ICC World Cup 2023: Disney+ Hotstar’s Last Roll Of The Dice?

Three hundred and thirty two (332) cricket matches. After nearly a decade in the Indian market, this is what Disney+ Hotstar’s fate has boiled down to on the day the first of those 332 matches begins at the ICC World Cup 2023.

The reported talks for potential acquisition of Disney+ Hotstar by Reliance points to a change in the OTT pecking order, and the loss of key entertainment and sports properties has made one of the oldest streaming platforms in India into an acquisition target, or even a distress sale.

But it’s important to trace the state of Disney+ Hotstar today back to the beginnings, when it was just known as Hotstar. And in many ways, what worked for Hotstar when it began its journey is now being revived at a time when the platform is striving for relevance. Put simply, Hotstar’s freemium model became the blueprint for JioCinema in the OTT wars and the balance has shifted now.

Will the World Cup be enough to save Disney+ Hotstar or will it be a swansong for India’s most celebrated streaming platform?

Hotstar Before Disney

When Hotstar came on the scene in February 2015, streaming and OTT entertainment were alien to most Indians. Even though SonyLIV was the first major entrant in 2013, it was Hotstar that catalysed the Indian streaming opportunity.

The formula it chose was simple: find cricket matches and stream them for free. Hotstar’s subscriber base grew substantially, with it easily becoming the largest OTT platform in India and retaining the position for a number of years. 

Hotstar’s market share meant that every other streaming platform was playing catch — not only in terms of marketing but also in terms of gaining the right properties and content to compete. Bagging the rights for marquee cricket tournaments such as the World Cup of yesteryears resulted in automatic free marketing and customer acquisition for Hotstar. It made it harder for SonyLIV, Voot and others to compete.

With cricket and sports streaming as a bulwark, Hotstar even took on Netflix and Amazon Prime Video in the original content space. The US giants entered India well after Hotstar but their bet on original and mainstream content was different from Hotstar’s positioning as a live streaming destination.

Hostar signed deals with HBO for its original slate and even had other high-profile sports events such as Formula 1 and English Premier League in its kitty as the second line of defence against subscriber attrition.

The free to premium transition had worked for Hotstar to a large extent, but it was still heavily reliant on ad revenue. Only the cream of the consumer base had opted to pay up for the ad-free tiers. And this came back to bite Hotstar in 2022 and 2023.

The Disney+ Hotstar Era

Naturally, when entertainment behemoth Disney was eyeing a massive $71 Bn acquisition of Fox’s global assets, Hotstar was seen as a prized jewel.

It was Disney’s gateway to the Indian market and it came with a huge subscriber base that could be monetised further with Disney’s mega franchises — Marvel, Star Wars and a host of animated shows.

Disney’s entry resulted in the Disney+ Hotstar we know today, but it also came at a time when the streaming game was about to change in a big way.

The pandemic brought more and more stuck-at-home users to the OTT fold and for a while, subscriptions took off. Streaming platforms banked on telecom and broadband bundles to scale up and reach more viewers, hoping that this would spur on a great cord-cutting movement in India in the post-pandemic years.

Unfortunately, the streaming glut of 2020 and 2021, also built up subscription fatigue in users. The fiscal policies that were put in place for economic recovery in the post-pandemic world were slowly withdrawn and the resultant slowdown in discretionary spending continues to date to some extent.

Amid this, the launch of JioCinema with the full might of the Reliance and Jio empires upended the game even further. JioCinema’s launch and subsequent expansion banked on free streaming on sports events.

It started with the biggest prize of them all — the Indian Premier League for which the Mukesh Ambani-led nascent streaming platform paid $2.7 Bn and then decided to make it free to watch.

It’s essentially Hotstar’s 2015 model which was revived by JioCinema but at a different time and moment in the Indian tech economy, when Jio was better poised to capitalise.

Between July and September 2022, the Disney-owned OTT platform added 2.9 Mn paid subscribers, reaching a total subscriber base of 61.3 Mn. In the three quarters since, the subscriber base has declined 34% to 40.4 Mn as of July 1, 2023.

When it lost IPL rights to JioCinema, analysts predicted that the company would see the exodus of at least around 25 Mn subscribers. In the past one year, JioCinema has snatched the digital streaming rights for marquee sports events such as the IPL, FIFA World Cup 2022 and the media rights for the domestic matches of the Indian cricket team from the incumbent Disney+ Hotstar.

JioCinema has also broadcast many tournaments, including the IPL, for free and has signed content partnerships with American studios such as HBO and NBCUniversal to emerge as the home of premium English content in India.

Back To Freemium

If Hotstar’s freemium strategy between 2015 and 2020 resulted in creating the groundswell for streaming in India, it also coincided with the launch of 4G telecom services, where again Jio disrupted the market with free mobile internet plans.

One could say that Hotstar would never have reached where it did in terms of leading the market without a little help from Ambani and Jio. Now, JioCinema is capitalising not only on the market that Hotstar in many ways created but also dragging the Disney-owned streaming platform into the free streaming turf war.

This brings us to the 332 cricket matches that could define the decade-long journey of Disney+ Hotstar. These are the ICC cricket matches or the ‘World Cups’ across cricketing formats for women and men till 2027.

Starting with the 2023 Cricket World Cup, which begins today, Hotstar has eight top-tier ICC women’s and men’s tournaments, as well as two standalone World Test Championship finals. Live sports streaming is restricted to English Premier League (football) and the ICC tournaments.

Hotstar’s strategy of banking on free streaming to grab ad revenue and capture some more subscribers is a hugely risky one. When JioCinema announced free streaming for IPL, it was seen as a risk too. However, that risk was then hedged with deals with major studios and other entertainment properties.

JioCinema banked on the free streaming for IPL to grab subscribers and it had the content arsenal to do so. Today, Disney+ Hotstar is a shell of the platform it was once and almost all its promotions are geared around Marvel and Star Wars franchises.

Without its erstwhile content library, sports deals and a compelling original slate to back up the free World Cup streaming, Hotstar pales in comparison to JioCinema today, which is perhaps the biggest reason why Disney+ Hotstar has made World Cup streams free on mobile.

Disney+ Hotstar did see some positives from its trial run of free sports streaming in September. It registered a peak 2.8 Cr concurrent viewers during the India-Pakistan match of the Asia Cup, setting a new digital viewership record for any India match. JioCinema also saw 3.2 Cr viewers tuning in to watch the IPL 2023 final between the Chennai Super Kings and the Gujarat Titans.

Despite record-breaking viewership, free access to premium content such as live cricket may be detrimental to revenue. The cost of acquiring media rights is high, and advertising revenue cannot fill the gap.

Moreover, advertising revenue growth is not in line with the increasing costs of media rights. Take IPL, for instance. While Sony won IPL media rights for 2009-2017 for INR 8,200 Cr, the rights for the 2023-2028 period fetched the BCCI INR 48,390 Cr — Disney Star paying INR 23.5K Cr for TV rights and Viacom18 paying INR 20K Cr.

But both together earned a total of INR 4,700 Cr from advertising revenue during the tournament, which is not even 10% of what they shelled out.

Karan Taurani, SVP, Elara Capital earlier told Inc42 that Hotstar and others will find it hard to compensate for the revenue lost from subscriptions. Sports is the big reason for consumers to pay, but now they don’t even have to do that. Analysts believe this will upend revenue expectations of the OTT space and puts them on par with TV channels in many regards.

India’s OTT market was estimated to have 428.3 Mn viewers in 2022 but only 30% opted for subscription, according to a Deloitte report. Despite the low subscription penetration, the revenue from subscription is definitely more attractive for platforms than relying on seasonal ad revenue.

But Disney+ Hotstar does not believe that it is leaving all subscription revenue on the table. Its “hybrid model” is meant to drive ad revenues by bringing more viewers on mobile, and it is targeting new subscribers for the Hotstar smart TV app where cricket streaming continues to remain a paid offering.

Sajith Sivanandan, head of Disney+ Hotstar, told Reuters in August that this “will drive two revenue streams more meaningfully” given the high visibility for the ICC World Cup.

It’s an interesting hedge, and it banks on the fact that the TV app is better suited for Hotstar’s other top-tier offerings such as Marvel or Star Wars movies, something subscribers would want to pay for.

World Cup: Last Chance For Disney+ Hotstar?

This World Cup is the chance for Disney+ Hotstar to gain some of the subscribers back. In terms of viewership, it is expected to be larger than the IPL given the global spotlight as well as the fact that the tournament is happening in India.

Disney+ Hotstar is eyeing 50 Mn concurrent viewership during the World Cup, double of what was seen in 2019 and, importantly, 56% higher than JioCinema’s numbers during the IPL 2023.

To add another revenue stream, mobile users on Disney+ Hotstar would be able to click through on product links from the app to WhatsApp and then complete the purchase.

Instead of bundling plans with telecom subscriptions, Hotstar is using QR codes on around 400 Mn Coca Cola bottles with a trial plan linked to the QR. The platform is hoping to bring in 80K subscribers through this omnichannel promotion.

But ultimately, it’s about how appealing Hotstar is to the average OTT subscriber. In that regard, analysts paint a bleaker picture. The notion in the industry is that Hotstar needs to move into new spaces where there’s still enough room for growth and innovation.

Analysts pointed to JioCinema’s recent esports streaming deal which supposedly brought in a lot of traction from mobile users. The other option is to invest heavily in Indian content, where there is plenty of competition, but the upside for one or two ‘hit’ shows can be big, even if momentary.

“If you want to prevent churn, you have to look at making your programming a lot more robust. But the parent company Disney has become bottom-line focussed and that means fewer investments for the content slate and more towards revenue,” said a Mumbai-based partner at a Big Four firm.

Of course, one cannot rule out the possibility of an acquisition of Disney+ Hotstar in the near future. The partner quoted above added that Disney still has a massive OTT player in the form of Hotstar, despite any subscriber attrition.

Earlier, The Walt Disney Co reportedly held talks with Reliance for the potential sale of the streaming and television business in India.  Top executives of Reliance and Disney are said to have had direct negotiations over various strategic options for Disney+ Hotstar and other networks. Disney was exploring both a joint venture and a sale of its Star India business, which also includes streaming giant Disney+ Hotstar.

“Its (Disney’s) perspective changed and it realised it did not have the stomach for the Indian market where profits are a long shot. Even globally streaming is not profitable for many players and they are bleeding money. Given this, the acquisition is certainly a positive outcome for some players,” the analyst added.

In case, the ICC World Cup bet doesn’t work, Disney+ Hotstar’s fate may once again be determined by Jio.