The Disney+Hotstar saga
After having let go, Bob Iger came back at the helm with a one-point mandate– To lift Disney+ to a profit. The streaming business had lost US$1 billion in the quarter, ending December 2022. Elimination of 7,000 jobs and a saving of $5.5 billion in costs were the initial steps to return power to Disney’s creative executives.
Bob Iger announced a major restructuring initiative, with the company organised into three core, collaborative business segments: Disney Entertainment, ESPN, and Disney Parks, Experiences and Products.
The CEO, who had steered the company for 15 years seems to be veering to a more curated HBO-like approach of making a few high-quality shows built around its major brands. The studio may resume making films and television shows for its rivals, marking a departure from recent years, when its production resources were harnessed to launch and grow its marquee Disney+ streaming service. “As we look to reduce the content that we’re creating for our own platforms, there probably are opportunities to license to third parties,” Iger said. “For a while, that was something we couldn’t possibly do because we were so favoring our own streaming platforms. But if we get to a point where we need less content for these platforms, and we still have the capacity of producing that content, why not use it to grow revenue.”
Iger also talked about the possibility of licensing content to third parties, noting that Seth MacFarlane’s animated series “Family Guy” drew viewers on Disney-owned Hulu after the shows originally aired on the Fox network.
And for India it means, that following non-renewal of the deal, Disney+Hotstar will no longer be the default destination for HBO content from March 31. This is just after India’s largest premium streaming platform had lost rights for the Indian Premier League (IPL).
Iger tweeted, “Starting 31st March, HBO content will be unavailable on Disney+ Hotstar. You can continue enjoying Disney+ Hotstar’s vast library of content spanning over 100,000 hours of TV shows and movies in 10 languages and coverage of major global sporting events.” A partnership since 2015, when HBO and Star India had agreed to make HBO content available on Hotstar is no more. In April 2020, Walt Disney Company had purchased 20th Century Studios and was renamed to Disney+ Hotstar. Hotstar had also not renewed the streaming rights for Formula 1 in 2023, with that content moving over to F1 TV Pro.
As expected this led to a fall in subscribers. As of December 2022, the platform had 57.5 million paid subscribers. In the October-December quarter, the platform had lost 3.8 million subscribers.
According to the company’s December 2022 quarter results, Disney+ Hotstar subscribers contributed $0.74 per user per month on average, significantly lower than the $5.95 contribution from Disney+ subscribers in the US and Canada.
Netflix, which is far more expensive than Disney+ Hotstar in India, reported an average revenue per member of $7.69 in the Asia Pacific region. This is after a 25% reduction in its subscription prices, which now start from as low as ₹149 per month for the most basic plan, translating to ₹1,788 per year. Netflix’ top-tier plan costs ₹7,788 per year. In contrast, the most expensive Disney+ Hotstar plan costs ₹1,499 per year. Essentially, Disney+ Hotstar’s most premium plan is still cheaper than Netflix’ most basic plan. On the other hand, Viacom18, which bagged the lucrative IPL streaming rights for ₹23,758 crore, will provide 4K streaming for free via the JioCinema app. Having said this, being the devil’s advocate, this is happening, only because Iger and his team want it to happen. They understand the consequences of their decisions, and the only reason why the decisions were made was, they were prepared. The focus is no longer on volumes-on the number of subscribers, but on quality and profitability. It will pull back from its aggressive hoarding of its own properties in favour of a more nuanced approach to windowing and licensing. The audiences for linear TV and streaming remained distinct, with the average linear viewer much older than streaming consumers.
Iger’s comment in the last earnings call says it all, “It’s also obvious to us we can’t get the profitability and turn this into a growth business without growing subs. So, while we’re taking off-the-table sub guidance, we’re still going to look to grow subs. We just want to grow quality subs that are loyal and where we actually have an ability to continue to price effectively to those subs. In addition, we’re going to lean more into our franchises, our core franchises, and our brands.” Disney CEO Bob Iger has returned, but only till another CEO is appointed, and he has two years to do that.
In Iger’s own words, “It was clear that the company needed to be stabilized. It was clear that reorganization was necessary, and it was also clear that we had to come to grips with our cost structure for a variety of reasons – whether they were competitive, disruptive, or global economic.
And we have done all of that already. We have stabilized, we have reorganized, we have truly aggressive cost-cutting efforts. Now it’s about getting our content pipeline right, making sure that we are making the right decisions, and the right number of decisions in terms of how much we’re making. And really being mindful it’s a world that is not getting less competitive, and that tech is only going to disrupt more.
It requires a lot of execution … and I have a lot of confidence in our ability to do that.”