Daybreak - How Disney+Hotstar is trying to fill the IPL-sized void

Episode Date: April 7, 2023

With the digital streaming rights to IPL gone and the recent losses it posted, India's undisputed OTT leader is trying to figure out a new strategy to stay on top of the game.As other OTT platforms around the world are consciously choosing to spend less on original programming, Disney+Hotstar is doing the opposite in India.But is it enough to make up for the 30 million viewers it would get on average every day when the IPL was on?Tune in to find out.

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 Ramon Ganesh, 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. Over the last few episodes of Daybreak, we've been talking a lot about geo-winning the digital streaming rights to IPL. We've talked about its decision to stream the IPL games for free,

how advertisers feel about it, and a bunch of other stuff. But have you wondered what is going on at Disney Hot Star after it lost the IPL digital streaming rights to Geo? IPL was one of the key factors that got Disney Hot Star to where it is now, the undisputed leader of the OTT space in India with over 50 million subscribers.

Amazon Prime and Sony Live each have 20 million, not even half of Hot Star. Netflix, meanwhile, is not even, even close, with an estimated 7 million subscribers or so. Regardless, there is still an IPL-sized hole in Disney Hot Stars' existence right now. Oh, and by the way, let us not forget that it has also let go of expensive HBO shows like Game of Thrones and Succession from its platform. These shows were drawing huge number of urban audiences to the platform.

The firm's subscriber base has also shrunk by a few million since last October. So what is Disney Hot Stars' new strategy to stay on top of the game in India? Turns out, according to a senior executive that the Ken reporter Somajit Sahas spoke to, it doubled its entertainment content expenditure for the year ending in March 22. Its financial show that the platform spent $96 million on original programming in the year that ended in March 2022. This is nearly double the amount that it spent a year ago. But hold on.

We're seeing inflation, rising interest rates, and all kinds of economic pressures on the market. Other OTT platforms are actually rethinking their approach towards original programming. They're consciously choosing to spend less on it. In fact, even Disney, its parent company, is cutting its programming budget by whopping $1 billion this year. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Da'Hsharmah 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 Friday, the 7th of April. The senior executive at a large production house that works with India's major OTT content providers, spoke to Somiji. And guess what they told him. They said, and I'm quoting, No one around me is working with a show of the night managers or Sacred Game Scale. End quote. So here is what Disney Hot Star has in mind.

Its IPL audience is gone. Now, it is increasing its focus on subscribers who pay to watch entertainment content. Very often, this segment of the audience is even ready to pay a premium to watch or re-watch TV content made for its sister form Star India Private Limited ahead of time. Disney Hot Star wants this audience to pay for both its big budget premium content that it calls hot-star specials such as the night manager and Rudra, and also for the small budget stuff like Ashikana and Deo Ishk, which the industry executives like to call TV Plus. And it's not like it has lost the cricket audience entirely. It still has the digital

streaming rights for the next edition of the ODI Cricket World Cup, Asia Cup, many international bilateral and trilateral series, and even domestic tournaments like the Ranji Trophy. but it's not like it has nothing to worry about. Many former and current Hot Star executives told again that a platform is under quite a bit of pressure to deliver in the profitability department. Disney Hot Star posted a loss of $42 million despite its revenues nearly doubling in the year

that ended in March 2022. Just for comparison, Star India posted a profit of $209 million in the same period. So what is the plan then? Stay tuned to find out. Somi Jit spoke to five former and current hot star executives, and all of them said the same thing to him. IPL or no IPL, cricket is going to be the platform's most important customer acquisition funnel this year. For example, like I told you earlier, the ODI Cricket World Cup,

which is going to be hosted in India this October. Now, let me help you understand this better. 16 million existing viewers logged into Hot Star to watch the India-Pakistan match during the Men's D-20 World Cup, which was held in Australia last year. This is actually more than the peak viewership of 12 million during an IPL match between Royal Challenger's Bangalore and Mumbai Indians in 2019. But things are not as simple as they appear. Most IPL matches, on average, draw 7 to 10 million viewers to the platform.

but the World Cup viewership drops drastically during non-India matches. So even the World Cup cannot replace the IPL. So what now? Hot Star is focusing on the next largest cohort of subscribers, Star India TV viewers. A former highly placed Hot Star executive told the Ken, and I'm quoting, this is not just a significant audience, but also one that is loyal. End quote.

The executive estimated that entertainment content viewers contribute 70% to the total time spent on the platform. They said, and I'm quoting again, if on average you had about 30 million viewers visiting the platform every day during the IPL, you would have about half of them visiting the platform on a non-IPL day. And the largest share of them came to watch Star India content. End quote. But the Ken could not verify these estimates independently. Coming up next, I tell you how Hot Star is trying a bunch of different things to make itself more attractive for these users. So, what are these new things that Disney Hot Star is doing?

First, it is set to release one Hot Star special every month this year. This includes an adaptation of the Good Wife featuring Cajol. Plus, the next seasons of its highly popular shows like Aria, Criminal Justice, and special ops. Second, it is experimenting with a genre of shows called TV Plus. These are shows that are made for the TV audience on a similar budget, but they have a higher production quality. According to these production house executives that Somerijid spoke to, these shows are

usually made on a budget of less than 10 crore rupees. But they tend to have 40 to 70 episodes, which is much higher than the 10 to 20 episodes in premium shows like Special Ops. Third, it is commissioning shows headlined by social media influencers like Taza Khabar that stars YouTuber Bhovanba. Not just this, the platform is also relying on regional content to boost its subscriptions.

It will release its first original in Malayalam this year. All this information is based on what a highly placed hot-star executive told Somerji. They also told him that they would be adding popular properties like Big Boss in Tamil, Telugu and Malayalam. But the question remains, is all of this enough for Disney Hot Star to stay on top of the game in India? See, one thing is quite clear. No matter what it does, Disney Hot Star cannot avoid the consequences of losing the IPL rights. And not to forget the drop in subscriber numbers.

All of this is obviously going to have an impact on its income from advertisements. Also, the OTT giants saw a series of resignations, including the likes of chief executive Sunil Ryan, Chief Technology Officer Akash Saxena, head of original content, Nikhil Madhuk. These exits were across product, engineering, partnerships and the ad teams last year. In the meantime, there is also competition to take into account. It is facing more heat in the award or ad-based video on-demand content from the likes of Amazon. Amazon is actually investing in its mini-TV offering and reportedly even considering buying market leader MX player. It is also facing competition from old rivals like Z5 and Sony Life when it comes

to producing premium content that is also palatable to TV audiences. And to make things worse, late last year, Gio pulled out from renewing a number of bundled plans with Hot Start. Gio was contributing 20% to Disney Hot Stars' total subscribers at that point. Some former and rival executives that Somerjit spoke to summed it up quite succinctly. It is not a question of survival for Hot Star. The real risk is stagnating and losing the things that make it stand out when compared to other OTT platforms. 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, and today's episode was edited by my colleague Rajiv Sien.