Streaming platform Disney+Hotstar, which faced a double whammy of losing IPL digital rights to Jio and HBO moving out of its platform, is set to see its paid users going down further by over 10 percent on top of an 8 percent decline in the March 2023 quarter.
According to estimates, Disney+Hotstar lost 15-16 percent of its paid subscriber base in India between October 2022 and March 2023. The platform is estimated to see a further decline of 10-12 percent in subscriber base in the April-May-June quarter, they said.
Currently, the streaming service has 52.9 million paid users versus 57.5 million in the previous quarter.
"There will be a total paid subscriber loss of 25-30 percent and a negative impact of 50 percent on overall revenue in 2023 for Hotstar as IPL had a 60-65 percent share in AVOD (advertising video-on-demand) revenues and a 40 percent share in SVOD (subscription video-on-demand) revenues. So we don’t expect a respite for Hotstar’s Indian ARPU (average revenue per user) at $0.59 per month currently due to the loss of major content properties and there is a high probability of a reduction in ARPU," said Karan Taurani, senior vice-president, Elara Securities.
Mounting pressure
The ARPU for the over-the-top (OTT) platform would fall further due to a lack of content that could replace IPL (Indian Premier League) and HBO, said Abhishek Jain, Head of Research, Arihant Capital.
"Disney+Hotstar has lost subscribers due to losing digital IPL rights to Jio and HBO pulling out of its contract with Disney+Hotstar, which has led to the removal of various content like Game of Thrones, Succession and The Last of Us, etc. Some of the HBO legacy shows are also no longer available on Hotstar as of April 1," he said.
Disney+Hotstar saw a 20 percent decline in the average monthly revenue it makes from each paid subscriber to $0.59 in the quarter ended March 31, 2023, from $0.74 reported in the previous quarter, the company had said during its earnings call.
ARPU will be under pressure and bundling with telecom as well as broadcasting players will be one of the strategies moving forward, noted Nitin Menon of NV Capital. "While they have a strong legacy business in the form of linear television as well as catch up TV, they will have to invest substantially in originals as well as the licensing business overall to maintain their market share," he added.
The platform is expected to lose substantial market share in India’s OTT market, said Taurani. "Disney+Hotstar's market share will be around 8-9 percent in 2023 from 17 percent earlier."
Some respite
In the second half of 2023, Jain expects some respite for Disney+Hotstar with T20 cricket World Cup 2023 scheduled between October and November this year. Hotstar has the rights for ICC (International Cricket Council) digital events, he said.
In August last year, Disney Star had retained the digital streaming rights for all ICC tournaments from 2024 to 2027 while it licensed the TV rights to Zee Entertainment.
Menon expects the platform to bounce back if it continues to invest aggressively in the content business. However, during the earnings call on May 10, 2o23, Disney chief executive officer Bob Iger said that the company intends to reduce the volume of content it is making and what it is spending to produce the content as well as continue calibrating its investments in specific markets.
Also, Taurani noted that if they come up with new originals it will take time to have an impact on subscriber addition and revenues as first, the content has to click with the audience and second, the platform will have to invest in content marketing to promote their titles.
Streaming market
India continues to be a price-sensitive market with per capita income around the $2,000 mark and discretionary spends like OTT viewing lower down the pecking order when consumers need to subscribe, noted Menon. "Though we have close to 100 million paid video subscriptions as per the latest report of FICCI- EY, the propensity to spend a substantial amount per month on a single OTT service is not that high," he said.
According to the report cited above, a consumer subscribing to three large video subscriptions today will spend around Rs 3,000 per year. It is expected that if large platforms launch more affordable packages or aggregators bring the bundled price down to Rs 1,500 or so per year the number of households paying for one or more subscription video services can reach 100 million and the total revenue will increase to around Rs 11,000 crore by 2025.
OTT subscriptions, like a lot of tech sectors, saw a surge during the pandemic both because of the extra time consumers had at hand, and on the strength of surplus cash in the economy, noted Utkarsh Sinha, MD, Bexley Advisors.
"However, those peaks are now passing and a new normal, which is still elevated from pre-pandemic levels will be reached, which will see some churn in subscribers and revenues," he added.
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