Disney Set to Sell Majority Stake in Indian Biz, Including Hotstar Streamer, For a Loss

Disney is reportedly set to sell a 60% stake in its Indian media assets, which include the Hotstar streaming service, JioCinema, the ad-supported free streaming service, Star India TV and Tata Sky, as it seeks to reduce global operating costs. Former Disney senior executive Kevin Mayer, who was brought back by CEO Bob Iger last July as a consultant, is heading the deal for Disney.

Hotstar has been integral to Disney+ since the latter’s global debut in late 2019, representing at its peak almost 40% of the streamer’s worldwide subscribers.

That significance waned last year when subscribers began exiting the platform after Hotstar lost its exclusive streaming rights to Indian Premier League cricket, which, along with soccer, is a national sport in India.

Disney+ Hotstar accounted for 37.4 million subs at the end of the most-recent fiscal period, down from 40.4 million through June 30, 2023.

In 2022, Hotstar lost the IPL rights following a multi-billion dollar bidding war with Viacom18, the latter a partnership between India’s Reliance Industries, Paramount Global and private equity company Bodhi Tree Systems.

Viacom18 is now paying $1.5 billion in cash for majority ownership of Disney’s Indian media assets, which is valued at $3.9 billion, according to The Wall Street Journal, which first reported the deal. The deal is slated to close this month.

When Disney assumed ownership of Hotstar, Star India TV and Tata following its $71.3 billion acquisition of 20th Century Fox, the Indian assets were valued upwards of $7 billion.

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Disney Reportedly Looking to Sell Indian Media Assets, Including Hotstar

The Walt Disney Co. reportedly plans to sell and/or spin off stakes in its Indian media properties, including streaming giant Hotstar — the platform that helped launch and continues to represent a sizable subscriber stake in the Disney+ service.

First reported by Bloomberg, which cited sources familiar with the situation, Disney has held preliminary talks with numerous Indian media companies, including Sun TV Network Group, the Adani Group, and Reliance Industries, among others. While no parties are commenting, and the talks could amount to nothing, any possible deal could mirror what AT&T did selling minority stakes with operational control in DirecTV and the former WarnerMedia (now Warner Bros. Discovery).

The reported sale/spin-off is part of Disney’s strategy to maximize the value and reduce the operating costs of its expansive asset portfolio. With the direct-to-consumer business not turning a profit as quickly as envisioned for most media companies not named Netflix, the money-losing situation for Disney and Hotstar was magnified by the latter’s loss of exclusive streaming rights to Indian Premier League, the top cricket division for the country’s most-popular sport.

Viacom18, an Indian conglomerate co-owned by Paramount Global, acquired the IPL streaming rights for $2.7 billion, choosing to broadcast them for free (with ads). Disney countered by streaming for free on Hotstar the current Cricket World Cup being held in India.

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Regardless, Disney + Hotstar lost 24% of its subscribers due to the loss of access to the IPL, resulting in 40.4 million subscribers in the most recent fiscal period. Disney+ global subscribers dropped to 146.1 million, down from previous analysts’ estimates of around 155 million. At the same time, Disney+ domestic subscribers continued to fall, offset slightly by international sub gains, excluding India.

Disney reports forth quarter and full-year fiscal results on Nov. 8.

Ampere: Disney+ Adjusting India SVOD Market Strategies

Disney+ is shifting its market priorities in India with a focus on spending and operational profit, according to new data from Ampere Analysis.

With about 53 million paid subscribers through March 31, Disney+ Hotstar is the largest subscription VOD service in India, and represented 33% of the global Disney+ subscriber base of almost 158 million through the first quarter.

Specifically, Ampere contends Disney+ Hotstar is refocusing efforts around live streaming sports rights as illustrated by the company’s withdrawal from the Indian Premier League (IPL) cricket license rights bidding last year. Ampere estimates that this saved Disney+ spending about twice its entire streaming revenue from the past five years combined.

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Instead, Viacom18 — which is 49% owned by Paramount Global — paid 205 billion rupees ($2.6 billion) for the IPL streaming rights covering 410 cricket matches over a five-year period and streamed on the company’s Jio Cinema platform.

Disney+ Hotstar is also being more careful in its content spending, especially on acquiring titles. It ended its licensing deal with Warner Bros. Discovery in March, and did not bid for rights to distribute Paramount Pictures movies and NBCUniversal titles in India. All three Hollywood studios’ content are now streaming on Jio Cinema.

Disney+ Hotstar still owns streaming rights 123 of the top 500 most popular titles in India, which places it behind Prime Video but ahead of Netflix (117 titles) and Jio Cinema (38 titles), according to Ampere.

“With India set to keep its position as the world’s third largest SVOD market after the U.S. and China, with an expected growth to 180 million subscriptions in 2027, it is important for Disney+ Hotstar to balance its content expenditure and subscription retention and acquisition,” senior analyst Orina Zhao said in a statement.

Jio Cinema is expected to announce more standard subscription plans later this year, which will increase direct competition with existing SVOD players and change the ecosystem of the market, according to Zhao.

“Disney+ Hotstar needs to find new sustainable strategies to improve profitability while maintaining its significant subscriber base in India,” she said.

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CEO Bob Bakish: IPL Cricket Key to Paramount+ Indian Launch in 2023

When Viacom18 — which is 49% owned by Paramount Global — earlier this year paid 205 billion rupees ($2.6 billion) for the streaming rights to the Indian Premier League (IPL) covering 410 cricket matches over a five-year period, the move was seen as a potential blow to Disney+ — and a win for Paramount+.

Speaking Aug. 4 on the fiscal call, Bob Bakish, CEO of Paramount Global, reiterated why the media giant and The Walt Disney Co. spent a combined $5.6 billion on rights to a sport most Americans have never heard of.

“Cricket is at the top of the food chain in India,” Bakish said.

Indeed, since the launch of Disney+ in late 2019, the IPL has played a key role in the SVOD’s burgeoning subscriber growth. Disney acquired the cricket rights through its acquisition of 20th Century Fox Studios from Fox Corp. The studio’s Hotstar streaming platform currently holds the IPL rights. Disney retains the linear rights.

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How that plays out for Disney+ is the $64,000 question. Currently Hotstar with the IPL represents more than 50 million Disney+ subscribers, or almost 37% of the SVOD’s subscriber base. Without the IPL, that percentage is likely to plummet and shrinking the Disney+ global subscriber base significantly.

Bakish said Paramount+ plans to offer cricket as part of a “hard bundle” tiered pricing plan, benefiting from the association while not directly investing financially as a distributor.

“It will be a real engine for streaming,” Bakish said. “And Paramount+ will benefit by being part of that … because we get the very material benefit of cricket.”

Disney Streaming Subscriber Growth in the Crosshairs

NEWS ANALYSIS — With Disney’s branded subscription streaming video-on-demand service, Disney+, the companywide focus since launching two years ago, all eyes Nov. 10 (after the market closes) will be on whether the platform sustained subscriber growth through the fiscal fourth quarter, which ended Sept. 30.

Disney+ ended the third quarter of this year with 116 million subscribers, an impressive tally for a service less than 2 years old. But as previously reported, one-third of those subs hail from India through Disney’s acquisition of the Hotstar streaming platform from Fox.

But in September, CEO Bob Chapek told an investor event that Disney+ could see challenges to its prolific sub growth due to ongoing issues in India, including timing of the professional cricket season coinciding with a rollover of existing Disney+ subs.

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Unlike in the United States, where Disney+ subscriber memberships automatically roll over on a monthly basis, in India Disney signed millions of subs to annual contracts that are not allowed to automatically renew in accordance with federal law. As a result, streaming memberships have to be renewed on an individual basis.

“Every time you lose that [sub], you have to get that [sub] back,” Chapek said at the Goldman Sachs event, adding that with the reboot of the Indian Premier League (cricket), there would lots of incentive among subs to renew.

Chapek cautioned Disney+ subscriber growth in India could fall to low double-digits or below.

“You have to take a step back before you can take a step forward in terms of those [Indian] renewals,” he said. “It’s a claw-back if you will.”

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Meanwhile, Disney+ continues to operate on all cylinders. The platform had 288.7 million unique visitors across all media devices, according to Morgan Stanley, which was up almost 75% from a year ago, and almost 5% from the previous quarter. Unique page views increased by 81.4% from January to September 2021, compared with the same period last year.

“We see Disney on the short list of global streaming majors,” the research firm wrote in a note. “Despite significant continued upward earnings revisions, shares have lagged as net [sub] add expectations ran ahead of content deliveries. As the content pipeline builds into 2022 and 2023, core net [sub] adds should accelerate.”