Pressure continues to mount for Disney + Hotstar, says Elara Capital’s Karan Taurani

Pressure continues to mount for Disney + Hotstar, says Elara Capital’s Karan Taurani

Hotstar may be able to make up for the loss of subscribers, he explains.

Mumbai: Elara Capital senior vice president – research analyst Karan Taurani mentions that Disney Hotstar loses 15-16 per cent of the India paid subs base over last two quarters (Q4CY22 and Q1CY23); expect this to bottom out next quarter as IPL season ends, which see subs loss of another 10 -12 per cent (base of 61mn – 90 per cent India subs) next quarter (Q2CY23), which in turn will mean a total paid subscriber loss of 25-30 per cent largely in line with our estimates of 30-35 per cent subs loss.

He explains, “Further, ARPU’s may also see convergence, as IPL remains the most expensive, which Hotstar lost to Jio Cinema in the new media rights bidding last year.

Expect a potential negative impact of 50 per cent on overall revenue in CY23 for Hotstar , as IPL had a large share in the AVoD revenue base (approx. 60-65 per cent)and also had a sizeable share in the SVOD revenues (approx 40 per cent).

Hotstar may be able to make up for the above loss of subscribers over the medium to long term, by investing heavily in original content (films and web series across languages); further, Hotstar also has a very strong catch-up TV content catalogue, as they are leaders on linear TV front in key markets (urban GEC, regional GEC genres).”

Taurani further adds, “However, investment in original content is a long gestation strategy, as content has to click with the audience, and platform will need to invest in content marketing

We thereby don’t expect a respite for Hotstar’s Indian ARPU (at USD 0.59 per month now), due to the loss of major content properties; in fact there is a high probability of reduction in ARPU due to the loss of IPL and Jio Cinema giving IPL and other premium content (films, movies) free.”

“We expect net loss to remain for the platform, despite IPL moving away, as the negative impact of loss in revenue will not be able to offset the cost (IPL had turned profitable in fourth year - 2021)  (the platform reported net loss of Rs  3.5bn in FY22); the platform (Disney Hotstar) will lose substantial market share in India’s OTT market (down from 17 per cent earlier towards 8-9 per cent in CY23 - post IPL content moving away),” he tells.