Disney+ Hotstar’s Subscribers Decline, A Growing Challenge From Ambani’s JioCinema In FY23

Disney+ Hotstar’s Tough Ride

Disney’s third consecutive quarter of declining subscribers primarily stems from the loss of 12.5 million paid subscribers on Disney+ Hotstar during the third quarter ending on July 1, 2023; the subscriber loss marks the largest decline since the company began disclosing its paid member count in April 2020. 

In response to these setbacks, CEO Bob Iger has proposed several strategies to bolster the financial performance of the company’s streaming services.

One of the key strategies entails raising prices for the ad-free plans of Disney+ and Hulu, which will be implemented in October. Additionally, Disney aims to address the issue of password sharing, planning to enforce measures against this practice over the coming year. 

The company’s streaming division registered a $512 million loss during the recent quarter, contributing to a total streaming deficit exceeding $11 billion since the launch of Disney+ in 2019. This quarter saw Disney+ lose approximately 11.7 million subscribers worldwide, leaving the service with a total of 146.1 million subscribers.

The decline in subscribers was particularly concentrated in the lower-priced version of Disney+ available in India. Excluding the Indian market, Disney+ managed to gain 800,000 subscribers, primarily from international regions. 

The Major Dent 

The loss of streaming rights to the IPL cricket tournament, which was secured by Viacom18 and streamed on JioCinema, played a significant role in this subscriber decline. 

Viacom18’s subsequent partnership with Warner Bros. Discovery to house HBO, Max Original, and Warner Bros. content on JioCinema, a move that was previously under Disney’s purview, further impacted Disney’s content offerings.

Analysts, including Karan Taurani from Elara Capital, attribute multiple factors such as the IPL’s shift to a different platform, JioCinema’s free content variety, and the relocation of HBO content to the decline in subscribers. 

“However, we believe the subs loss is now largely bottomed out and may see a stable subscriber base/marginal decline over the near term,” Taurani said.

Taurani believes that the subscriber loss has likely reached its lowest point and may stabilize or marginally decline in the near future.

Despite reporting a 4% increase in revenue for the quarter, Disney experienced a net loss of $460 million, a shift from the $1.4 billion net profit in the same quarter of the previous year. This financial setback can be attributed to domestic and international customer decrease.

The Strategy

The crackdown on password sharing is slated to commence in 2024, with the possibility of extending beyond that year. Analysts, as cited by AP, have suggested that these measures, including the price hike and measures against password sharing, could play a pivotal role in steering Disney towards a trajectory of sustainable growth.

“Our results this quarter are reflective of what we’ve accomplished through the unprecedented transformation we’re undertaking at Disney to restructure the company, improve efficiencies, and restore creativity to the center of our business,” Variety quoted Iger.

“In the eight months since my return, these important changes are creating a more cost-effective, coordinated, and streamlined approach to our operations that has put us on track to exceed our initial goal of $5.5 billion in savings as well as improved our direct-to-consumer operating income by roughly $1 billion in just three quarters. While there is still more to do, I’m incredibly confident in Disney’s long-term trajectory because of the work we’ve done, the team we now have in place, and becbecause of the work we’ve done, the team we now have in place, and because of Disney’s core foundation of creative excellence and popular brands and franchises.”

Strategic Options for TV Business

In addition to addressing the challenges in its streaming division, Disney is also contemplating strategic options for its TV networks portfolio. CEO Bob Iger acknowledged that the media landscape is undergoing significant changes due to cord-cutting trends, and the company is preparing for a future without traditional television.

Iger highlighted that Disney’s future growth will be fueled by film studios, theme parks, and streaming services, while acknowledging the undeniable shift caused by cord-cutting trends. He mentioned that the company is thinking expansively and considering a variety of strategic options for its portfolio of TV networks.

Even the prominent sports cable network, ESPN, which falls under Disney, is exploring strategic partnerships while aiming to retain control over the network. Iger emphasized that premium sports programming is shifting towards streaming platforms, indicating the inevitable transition away from linear TV assets.

As part of this strategic shift, the potential sale of linear TV assets, including ABC, is being considered. Analysts have noted that Iger was clear about the willingness to sell these assets, highlighting ABC as a potential candidate for sale. 

Disney Explores Sale or Partnerships for Its India Business

Recent reports have unveiled that Walt Disney is actively considering various options for its digital and TV business in India, including a potential sale or partnership. 

While these discussions are in their early stages, the source emphasized that no potential buyer or partner has been approached thus far; therefore, the precise direction of this process remains to be determined, given the nascent nature of the discussions.

The decision to explore these options has been prompted by internal conversations within Disney’s leadership, particularly at its headquarters in the U.S., regarding the most viable path forward.

The Wall Street Journal was the first to break the news of Disney’s contemplation of such moves. According to the publication, Disney has initiated dialogues with at least one bank to explore avenues for aiding the growth of its India business, potentially involving the sharing of costs.

This strategic consideration occurs at a time when Disney faces mounting challenges in response to the growing influence of Reliance Industries’ (RELI.NS) streaming platform, JioCinema. Run by Mukesh Ambani, Asia’s wealthiest individual, JioCinema has attracted attention by offering complimentary access to the Indian Premier League cricket tournament, a property previously under Disney’s digital rights.

JioCienema’s Growing Clout

Estimates from research firm CLSA suggest that Disney+ Hotstar witnessed a reduction of nearly 5 million subscribers in India following the loss of digital rights for the IPL.

In a significant move, Viacom18, part of Reliance’s broadcast venture, joined forces with Warner Bros in April to offer HBO and other popular content like Succession. Previously, many of these top-rated shows were aired in India via Disney’s platform.

Viacom18’s stakeholders include Reliance, Paramount Global (PARA.O), and Bodhi Tree, a joint venture between James Murdoch and former Star India executive Uday Shankar.

Disney’s presence in India encompasses the Disney+ Hotstar streaming service and Star India, which came under its ownership after the acquisition of 21st Century Fox’s entertainment assets in 2019. This business entity was rebranded as Disney Star in the past year, encompassing a variety of TV channels and a share in a movie production company.

As with its peers across the streaming and broader media landscape, Disney is proactively addressing cost-cutting measures due to macroeconomic challenges affecting its advertising revenue and subscriber growth.

Earlier this year, in February, the company announced a substantial workforce reduction of 7,000 jobs, forming part of a broader effort to realize $5.5 billion in cost savings through a comprehensive restructuring initiative

The Last Bit, Disney’s challenges with declining subscribers on Disney+ Hotstar have prompted CEO Bob Iger to unveil a range of strategic measures to revive the streaming business. The strategies include:

• Raising prices for ad-free plans.
• Cracking down on password sharing.
• A shift in focus towards extracting more value from existing subscribers.

Simultaneously, Disney is considering strategic options for its TV network portfolio in response to cord-cutting trends. These steps and the exploration of new growth avenues demonstrate Disney’s commitment to staying competitive in an evolving media landscape and ensuring long-term success.