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Disney+ Hotstar user base rises to 61.3 million, expects decline in subsctiption over IPL

Disney’s video streaming service Disney+ Hotstar added 2.9 million paid subscribers for the quarter ended October 1, 2022, taking its total base to 61.3 million, the media and entertainment conglomerate disclosed as part of its earnings results on November 8.

The service recorded a 42 percent increase in its member base on a year-on-year basis.

Disney’s chief financial officer Christine McCarthy, however, warned during the company’s earnings conference call that the streaming service’s user base will decline in the ongoing quarter (Q1-FY23) due to the absence of the Indian Premier League (IPL) tournament. McCarthy said they expect it to stabilise in the forthcoming quarter (Q2-FY23). Disney follows an October to September fiscal year.

In August, Walt Disney had stated that it is lowering the subscriber target for Disney+ Hotstar after losing the streaming rights for the IPL tournament for the 2023-2027 period to Viacom18 earlier this year.

They expect Disney+ Hotstar to reach upto to 80 million by the end of fiscal 2024. At the time, McCarthy had said they intend to refine this target over time as subscriber visibility in India will be clearer once the ICC and BCCI cricket rights sales processes are completed.

Subsequently, the company was able to retain the television and digital rights of all ICC events till the end of 2027 for a reported $3 billion in August 2022 and sublicensed the television rights to Zee Entertainment Enterprises.

Disney+ Hotstar accounted for about 37.3 percent of the total paid subscriber base of Disney+ for the quarter that stood at 164.2 million, up 39 percent from 118.1 million subscribers in the same quarter last year. Note that Disney+Hotstar is currently available in India and certain Southeast Asia markets such as Indonesia, Malaysia and Thailand, although a majority of the subscribers are from India.

ARPU decline
Disney+ Hotstar’s monthly average revenue per user (ARPU) however declined to $0.58 for the quarter, a 9% drop from $0.64 in the same quarter last year, due to lower per-subscriber advertising revenue and a higher mix of wholesale subscribers, partially offset by pricing increase.

It’s worth noting that the service’s ARPU is significantly lower than other markets. For instance, an average Disney+ customer in the United States pays $6.10 per month while an average International customer (excluding Disney+Hotstar) pays $5.83 per month.

Disney+ said it earned an overall average of $3.91 per month from each customer this quarter, however if Disney+ Hotstar is excluded, the ARPU rises to $5.96 per month.

Disney had launched Disney+ in India on top of Hotstar in April 2020 and rebranded the service as Disney+ Hotstar. The service currently operates on a freemium model wherein it offers some content on a free ad-supported model, unlike Disney+ which only offers paid subscriptions at present, although an ad-supported tier is expected to be launched on December 8, 2022.

Streaming business at a ‘turning point’

Globally, revenues from Disney’s direct-to-consumer (D2C) segment, which comprises all its streaming services, increased 8% year-on-year to $4.9 billion for the quarter while operating loss saw a significant uptick to $1.47 billion from $0.63 billion in the year-ago period.

On the earnings call, Disney chief executive Bob Chapek said the segment has reached a “turning point” and they expect losses to decline going forward due to the upcoming price hikes, the launch of Disney+ ad tier next month and “meaningful rationalisation” of its marketing spends.

The company is also leveraging its learnings and experience in the direct-to-consumer segment to optimise its content slate and distribution approach to deliver a “steady state of high-impact releases that efficiently drive engagement and subscriber acquisition”, Chapek said.

“We believe we are on a path to profitable streaming business…Assuming we do not see a meaningful shift in the economic climate, we still expect Disney+ to achieve profitability in fiscal 2024, as losses begin to shrink in the first quarter of fiscal 2023” he said.

The entertainment conglomerate now has around 235 million subscribers across its streaming services— Disney+, ESPN+, and Hulu—at the end of the quarter.

Overall, Disney posted total revenues of $20.15 billion for the quarter, a 9 percent increase from $18.5 billion in the same quarter last year. Net profit was at $162 million for the quarter, as compared to $160 million profit from a year-ago period. Money Control

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