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Disney Reveals That Hulu Is Key to Its Fox Searchlight Strategy

In the Disney earnings call, Bob Iger set expectations for Fox Searchlight in Disney's streaming strategy.

Guillermo Del Toro - Director - 'The Shape Of Water' and Best Picture - 'The Shape Of Water'90th Annual Academy Awards, Press Room, Los Angeles, USA - 04 Mar 2018

Del Toro won Best Picture and Best Director for “The Shape of Water,” a Fox Searchlight release.

David Fisher/REX/Shutterstock

As Disney CEO Bob Iger introduced former Fox properties to the Disney discipline, Fox Searchlight appeared to be an outlier.  Earlier this year, co-chairmen Nancy Utley and Steve Gilula said things were “business as usual;” indeed, the label will release new films by Wes Anderson and Armando Iannucci in 2020, and production began this week on the Michael Showalter’s “The Eyes of Tammy Faye.”

However, on Thursday Iger revealed that he plans to tap Fox Searchlight to create original content for Hulu — showing there’s no such thing as business as usual as the streaming wars accelerate.

Searchlight is developing “original content” that will land on Hulu, Iger said, offering no details about what that might include. But it’s likely such productions could go straight-to-streaming, which would push Searchlight — known for its awards titles — in an adjacent path to Disney’s other film efforts.

There’s no suggestion that Searchlight would abandon its awards-fodder bread and butter. The studio has earned an impressive four Best Picture Oscars in 25 years, most recently Guillermo del Toro’s “The Shape of Water” in 2017. Disney’s film output is almost entirely devoted to tentpoles; Searchlight could be its counter to the creative environment developed by chief streaming competitor Netflix, which is spending big on awards contenders like “Marriage Story” and “The Irishman.”

During Disney’s Q4 earnings call Thursday, Iger said his company acquired 20th Century Fox for the value it brings to the company’s direct-to-consumer streaming strategy: the family-oriented Disney+, which launches next week; the more adult-skewing Hulu; and ESPN+, the definitive subscription for cord-cutting sports fans.

Although the Disney+ debut is less than a week away, on the call Iger brought much of his energy to Hulu. It’s part of a $13 bundle that includes Disney+ and ESPN+, as part of the company’s Netflix-killing strategy. However, the Hulu in that package comes with commercials.

“Hulu is a significant driver of advertising revenue and continues to be,” Iger said. “The value of an ad-supported Hulu subscriber, given the ad revenue that it drives, is very, very high.”

Disney plans to entice audiences with exclusive and library content from FX, the network that airs edgy shows like “American Horror Story,” as well as Fox Searchlight, which released everything from “Napoleon Dynamite” to “Slumdog Millionaire.”

Fox currently has an HBO output deal, which means that Searchlight’s 200-film library won’t be available for Disney’s Hulu until 2022; a previous iteration of the pact was worth $1 billion over 10 years. It would be natural for those movies to head to Hulu when the deal expires; on the other hand, thats a a lot of money. On the call, Iger said it was “premature to speculate.”

Hulu currently has output deals with Annapurna, Neon, IFC Films, and Bleecker Street, making it a go-to place for indies like “I, Tonya,” and “Sorry to Bother You” — films that would be right at home alongside episodes of FX’s “Pose” and “Archer.”

Fox Searchlight also has been on a buying spree of short films this year, including the Oscar-nominated “Skin.” Utley told IndieWire in February that the shorts would play well on the studio’s YouTube channel, playing down any connection between the buys and possible subscription streaming placement.

Of course, it’s even more likely that short films could succeed on Hulu. But that was before the acquisition, when things looked much different in Hollywood.

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