds a sizable chunk of the business, thereby risking its final buyout price. However, as already noted, the move could encourage Disney to invest more into the streamer, potentially increasing its value. Either way, Comcast's decision to bolster Peacock now could be an indication it will challenge Hulu for subscribers.

Now that Comcast is taking its content away from Hulu, investors may wonder when the company will fully divest itself of the streamer. It's possible Comcast could provide such guidance in its next earnings report, which is expected late October 2022. But in terms of whether second-day NBCUniversal programming is making a difference to Peacock subscriber numbers, evidence of that might not show until later in the year. Regardless, Comcast stakeholders are readying for life after Hulu, and part of that is setting Peacock up as a direct competitor.