Disney+ Hotstar’s game of survival

Another contest, equally engrossing, is playing on the sidelines: Viacom18 versus Disney Star.

Viacom18 Media Pvt Ltd, controlled by Reliance Industries Ltd, holds the streaming rights for the cricket extravaganza. It claimed a peak concurrency—the highest number of viewers at one point during the livestream—of 16 million on the opening day. Overall, 60 million viewers streamed the match that day, on their phones, laptops, or smart TVs. And in the first weekend, average time spent by each viewer in every match totalled 57 minutes, 60% higher than last year, the company announced. Viacom18 further stated that viewers were preferring to watch the tournament on its digital platform, JioCinema, where it was streaming for free.

This was an obvious dig at Disney Star, the media firm owned by The Walt Disney Company. Disney Star held both the satellite and digital rights to the IPL until last year. In June 2022, the company spent ₹23,575 crore to buy television broadcast rights for the tournament for five years, beginning 2023, but gave up the coveted digital media rights to Viacom18 that bid a staggering ₹23,758 crore.

Citing viewership data from the Broadcast Audience Research Council, Disney Star claimed that the free live streaming of IPL has not dented TV ratings—it has only grown over the past year.

In some ways, Disney Star was prepared for the barbs coming its way. Its video streaming platform, Disney+ Hotstar, premiered Gaslight, a mystery film starring Sara Ali Khan and Vikrant Massey, on the opening day of IPL. While cricket won hands down, the mid-budget thriller’s numbers are impressive, too. Media consulting firm Ormax estimated it had clocked 3.7 million views within India in the week ending 2 April and was the most viewed Hindi language over-the-top (OTT) original for the period across top streaming platforms.

Claims and counter-claims aside, a big question mark does appear around the future of Disney+Hotstar. After all, the streaming platform built its reputation and might on the back of IPL, which it had been streaming since 2015.

Hotstar was launched by Star India—it coincided with the 2015 ICC Cricket World Cup as well as the IPL that year, for which the company had acquired the streaming rights.

In June 2018, Walt Disney acquired Rupert Murdoch’s 21st Century Fox Inc. in a $71 billion cash and stock deal, making Star India, Fox Star Studios, and Hotstar part of the media conglomerate. Back then, the businesses of 21st Century Fox in India was parked under Star India. In 2020, Hotstar was rebranded as Disney+ Hotstar.

The platform today dominates the video streaming market in India, and is ahead of rivals like Amazon Prime Video, Netflix, SonyLIV, ZEE5 and several others in terms of subscribers (Netflix is the No. 1 in terms of subscription revenue). Disney+Hotstar had clocked sponsorships and advertising worth ₹1,500 crore in 2022, Mint had earlier reported. The IPL made up 70% of the ad revenue, market watchers estimated.

“It is accurate that the IPL played a crucial role in the success of Disney+ Hotstar and helped it get to the position of the leading streaming service in the country,” said Sajith Sivanandan, head of Disney+ Hotstar, India. “But while a significant number of our subscribers came for IPL, they stayed on for the rest of our content offerings. IPL essentially gave us the opportunity to showcase our spread of entertainment content, both local and global to our subscribers,” he added. Today, the platform has struck the right balance between sports and entertainment, he further said.

Despite this optimism, Disney+ Hotstar may be on a slippery slope—apart from the IPL, the platform has stopped streaming tens of popular international content. Over the past few months, the platform’s growth rate has, therefore, slowed. In the December quarter of 2022, its subscriber count, globally, dipped to 57.5 million from 61.3 million earlier. India accounts for the majority of its subscribers.

A change in strategy has done some of this damage.

Succession and goals

In November 2022, Disney reappointed Bob Iger as its chief executive, just 11 months after he left the company. He replaced Bob Chapek, amid a slump in the company’s share price.

As the shakeup took place, analysts predicted that Iger would focus on financial discipline and higher profitability, especially for Disney’s streaming business. In the months that followed, he treaded the expected path. The company has announced a reduction of workforce by 7,000; it is targeting $5.5 billion in cost savings across verticals, including $3 billion in savings on the content side alone, excluding sports.

In India, though, the re-organization in the company’s strategy was in the works for a while. Those familiar with the workings of the company said that the corridors of Disney India aren’t exactly fraught with tension because of the IPL loss.

“They absorbed that news (IPL) a while ago and were prepared to scale up their entertainment offerings for 12-18 months now,” an entertainment industry expert tracking the company said. “IPL was a fuel for them to get somewhere. But now, they need other ways to stay the course. This was a pivot in the making.”

This pivot hinges on a multi-pronged strategy. First, and most critically, Disney+ Hotstar wants to build on local originals whose intellectual property resides solely with Disney, across multiple Indian languages. Second, it wishes to utilize the shelf life of television programming from Star India’s satellite TV channels, such as Star Plus, Star Vijay and others. Third, it is likely to reiterate the draw of original Disney content—including Marvel, Star Wars and Pixar franchises—to satiate the demand for international programming. Fourth, it hopes to cash in on the pull of movies, both streamed directly on the Hotstar platform or acquired post their theatrical release. Last, the strategy is to stack up on a sports portfolio. There is no IPL, but the platform still has other premium cricket, football and tennis properties.

House of woes

Let’s take a closer look at the streaming platform’s second loss, a consequence of its focus on financial discipline.

Starting 31 March, Disney Star has removed 144 HBO originals as the company decided against extending its longstanding content deal with Warner Bros. Discovery, a global media and entertainment company and the parent firm of HBO. The company paid $10 million a year for HBO content and this was simply not worth it, given its niche audience, the company reasoned.

As a result, popular series like the Game of Thrones, House of the Dragons, The Last of Us, and Succession will no longer be available on the service. Racing property Formula 1, too, will no longer stream on the platform. This has raised further concerns on the future and viability of Disney+ Hotstar in India.

Several industry experts said that Hotstar is staring at a massive loss of subscribers—at least two-thirds of its existing customers in the short term. “That will be a huge dent to the global Disney subscriber base. Hotstar may be a low ARPU (average revenue per user) offering but India is definitely one of the top five markets when it comes to the number of subscribers for Disney globally,” a senior executive at a rival streaming platform, who did not want to be identified, said.

“It’s definitely an annual subscription struggle for them. A fairly testing period that nothing can compensate for,” a media analyst, who also did not want to be identified, said. Growth is out of the question. However, once the platform crosses the hump of the initial subscriber loss, things should stabilize by May, the person added.

Many knights

So, how will Disney+ Hotstar survive this attrition?

Some experts point out that year-round entertainment brings in far more viewers than big event properties such as the IPL, which last 60 days. Further, many Hotstar originals are super hits. For instance, Koffee With Karan, a celebrity talk show, clocks in more viewership than the entire library of niche HBO content. Also, the company can still fall back on original Disney content, which includes Marvel Studio films and TV series.

“Disney+ Hotstar has a strong content library in the Marvel shows. As per our viewership estimates since 2021, while HBO’s House Of The Dragon, on Disney+ Hotstar, topped the list with a viewership of 28.2 million, it is the Marvel shows that make for seven of the top 20 most viewed international web series in India,” said Keerat Grewal, partner at media consulting firm Ormax.

Marvel’s bouquet includes Moon Knight (viewership of 23.4 million); Hawkeye (19.3 million) and Ms Marvel (15.1 million). They compare favourably with Prime Video’s The Lord Of The Rings: The Rings of Power (22 million), Grewal said.

From an advertiser lens, the platform has a strong base of freemium consumers, a matured ad tech stack and strong tail wind of growing connected TV households, Shekhar Banerjee, chief client officer and office head—West, Wavemaker India, said. Wavemaker is a media agency network.

In fact, many media experts said that the number of subscribers should not be the only metric to evaluate the performance of a platform; monetization is what investors are keen on, with both ad and subscription revenue being the key. As far as subscription revenue goes, Disney+ Hotstar ranks third after Netflix and Prime Video in India, according to estimates by Media Partners Asia, a research outfit.

The edge of specials

Like we pointed out earlier, Disney+ Hotstar wants to remain relevant by building on its India originals. What has been its track record thus far, and what’s cooking?

Its hits include Rudra: The Edge of Darkness (viewership of 35.2 million); Criminal Justice: Behind Closed Doors (29.1 million); The Night Manager (27.2 million); Taaza Khabar (23.5 million); The Great Indian Murder (23 million).

Going ahead, the company’s strategy will continue to revolve around content in multiple languages.

“Disney+ Hotstar announced exciting new content titles late last year where we unveiled three new projects that are currently in the works. With the success we saw with Koffee with Karan Season 7, we are happy to be bringing it back for the eighth season. We are also strengthening our relationship with Karan Johar and Dharma by collaborating with them on their new show Showtime (a web series),” Gaurav Banerjee, head—content, Disney+ Hotstar and HSM (Hindi-speaking market) Entertainment Network, Disney Star, said. Dharma Productions is an Indian film production company, led by filmmaker Karan Johar.

“We are also looking forward to Mahabharata, Aarya Season 3, Saas, Bahu aur Flamingo and The Good Wife,” Banerjee added. These India originals are yet to release.

It is difficult to predict the success of any web series or film. All we know is that in the past, the platform’s viewership was probably driven by annual subscriptions. These subscriptions, in turn, were driven by the interest in IPL. While Disney+Hotstar can bank on cheaper packages, such as a three-month pack, converting free users into subscribers will still be a tough battle without the cricketing show. And as a rival media executive quoted earlier said, “Disney+Hotstar now has to put out really compelling Hindi shows that can attract viewers. Customers are loyal to content, not platforms.”