Disney+ Hotstar loses its best performer as Viacom18 gets IPL’s digital rights

Disney+ Hotstar almost ruled the OTT space over the past few years with over 46 million subscribers. This is far ahead of its competitors such as Amazon Prime Video (~22mn) and Netflix (~5.5mn). But its reign may have now come to an end.

Viacom18 bagged the digital streaming rights to India’s most popular cricketing league - The Indian Premier League, for a whopping Rs 23,758 crore for 2023-2027. Hotstar held these rights for the past five years, which at the time it had bagged for Rs 16,347 crore.

While it may seem like it’s just one sporting league that goes out of Hotstar, it was the one raking in moolah, not just in terms of subscribers, but also in terms of revenue.

Out of the 137.7 million global subscriber base of Disney+ as of April 2, 2022, 50.1 million came from India’s Disney+ Hotstar, with the company saying that a little over half of the subscribers it added globally in the Jan-March quarter too were from Hotstar.

“A little over half of those net adds were from Disney+ Hotstar, which benefited from the start of the new IPL season toward the end of the second quarter,” Christine McCarthy, Senior Executive Vice President and CFO of Walt Disney said in the earnings call.

According to an Emkay global report, IPL and India’s cricket rights led to app downloads of 500mn+  for Hotstar.

At its peak – a crucial match or an IPL final, the viewership on the OTT platform was in tens of millions. During the IPL 2018 final for instance, 10.3 million people were on the OTT platform watching the match. This went up to 18.6 million during the 2019 IPL final between Chennai Super Kings and the Mumbai Indians.

This meant that Disney would have had to invest a significant amount to improve its streaming service. “Over the past five years, Hotstar has invested a significant amount of time and capital to improve its product engineering in terms of seamless streaming, animations, creative programming, digital-specific commentary, maximum number of concurrent users and so on,” a Kotak Institutional Equities report noted.

On the revenue side, according to the report, Hotstar garnered ad revenues of Rs11 bn (Rs150 mn/match) and subscription revenues of Rs12 bn (Rs160 mn/match) for IPL 2022 season.

Disney Star, which bagged the TV rights package for 2023-2027 said in a statement that this time around, it chose not to proceed with the digital rights “given the price required to secure that package.”

Analysts tracking the space always maintained that Hotstar's edge over every OTT player was not the Disney content, or serials from Star’s vast network across languages, but sports - especially cricket.

Karan Taurani, Senior Vice President and Research Analyst at Elara Securities says that as a platform, Hotstar may become much smaller. In the Subscription Video on Demand market, Hotstar has a market share of about 22 percent, which he says may sharply drop, with the IPL subscribers moving to Voot or Jio.

“In terms of subscribers, Star’s subscriber base may also pare at least 40-50 percent due to the loss of IPL property and if other cricket properties are not acquired. The share may decline to less than 70 percent in the medium term,” Taurani added.

And not just in terms of subscribers, in the Advertising-based Video on Demand (AVOD) space as well, Star has a market share of 16 percent dominated by IPL, which is now expected to shrink to 7 percent, slightly higher than other broadcaster OTTs that enjoy ~3-4 percent AVOD share (Zee5 and Sony Liv), primarily led by sports content (Star’s other cricket properties).

Without IPL, Hotstar has now lost its biggest edge over other OTT platforms and will now have to work twice as hard to compete with Netflix and Prime Video, MX Player, etc. On the other hand, Viacom18 (With Voot and Jio) will leverage IPL to build a successful streaming platform.

Competition is now set to intensify further in India’s OTT space and Disney will have to chart out a strong non-sports strategy to be able to either maintain its lead or avoid a major drop in subscribers and revenue.

Like Netflix and Prime Video, regional original content seems to be the path Disney+ Hotstar too will take in the Indian market.

Disney Star said in a statement that the company is now focused on growing its slate of original entertainment content for Disney+ Hotstar.

With over 100 local original titles in its content pipeline, over 80 local originals slated to premiere this fiscal year - will Disney+ Hotstar be able to keep up its game despite its star player going out of the team? Only time will tell.