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Disney India to focus on advertising for streaming revenue growth
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The change in strategy comes amid growing rivalry with India’s Ambani
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Hotstar has lost millions of users, but it is confident
By Aditya Kalra, Munsif Vengatil and Don Chmielewski
NEW DELHI/LOS ANGELES, Aug 29 (Reuters) – Walt Disney is trying to revive the fortunes of its streaming business in India by offering free cricket on smartphones, betting the strategy will boost advertising revenue And the effect of customer exodus will be offset.
The Indian streaming operation, which was Disney’s largest by users globally last year, reported a loss of $41.5 million on revenue of $390 million for the year to March 2022, as per its last announced results.
With subscriber exits accelerating and user base shrinking by a third between October and July last year, the Burbank-headquartered entertainment giant’s financial performance in the country is expected to come under further pressure.
Disney’s troubles are a cautionary tale about the Indian market, where the expectations of a growing middle class often frustrate cost-conscious consumers.
The company acquired Indian streaming service Hotstar after it paid $71 billion for some of 21st Century Fox’s global assets in 2019. Keeping the streaming rights of the Indian Premier League (IPL), the world’s richest cricket league, in its bag, Disney made Cricket on Hotstar a paid service in 2020 and was confident of getting 100 million users within a few years.
But Indian billionaire Mukesh Ambani snapped up the rights to the IPL last year in a $2.9 billion bid and then streamed the games for free. Soon, Disney’s customers fled—out of 61 million users in October, about 21 million were gone by July.
Disney admitted internally that it misunderstood Indians’ willingness to pay – people signed up for Hotstar when IPL was on, but were unwilling to buy more premium plans to watch other content, Disney’s two sources told Reuters.
A source said, “We were sure of the Indian customers’ propensity to pay. It didn’t work out.” “Free cricket is the only option left.”
From August 30, the company will be live-streaming matches of the Asia Cup as well as the World Cup in October-November, which the 600 million smartphone users in the cricket-crazy nation can watch without paying anything.
The new strategy comes as Disney is exploring the options of finding a joint venture partner or even selling its Indian business.
‘hybrid model’
Disney renewed its rights to show International Cricket Council tournaments in India from 2024 to 2027 by paying around $3 billion. It retains the digital streaming rights, but last year licensed the TV broadcast rights to India’s Zee Entertainment for about $1.5 billion, said a source.
The company has assessed that going back to the free-cricket model on mobile phones and tablets is the strategic pivot needed to grow revenue. It calls the move a new “hybrid model” to increase advertising revenue by increasing smartphone viewership, while targeting new customers for the Hotstar TV app where cricket will remain under paid plans.
The strategy is about “how do we create a model that will allow us to drive the two revenue streams more meaningfully,” Disney+Hotstar head Sajith Sivanandan said in an interview, adding that Disney is confident that Its user base will grow in the coming years.
Making cricket free on mobile will help the 50-over World Cup to be hosted by India “add more than 450 million subscribers” over 48 days, while the previous World Cup in 2019 had over 300 million subscribers, a The “festival” is said in a Disney presentation of Cricket 2023 made for advertisers and seen by Reuters.
The document states that the company is eyeing a new record of 50 million concurrent viewers during the World Cup, double the number from 2019. This will be 56% more than what Ambani’s JioCinema earned during this year’s IPL final in May.
Sivanandan said the company would target advertisers with budgets below 200,000 rupees ($2,421). Another new initiative will be interactive ads that will engage with brands’ WhatsApp chats to enable viewers to shop for products.
Disney document shows a new deal with Coca-Cola to increase subscriptions. QR codes on an estimated 400 million Coke bottles will offer Hotstar trial, with Disney hoping 80,000 people will take paid plans.
low average revenue
However, there’s no guarantee that Disney’s strategy will be successful.
Daoud Jackson, a senior analyst specializing in streaming businesses at UK research firm Omdia, said free cricket was not a sure winner as companies pay billions of dollars to obtain streaming rights but it would take years for advertising revenue to match. Are.
India’s middle class is huge, but the broad user base in the world’s most populous country is “increasingly narrow” when it comes to paying users, VC firm Bloom Ventures said in April.
In the United States, subscription rates for the ad-free Disney+ streaming service will increase by 27% to $13.99 per month. In contrast, in India, the Disney+ Hotstar service costs $3.62 per month.
According to Disney’s latest quarterly earnings report, the average revenue per user (ARPU) in India is a meager $0.59, compared to $7.31 for the Disney+ US service.
Disney’s global leadership has pressed India to accelerate Hotstar’s “path to profitability”. The sources said Nancy Lee, chief of staff to CEO Bob Iger, visited the country earlier this year and asked business leaders whether the streaming operation could be profitable ahead of the global target of end-2024.
They were told that it would not be possible to pursue the target.
Nevertheless, research firm Media Partners Asia estimated last year that India’s streaming market would be worth $7 billion by 2027, where Netflix and Amazon.com’s Prime Video would also compete. But it is the rivalry with JioCinema, run by Ambani’s broadcasting unit Viacom18, that could be the most intense.
As Ambani promoted the IPL around March on his streaming apps, he focused on how people could watch matches on the go, on smartphones, and didn’t need a TV. To counter this, Disney released advertisements at the time stating that cricket was best watched on TV – for which it still held the IPL rights.
In new ad campaigns last week, Disney changed its stance.
It said, “Now watch all the matches of the world’s biggest tournament, anywhere, on your mobile absolutely FREE.” ($1 = 82.6100 Indian Rupees)
(Reporting by Aditya Kalra in New Delhi, Munsif Vengatil in Bengaluru and Don Chmielewski in Los Angeles; Editing by Muralikumar Anantharaman)
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