Disney+ Hotstar shifts focus to profitability, ARPU growth in India

Disney+ Hotstar is taking a notable strategic shift in in India, according to a research conducted by Ampere Analysis. The leading streaming service has responded to escalating costs, specifically pertaining to sports rights, by realigning its focus towards enhancing profitability and driving Average Revenue per Subscriber (ARPU) growth.

Though there has been a recent slide in subscriber numbers, Disney+ Hotstar maintains a dominant position in the market, boasting a significant 29% share of the streaming industry. As of Q1 2023, the platform's subscriber base exceeded that of competing global SVoDs in India, including Amazon Prime Video (12.4 million) and Netflix (6.2 million), with a substantial tally of approximately 50 million subscriptions. Ampere Analysis predicts that Disney+ Hotstar will continue to hold its market leadership position despite ongoing shifts within the industry.

Ampere's analysis identifies two key elements of Disney+ Hotstar's current cost control strategy:

1. The organisation places significant emphasis on effectively managing expenses related to sports rights. This is evidenced by the company's decision to abstain from the IPL rights auction in early 2022. Ampere estimates that this move resulted in savings equivalent to nearly double the platform's total streaming revenue from the past five years.
2. In parallel with its prudent approach to sports rights, Disney+ Hotstar exercises caution regarding expenditures associated with acquiring content. The platform adopts a more discerning stance when it comes to procuring titles. Notably, the organization terminated its licensing agreement with Warner Bros. Discovery in March 2023 and refrained from bidding for the distribution rights of Paramount and NBCU titles in India. As a result, the content offerings from these three major Hollywood studios are currently available exclusively on Jio Cinema, which also serves as the home streamer for the IPL.

Ampere Analysis suggests that, in order to foster ARPU growth, Disney+ Hotstar should review its partnership agreements with mobile telecommunications companies and encourage direct subscription sign-ups. Presently, the platform has distribution deals in place with the top three mobile telcos in India. Certain customers subscribed to Reliance Jio, Bharti Airtel, and Vodafone receive complimentary access to Disney+ Hotstar. While these bundled arrangements bolster service adoption and extend reach for advertising sales, they adversely affect subscription ARPU. In Q1 of 2023, Disney+ Hotstar's ARPU amounted to a mere $0.59 (€0.54), representing over ten times less than the $6.47 generated by the core Disney+ service.

Consequently, to achieve sustainable growth, Disney+ Hotstar must reevaluate its partnership dynamics with mobile telcos and promote direct subscription engagement. By optimizing these aspects, the platform can elevate its ARPU figures and align them more closely with those of the primary Disney+ service.

Ampere Analysis further says: “With India set to keep its position as the world’s third largest SVoD market after the US and China with an expected growth to 180 million subscriptions in 2027, it is important for Disney+ Hotstar to balance its content expenditure and subscription retention and acquisition. Jio Cinema is expected to announce more standard subscription plans later this year which will increase direct competition with existing players and change the ecosystem of the market. Disney+ Hotstar still owns 123 of the top 500 most popular titles in India, by Ampere’s estimates, which places it behind Amazon Prime but ahead of Netflix (117 titles) and far ahead of Jio Cinema (38 titles), but now needs to find new sustainable strategies to improve profitability while maintaining its significant subscriber base in India.”