Daybreak - Disney leaves Jio the keys to the kingdom

Episode Date: August 30, 2023

A few months ago, multiple Hotstar executives had told The Ken the same thing. “IPL or no IPL, cricket is going to be the platform’s most important customer-acquisition funnel this year.��� It seems Disney Star is holding on to that strategy. The Asia Cup is going to be streamed for free on Disney Hotstar from today onwards.Even after losing the IPL's digital streaming rights, Disney+Hotstar is the leader of the Indian OTT space in terms of subscriber numbers. But OTT is a complex business and just having the largest subscriber base is not really enough, at least not in India.In fact, Disney has been on quite the downturn in India. And the way its headed, it almost seems like its making space for Jio to come take its crown.Tune in.Free ReadProject Manager is dead. Long live the Product Manager Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. The 2023 Asia Cup cricket tournament is all set to begin today. And Disney Star is going to earn anything between 350 to 400 crore rupees in ad revenues from it.

Just to clarify, Disney Star is Walt Disney's India arm and it owns Star Sports and Disney Hot Star, both of which will be streaming the matches on TV and online. 17 sponsors and 100 plus advertisers across both television and digital have signed agreements with Disney Star. So after what happened with IPL, it sounds like Disney is doing pretty well, right?

I mean, it seems to be making up for losing the IPL streaming rights to Reliance's Geocinema. A few months ago, multiple Hot Star executives had told the Ken the same thing. IPL or no IPL. Cricket is going to be the platform's most important customer acquisition funnel this year. And it looks like they are holding on to that strategy. The Asia Cup is going to be streamed for free on Disney Hot Star. Now, you obviously know that if you just go, by subscriber numbers, Disney Hot Star is without doubt the leader of the Indian OTT space.

It boasts of roughly half of India's 90 million paid OTT subscribers. But OTT is a complex business, especially in India, and just having the largest subscriber base does not really cut it here. In fact, Disney has been on quite the downturn in India. And the way it is headed, it almost seems like it is making space for geo-cinemoration. out to take its crown. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I Don't Chase the News Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one

business story that is worth understanding and worth your time. Today is Wednesday, the 30th of August. The story of Disney's fall has three parts. The first part is actually quite a fascinating point of view that my colleague Praveen had written about in his newsletter to NutGruff. He says that Disney Hot Star, even though it is an OTT platform, is actually more like a cable television company. Let me explain.

After it lost the IPL rights last year, the television users that Disney Hot Star was hoping to acquire remained television users. Remember that Disney Star still had the TV broadcast rights for IPL. But when it comes to digital streaming, the thing, though, is that it is supposed to be a direct-to-consumer model. That is when it has most value. But if it is distributed through intermediaries and telecom providers as bundles, it becomes a television channel.

It is not as lucrative. And Disney saw this unfold right in front of its eyes. You see, to crack distribution, which is key to cracking the OTT game, Disney Hot Star decided to be a part of these streaming bundles which were offered by telecom and direct-to-home service providers like geo and Airtel. And the logic was this. To the price-sensitive audience in India, it is a much better option than paying for individual OTT subscriptions. But guess what happened next?

Reliance won the five-year contract for digital streaming the IPL, this you knew, and here comes the blow to this whole strategy that Disney had for distribution. In November last year, Reliance Geo suddenly pulled the plug on most of its streaming bundles with Disney Hot Star. The fairy tale came to a very abrupt end. Now, before I tell you more about this, my colleague Aksha has something to say to you. Product managers are what all-rounders are to cricket. They batts somewhere in the middle. They can bowl if need be.

They basically specialize in being generalists. This is how Ashank Bandari, Flipkart's former product manager, defines product managers. It may come as no surprise then that it is one of the most sought-after roles in the career space right now. Companies across the board are hiring in droves at competitive salaries. While everyone wants to become a product manager, nobody really knows how to. Typically, engineers with an MBA crack the product manager roles at top startups, with ease, says Bandadi. So is MBA the answer to becoming a product manager? Or a course on nudemy or upgrade? Just enough. Can you really teach crucial skills like customer empathy or

critical thinking in a course? Some of India's top product managers weigh in on this subject in a story by Olina and Shreder. If you want to know what they think, click the link in the show notes of this podcast. This story has been made available for free for exact. exactly 24 hours just for today, the 30th of August. So go ahead, give it a read and share away with your friends before the counter runs out. I'm Aksha from the Ken's Newsroom. Thank you for listening to us. If you like what we do, please rate and review us wherever you get your podcasts. And now, back to Snigda.

The second part of the story of Disney's downfall was its decision to not renew the content deal between Disney Hot Star and HBO in India. As a result, HBO shows like Game of Thrones and Succession were removed from the platform. But we all know how these shows were drawing huge numbers of urban audiences to Disney Hot Star. Naturally, the OTTs subscriber base shrunk by a few million since last October. Back then, Praveen had written about Disney making Hot Star less attractive because it was expecting to lose subscribers. And why would it do that?

because it did not want those subscribers anymore. The point he was trying to make was that Disney wanted to make its streaming business profitable. And the only way to do it was to let go of all its low-value subscribers from India. And then early last month, it actually went a step further. News came that Walt Disney is looking for avenues to sell or find a joint venture partner for its India digital and TV business. The report on Reuters said that the talks are at a very, very nascent stage and that no potential bio or partner has been approached so far.

And that it remains unclear how the process will pan out. And the source told Reuters that talks had begun internally on what makes sense to do and these discussions were being led by executives at Disney headquarters in the US. But wait. Wasn't the whole idea of giving up on the digital streaming rights of IPL because Disney Star had changed its strategy? It had decided to bet on television over digital streaming, right? It paid more than $3 billion for IPL's TV rights. Television was something that they were more confident about.

So why think of giving up on it? Stay tuned to find out. You see, if you try to look at things from Disney's point of view, it probably thought that it was impossible to make money from streaming in India, which is why television was a good bet to make. But how did that work out for Disney? It kind of backfired. And you know why?

Because Geo did not just go after Disney Hotstar streaming users, they even acquired their TV customers. Uday Shankar, an investor and director at Geo Cinema's parent company, YCOMM 18, gave a very interesting interview to Financial Times some time back. He said that the goal was to build a platform with audience volumes to rival television and scale. Geo Cinema does not even consider other streaming platforms in India like Netflix and Amazon Prime as its competition. He said that they see television as their competition.

Their mission is to get a large number of people to not watch TV and watch all their content. on Geo Cinema. Now here again it comes back to losing the IPL streaming rights. You might think, okay, Disney lost the digital rights, but it still has the TV broadcast rights for IPL, right? But do you remember what Geo Cinema did with the digital streaming rights for IPL? The move had sent quite the shockwaves. After buying the rights for IPL for almost $3 billion, it announced that it was going to stream it for free. put two and two together and you realize that by doing this, Gio Cinema actually undercut Disney Stars' paid TV business.

At the time, Gio Cinema became the most downloaded video streaming app according to a mobile data analytics company called Data AI. Also, it helps to note that even though Disney decided to bet on TV in India, in the rest of Asia, for the last couple of years, actually, it has been steadily but consistently shutting down its TV assets. It has killed a bunch of channels across Southeast Asia, Hong Kong and Korea. So it feels like Disney does not believe in television much anymore. Meanwhile, in India, it has an OTT rival that is ready to take on television.

And let us not forget all the undeniable advantages that Geo Cinema has. It owns and controls the telecom networks, home fiber and cloud. infrastructure. With all this, it can control that one thing that Disney cannot control. Costs and efficiency of distribution through a direct consumer relationship. Geo's cloud services bring down the cost of storage and streaming and its Fibo and Telecom makes selling and bundling them to its users much easier. And the fact that it also owns the cricket team and sponsors all the others, Geo Cinema may very well become the Disney of India. Daybreak is produced from the newsroom of the Ken,

India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, In today's episode was edited by my colleague Rajiv Sien.