Disney+ Hotstar Shifts Focus To Up ARPU, Faces Stiffer Competition

In line with its broader corporate streaming strategy, Disney has shifted its focus for Disney+ Hotstar, India’s leading streaming service, from pumping up subscriber volumes at any cost to driving average revenue per subscriber (ARPU) and, ultimately, profitability. 

The shift was signaled by Disney’s decision in June 2022 not to outbid rival streamer Viacom18-backed OTT platform JioCinema to keep streaming rights to the Indian Premiere League (IPL) cricket tournament. JioCinema paid $3.05 billion. Disney, which had had the digital rights for five seasons, chose instead to pay $3.01 billion to continue to hold the IPL broadcast rights. 

Forgoing the streaming rights saved Disney a figure just short of twice its entire streaming revenue over the past five years, according to a new study by Ampere Analysis.

Despite recent subscriber declines, Disney+ Hotstar leads the subscription video on demand (SVOD) market, with a 29% share. As of the end of Q1, 2023 (Disney’s FY 2023), it had 52.9 million subscriptions — down from 61 million in October 2022, but still far more than Amazon Prime Video, at 12.4 million, and Netflix, at 6.2 million.

Ampere expects Hotstar to remain the leading SVOD despite the subscription declines.

However, the IPL streaming rights were a major — perhaps the major — contributor to building Hotstar’s subscriber base in the first place.

And Hotstar also lost advertising revenue in the latest quarter, contributing to a drop in ARPU from an already-low $0.74 to $0.59 — about 10 times below the $6.47 of the Disney+ service global service.

Media Partners Asia projected that JioCinema would get 60% of IPL 2023’s total ad sales, and that digital ad revenue for the event would surpass TV ad revenue for the first time.

In the end, JioCinema, which offered the IPL coverage for free at least for the 2023 season, and might decide to keep doing so, attracted more than 400 million viewers for the IPL streams of 70 games in April and May — including a record-breaking 32 million simultaneous views for a livestreamed event for the May 29 finale game. Disney’s satellite TV coverage drew 482 million viewers for the first 66 matches, according to Broadcast Audience Research Council.

JioCinema has also acquired rights to TV titles and films from Warner Bros. Discovery, NBC, HBO and other global platforms, and is showing most content for free, sparking a pricing war in India’s rapidly growing streaming market. JioCinema is also building a 100-title slate of original TV shows and movies.

Disney, on the other hand, ended its Hotstar licensing deal with WBD and did not bid for licensing rights for Paramount and NBCUniversal titles in India. Disney+ Hotstar content consists primarily of movies and TV shows from Disney, Pixar, Marvel, Star Wars and National Geographic.

It will be difficult for JioCinema to recover even 30% to 40% of the IPL content acquisition cost on a free-to-viewers basis in the near term — and the free content will also hurt the ARPUs of all streamers in the market, Karan Taurani, SVP at Elara Capital, told Benzinga. “It will be a big negative impact for monetization of the most expensive entertainment IP in India,” she said.

However, the short-term positives of a free IPL for JioCinema cannot be denied, Taurani added. After its successful FIFA World Cup 2022 and WPL 2023 offerings, the content could push its subscriber base to a new high. It reportedly gained 10 million new sign-ups in Q1 2023, according to Business Today. (Finding an estimate of JioCinema’s total users/subscribers is an exercise in frustration.) 

"With an estimated 20-25 million paying subscribers of Disney+ Hotstar expected to migrate to Reliance Industries-backed JioCinema to watch the Indian Premier League (IPL) cricket tournament for free, the country’s already small $668-million subscription-video-on-demand (SVOD) streaming market might get dented further, even as price-sensitive Indian users were getting used to paying for content," wrote Business Today.    

Elara Capital estimated the Indian video OTT market’s total revenue at $1.7 billion as of April 2022, of which SVOD accounts for $668 million (37%) and AVOD contributes $1.1 billion (63%). India has about 49 million paying/SVOD audiences, according to a report by media consultancy firm Ormax Media. Analysts estimate that JioCinema’s free IPL streaming is likely to attract around 50% of the total SVOD viewership to its platform.  

The platform recently began supplementing its free tier with subscription packages targeting more affluent and English-speaking audiences. One new one is priced at $12 per month.

Despite heavy losses from providing free content, JioCinema’s rapid rise “has made it a serious player in the streaming market,” sums up Benzinga.

Ampere’s analysis concludes that to achieve ARPU growth for Disney+ Hotstar, Disney will need to reassess its deals with mobile telcos, including Reliance Jio, Bharti Airtel and Vodafone, which give some mobile or broadband customers free access to the streamer. While the deals support ad sales by extending the streamer’s reach, they depress ARPU.

“With India set to keep its position as the world’s third-largest SVOD market after the U.S. and China, with an expected growth to 180 million subscriptions in 2027, it is important for Disney+ Hotstar to balance its content expenditure and subscription retention and acquisition,” states Ampere Senior Analyst Orina Zhao. “JioCinema is expected to announce more standard subscription plans later this year, which will increase direct competition with existing players and change the ecosystem of the market. Disney+ Hotstar still owns 123 of the top 500 most popular titles in India, by Ampere’s estimates, which places it behind Amazon Prime, but ahead of Netflix (117 titles) and far ahead of JioCinema (38 titles), but now needs to find new sustainable strategies to improve profitability while maintaining its significant subscriber base in India.”

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