Disney Eyes Joint Venture Or Sale For Hotstar

Disney is reportedly in the early stages of exploring a possible joint venture partner or sale for the Indian digital and TV business that includes the Disney+ Hotstar streamer and Star India. 

The company has not commented on the reports by The Wall Street Journal and Reuters. 

Sources said “very nascent” internal discussions about what to do with the properties have begun, driven by Disney executives at the U.S. headquarters, and that Disney has reached out to at least one bank about a JV to help the streamer grow while sharing costs. 

As reported in DND earlier this month, Hotstar, which was estimated to have an enterprise value of about $15 billion to $16 billion when it was acquired as part of Disney’s 2019 acquisition of 21st Century Fox’s entertainment assets, is now facing increasingly formidable competition from the indigenous streamer JioCinema. 

JioCinema is backed by Viacom18, whose shareholders include Paramount Global, Reliance and Bodhi Tree, a joint venture of James Murdoch and former Star India executive Uday Shankar. 

In June 2022, JioCinema outbid Disney, paying $3.05 billion, to secure the streaming rights to the Indian Premiere League (IPL). Disney, which had had the digital rights for the five seasons following its acquisition of Hotstar, 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 study by Ampere Analysis. That would contribute to Disney’s aggressive push to slash $5.5 billion in costs over the next several years, which includes $3 billion in content expenditures, as well as 7,000 jobs. 

But the audience for the broadcast coverage of the IPL tournament this year was only moderately higher than the audience for the streamed coverage. 

Disney+ Hotstar, which owed most of its rapid growth to its IPL rights, lost 8.4 million subscribers since losing those rights, from 61.3 million as of the end of October 2022 to 52.9 million as of April 1, 2023, and is expected to lose 8 million to 10-million more in Disney's FY Q3 ending July 1. Hotstar losses caused the first-ever quarterly subscription loss for the global Disney+ platform in the quarter ending December 2022.   

Hotstar has also lost ad revenue, driving another 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 thanks to its IPL coverage, and that digital ad revenue for the event would surpass TV ad revenue for the first time.

The Star India business's overall revenue for the fiscal year ending September 2023 is expected to decline by about 20%, to slightly less than $2 billion, and its EBITDA (earnings before interest, taxes, depreciation and amortization) is expected to drop by 50%, from about $200 million in the previous fiscal year, according to WSJ.

JioCinema has also turned up the heat by acquiring rights to TV titles and films from Warner Bros. Discovery, NBC, HBO and other global platforms, and building a 100-title slate of original TV shows and movies. Not to mention showing most content  for free -- including its first season of IPL streaming coverage, despite losses against its rights investment. That strategy is sparking a pricing war that is expected to further drive down ARPUs in the country's rapidly growing streaming business.

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.

Despite recent subscriber declines, Disney+ Hotstar leads the subscription video-on-demand (SVOD) market, with a 29% share. 

Disney reduced its streaming/direct-to-consumer losses from more than $1 billion in its FY Q1 ended December 2022, to $659 million in the quarter ended March 31, 2023.  

But the company is clearly bent on pushing the crucial division into the black as quickly as possible via subscription price hikes and the new Disney+ ad-supported tier, along with the content and job cuts. And India presents a unique challenge, given economic realities and consumer expectations that keep streaming prices low, as well as mounting competition from JioCinema.

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