After IPL streaming rights loss, Disney lowers the subscriber target for Disney+ Hotstar

Walt Disney is lowering the subscriber target for its video streaming Disney+ Hotstar after recently losing the streaming rights for the Indian Premier League (IPL) tournament to Viacom18.

During the company's earnings conference call on August 10, Disney's chief financial officer Christine McCarthy said they are separating their guidance into two categories: core Disney+ and Disney+ Hotstar.

They expect Disney+ Hotstar to reach upto to 80 million by the end of fiscal 2024. McCarthy said they intend to refine this target over time as subscriber visibility in India will be clearer once the ICC and BCCI cricket rights sales processes are completed.

"As you may know we recently made the disciplined decision to not proceed with the Indian Premier League digital rights and we'll evaluate these rights with that same discipline" she said.

This also brings down the overall guidance for Disney+, with the company expecting to hit 215 million to 245 million global subscribers by the end of fiscal 2024, as compared to the previously announced guidance of 230 million to 260 million.

McCarthy said they expect its core Disney+ subscriber target range to hit 135 million to 165 million by the end of fiscal 2024, excluding the impact of any significant future macro headwinds, which is largely consistent with previously provided guidance.

Viacom18 had secured the consolidated IPL digital streaming rights for the Indian subcontinent for Rs 23,758 crore for the 2023-2027 period in the media rights auction conducted in June 2022. Analysts had predicted that Disney+ Hotstar could face a significant impact on its user base after it failed to secure these rights.

Why is IPL important for Disney?

The IPL tournament has been one of the major subscriber growth drivers for Disney+ Hotstar and was considered key to the future growth of the streaming service that recently crossed the 50 million paid subscriber mark.

For the third quarter ended July 2, 2022, Disney+ Hotstar added 8 million paid subscribers to take its total paid user base to 58.4 million, a 30% jump from 44.9 million subscribers in the same quarter last year. The company attributed this growth to a new season of the IPL tournament that was held between March-May 2022.

Disney+ Hotstar accounted for about 38.4 percent of the total paid subscriber base of Disney+ for the quarter that stood at 152.1 million, up 31% from 116 million subscribers in the same quarter last year.

Even as the entertainment conglomerate lost the streaming rights, Walt Disney's India subsidiary Disney Star had bagged the five-year television rights for IPL at Rs 23,575 crore.

During the call, Disney CEO Bob Chapek mentioned that their Pay TV distribution in India continues to be a "robust business with projected GDP growth expected to drive advertising and consumer spending" and the "growth potential" exists for its portfolio of more than 70 channels that reaches 90% of pay cable and satellite TV homes in the region.

He also noted that India is one of the only markets in which they are launching new linear channels.

In June, Disney Star had said in a statement that it will focus on growing its slate of original entertainment content for Disney+ Hotstar and its television channels in the region, apart from exploring other multiplatform cricket rights.

ARPU jump

Disney had launched Disney+ in India on top of Hotstar in April 2020 and rebranded the service as Disney+ Hotstar.

The service currently operates on a freemium model wherein it offers some content on a free ad-supported model, unlike Disney+ which only offers paid subscriptions at present, although a ad-supported tier is expected to be launched on December 8, 2022.

Disney+ Hotstar's monthly average revenue per user (ARPU) rose to $1.20 for the quarter, a 54% increase from $0.78 in the same quarter last year, due to higher per-subscriber advertising revenue.

The service has also recently forayed into new markets in Southeast Asia with higher average prices and is currently available in Indonesia, Malaysia and Thailand, although a majority of Disney+ Hotstar subscribers are still from India.

Despite the growth, it is worth noting that Disney+ Hotstar earns the company a significantly lesser amount than other mature markets. For instance, an average Disney+ customer in the United States pays $6.27 per month while an average International customer (excluding Disney+Hotstar) pays $6.31 per month.

Disney+ said it earned an overall average of $4.35 per month from each customer this quarter, however if Disney+ Hotstar is excluded, the ARPU rises to $6.29 per month.

Overall, Disney now has around 221.1 million subscribers across its streaming services— Disney+, ESPN+, and Hulu—at the end of the quarter, surpassing streaming giant Netflix which had reported 220.67 million global member base last quarter, after losing 970,000 subscribers compared to the prior quarter.

Disclaimer: Reliance Industries Ltd, which owns 51 percent in Viacom18, is the sole beneficiary of Independent Media Trust that controls Network18 Media & Investments Ltd.