Scaling Back: Disney to Combine Hulu and Disney+ into Single App by End of 2023

Disney merging Hulu and Disney+ by 2023 into one app, with content cuts and a $1.5-1.8B impairment charge, to boost ad opportunities and profit.

Tobey Nesbit 5.10.23

Disney announced on Monday that it plans to merge its streaming services: Hulu and Disney+. The two will combine into one single app by the end of 2023. The combination of both platforms' programming will be available to customers who subscribe to both streaming services. "This move is seen as a logical progression of Disney's direct-to-consumer offerings" said CEO Bob Iger.

While the two services will remain separate [for now], expect the combination of Disney+ and Hulu to provide Disney with a digital opportunity to serve digital ads and grow its advertising business. 

As part of the consolidation, Disney will make content cuts and other changes, resulting in a "$1.5 billion to $1.8 billion impairment charge" related to these expenses, according to CFO Christine McCarthy.

The last time a major media company combined content from two streaming services was the Paramount+ and Showtime merger, which now exists as a single service. It remains unclear whether this will become a trend among streaming services. Still, the move by Disney is a strategic step in the direction of its direct-to-consumer offerings, which includes prioritizing streaming profitability with Disney+, Hulu, and ESPN+.

Disney's new strategy aims to increase digital opportunities to serve digital ads and grow the advertising business while also: cutting back on content costs and layoffs. 

Disney is targeting $5.5 billion in savings, with $3 billion coming from content costs. Combining Disney+ and Hulu content into one app is part of this strategy. And the company hopes it will increase engagement and advertising opportunities.

It is uncertain how Disney plans to make their services profitable. But, a growing movement within the industry is to cut back on the amount of original content and focus on offering ad-supported options. One possibility is for Disney to join the likes of Warner Bros. Discovery to cut back on content costs and even license some of it to other ad-supported services.

The future of Hulu as a standalone streaming service after the merger with Disney+ content is uncertain. Then Disney CEO Bob Chapek recently hinted that he wanted to integrate Hulu into Disney+. But, it depends on when Comcast sells its stake in the service and its terms. 

Reports speculate that Disney looks to close a buyout deal with minority Hulu owner Comcast sooner than the original 2024 expectation. By the end of 2023, Disney will roll out a single app experience incorporating Hulu content on Disney+, available to customers who subscribe to both streaming services. However, Disney+, Hulu, and ESPN+ will still be available as standalone options.

Impairment charges are expenses that reflect a reduction in the carrying value of an asset on the balance sheet when the carrying value of a particular asset exceeds its fair market value. 

While the entertainment industry is not [specifically] mentioned, impairment can occur due to a change in legal or economic circumstances or as a result of a casualty loss from unforeseen hazards. Assets that can be impaired include goodwill, long-lived assets such as property, plant, and equipment, and financial assets such as investments and receivables. When an impairment charge is recognized, it is recorded as a loss on the income statement and added back into cash from operations.

Sources: 

Disney+ And Hulu Programming To Be Combined Into One App By Year’s End, Bob Iger Says

Disney+ and Hulu Content to Merge Into One App, Services Will Stay Separate

Disney Earnings: Streaming Losses Shrink and ARPU Rises, Disney+ Subscribers Fall to 157.8M

Disney Flags Risk of Impairment Costs in Iger Overhaul

Disney Wants to Prioritize Streaming Profitability With Disney+, Hulu, and ESPN+

As Disney looks for cost cuts, what’s the future of Hulu?

Hulu content coming to Disney+ in "one-app experience" by end of year

DISNEY IS CUTTING CONTENT FROM THEIR STREAMING SERVICES

The Disney Bundle: Everything to Know About the Disney+, Hulu, and ESPN+ Bundle

Impairment Charge

Impairment Charges: The Good, the Bad, and the Ugly

Impairment (financial reporting)

Goodwill Impairment Accounting