Disney+ hotstar’s decision to go free for all its mobile phone subscribers was not entirely unexpected. This comes right after JioCinema aired the Indian Premier League (IPL) without charging its subscribers a single rupee. The strategy is driven by an underlying confidence that the money lost on subscriptions will be recouped through advertising, and marks a new front in the war between the two largest over-the-top (OTT or streaming) platforms in India to grab more eyeballs at any cost—in fact, at no cost to the user.
Disney+ Hotstar has been under pressure for a while now, with falling subscriber numbers and after losing key content such as the HBO catalogue, apart from not being able to renew its content deal with telecom operator Reliance Jio. It has now decided to offer two big cricketing tournaments, the Asia Cup followed by the ICC Cricket World Cup, for free, with a company statement saying this will benefit “more than 540 million smartphone users across India”.
Mounting pressure
The moot point is whether Disney+ Hotstar can continue to take the hit. Its subscriber base in India and the rest of Asia stood at 52.9 million at the end of the March quarter, a drop of 8.4 million over six months. A large part of this base—upwards of 80 per cent—comes from India. The pressure is visible in Walt Disney Co.’s falling stock price, sparked by declining OTT subscriber numbers globally. In the past year, it has shed close to 4 per cent, and since February the drop has been just a shade under 19 per cent.
Mobile phone users account for over 70 per cent of Disney+ Hotstar’s subscriber base in India. In financial year 2021-22 (FY22), Novi Digital Entertainment, the company that runs Disney’s OTT business in India, had a turnover of Rs 3,220 crore primarily driven by live cricket. Of this, Rs 1,374 crore (or 43 per cent) came from subscription and most of the rest came from advertising; in FY21, it was split evenly between the two segments. In FY22, the company owned the digital rights to the IPL and that led to a spike in revenue across both segments. Its decision to go free now implies that advertising must make up for the loss of that revenue.
“There is obviously pressure to increase the OTT subscriber numbers and this decision is a step in that direction. However, this makes the business vulnerable, since subscription is a stable revenue model, unlike advertising that depends on a huge event,” says R.C. Venkateish, Promoter of Lex Sportel Vision and former Managing Director of ESPN Star Sports. The other
concern relates to the ability to charge a fee for a service once it has been provided for free. It is not clear how much of that has been thought through or, for that matter, what the revenue story will look like.
All indications are that the “free” war will likely be a bloody one.
@krishnagopalan
