The last of HBO on Disney+Hotstar to cost the OTT over 15 million subscribers

The Telecom Regulatory Authority of India (TRAI) had scheduled a meeting with telecom operators and ISPs to chalk out the agenda for 2023 where players raised multiple issues. (Representative Image)

Losing HBO content has come as a double whammy for Disney+Hotstar, the streaming platform that lost the digital rights of Indian Premier League (IPL) for the 2023-2027 cycle.

A double-digit drop in paid users of around 15 million subscribers is expected due to the loss of HBO content, say experts tracking the over-the-top (OTT) space.

Disney's chief financial officer Christine McCarthy during an earnings call had said that its user base will decline in Q1 FY23 due to the absence of the Indian Premier League (IPL) tournament. Disney follows an October to September fiscal year.

Now, the loss of subscribers will worsen as the premium user base will get impacted due to a halt on the streaming of HBO content including shows like The Last of Us, Game of Thrones and House of The Dragon among others from FY24. Many of these shows recorded strong viewership in India with the Game of Thrones finale registering 19.3 million views in a day and House of The Dragon clocking 28.2 million views, according to data by media consulting firm Ormax.

"The HBO catalogue going away will affect the churn of subscribers from the premium tiers. And Disney+Hotstar may lose low and high ARPU (average revenue per subscriber) subscribers as a consequence of losing both HBO content as well as streaming of IPL," said Abhishek Nag, Partner, Lightspeed, a venture capital firm with investments in the enterprise, consumer sectors.

Paid-user pangs

The platform has already lowered its subscriber target to 80 million by end of FY24 after losing IPL streaming rights. It saw the biggest-ever quarterly subscriber decline in the December 2022 quarter with paid users dropping 6 percent to 57.5 million from 61.3 million in the previous quarter.

Disney+Hotstar could see a 25-30 percent decline in paid memberships, estimates Karan Taurani, senior VP, Elara Capital. He expects paid users to be in the range of 42-45 million in the next three quarters.

"Losing HBO content is a setback because many people in India were downloading Disney+Hotstar just to get access to American movies, content, and series that were premiering on HBO. Subscribers will now be unable to watch content like Succession and Industry from the next season. It will have a significant impact on OTT subscribers," said Prashant Gupta, Founder & CEO, Caerus3 Advisors, and Think-Tank.

Another estimate is that the OTT could lose around 15 million subscribers by end of this year, said Mihir Shah, vice-president, Media Partners Asia in an interview to another publication.

Subscriber loss is expected to continue till June 2023 quarter. Also, the platform losing streaming rights to India matches could further hit the paid user base. "BCCI is expected to renew its contracts for India matches this year and if Hotstar ends up losing that for CY24 and beyond, then it will be a bigger blow as the active paid subscriber base can move even below 40 million over the medium term," Taurani said.

Queries emailed to Disney+Hotstar on the impact of no HBO content on the platform remain unanswered till the time of writing this article.

The loss of IPL and HBO content could also lead to a cut in subscription revenues. The platform currently offers many paid plans including mobile plans that cost Rs 149 for three months and Rs 499 for a year. Then there are premium plans of Rs 299/month and Rs 1,499/year along with an ad-supported plan of Rs 899 a year.

The average revenue of Disney+Hotstar from each paid subscriber had increased 28 percent to $0.74 for the December 2022 quarter.

Concentration on content

While the platform will lose subscribers, it has saved money, said experts.

According to media reports, the cost to stream HBO content is around $40 million for four years.

"Some of the content budget savings from the HBO catalogue going away will be used towards commissioning and acquiring Indian language content. However, that takes time to show on the catalogue. So, I expect Disney+ Hotstar to have a few rough quarters in subscriber growth, Nag said.

Investment into original content and new IP takes some time as this requires a transition time of 12-18 months, Taurani noted.

"Netflix too had seen some pressure due to its loss of Disney content in 2019. However, they invested in building original IP and shows which has paid rich dividends over the last four years. We expect Hotstar to also invest aggressively into fresh and original content, which needs to click well with the audience in order to ensure subscriber retention," he added.

The platform has to its credit some successful originals including Sushmita Sen-starrer Arya, Criminal Justice starring Pankaj Tripathi and Ajay Devgn's Rudra. Nitin Menon of NV Capital said that the OTT has to build more such originals.

"They need to draw their strategies on building their content library further in terms of gripping originals as well as a stronger catalogue of movies. They have already started that trend with tent pole originals like Rudra," he said.

Regional content will be a big draw for subscribers, analysts said.

Regional content has taken the centre-stage in the strategy of most of the OTTs in India. From Zee Entertainment's streaming arm ZEE5 to Viacom18's Voot, the focus has been on expanding regional content.

The share of regional language consumption on OTT platforms will cross 50 percent of total time spent on streaming platforms by 2025, according to an Ernst & Young report. Out of the original shows produced, the share of regional content has increased to 50-60 percent in recent times compared to 20 percent three to four years ago.

Streaming platform ZEE5 records almost 50 percent viewership from regional language content, Manish Kalra, the OTT's chief business officer, had told Moneycontrol in an earlier interview.

OTT platforms

Be it IPL or other content, Disney+Hotstar has been leading in the OTT space in terms of the number of subscribers. Disney+Hotstar accounts for 50 percent of the subscriber market in India, followed by Amazon Prime with 19 percent and Netflix with 5 percent.

"Disney+Hotstar is still in pole position as compared to other OTT platforms. However, the growth of Song LIV which has been significant as well as the advent of the new Jio platform would be a cause of concern for Disney+Hotstar in the future," Menon said.

Disney+Hotstar recorded 46 million paid users in 2021 and 26.3 million in 2020. Next to it was Amazon Prime Video with 21.8 million in 2021 and 17 million in 2020 followed by Netflix with 5.5 million in 2021 and 4.2 million in 2020, according to MPA data, an advisory, consulting and research service.

With IPL and HBO content gone, the question is whether Disney+Hotstar will be able to retain its top position in the OTT subscriber market.

While the HBO content will be unavailable on Disney+Hotstar starting March 31, the company said that users can continue enjoying Disney+Hotstar’s vast library of content spanning over 100,000 hours of TV shows and movies in 10 languages and coverage of major global sporting events.