Does Disney+ Hotstar minus IPL equal trouble for the streaming giant?

While Walt Disney Co. will not be paying the steep price to renew its streaming rights for the Indian Premier League — considered by some to be the crown jewel of Disney+ Hotstar content — its absence may cost the platform subscribers. Disney secured the TV rights for the Board of Control for Cricket in India-owned league while Viacom 18 Media Private Ltd. won the digital rights for the 2023-27 season games in India, which should give the company's Voot Select subscription video-on-demand service a much-needed boost.

Disney+ Hotstar accounts for the lion's share of paid online video subscriptions in India at an estimated 35.7% as of year-end 2021. Its subscriber base is 76.8% larger than that of the second-largest player, Amazon.com Inc.'s Prime Video. The platform launched in India in April 2020 as the combined service of Disney+ and Hotstar, which Disney acquired through the 21st Century Fox deal in 2019.

Hotstar traces its sports pedigree back to the debut of Star India Private Ltd.'s dedicated sports streaming service starsports.com in June 2013. In February 2015, the channel operator launched the Hotstar app to expand its digital offering to include movies and other entertainment content. Having acquired the exclusive global TV and streaming rights to the IPL games for the 2018-2022 seasons, Star India streamed all IPL matches on Hotstar.

As of year-end 2019, Hotstar was the third-largest streamer in terms of subscriber share, lagging behind Eros Media World PLC's Eros Now and Amazon Prime Video. In the three quarters preceding integration with Disney+, the service logged solid subscription growth of 20%-30%. Yet in the first two quarters after its launch, Disney+ Hotstar's subscriber base exploded by an estimated 61.2% and 111.5%, respectively, replacing Eros Now as the biggest SVOD platform in India in the third quarter of 2020. Although the subscription boom was partly driven by the COVID-19 lockdown, Disney+'s extensive library played a significant role.

Aware of the uncertainty of maintaining exclusive digital rights to premium sports like the IPL, the Disney+ Hotstar has aimed to grow its library with equally compelling content. Its investments in the production and acquisition of popular Indian content provided the platform an average of one new series or new season of a previously released title each month throughout 2021. In terms of sports, Disney+ Hotstar is still home to a number of other cricket contests including Asia Cup, Cricket World Cup and BCCI international matches. Despite the loss of IPL, Disney+ Hotstar's remaining content could help sustain its position as one of the largest streamers in India.

Given Viacom18's ownership by Reliance Projects & Property Management Services Ltd. of Reliance Industries Ltd. and Paramount Global, it is still uncertain if IPL will be streamed on Voot, the highly anticipated Paramount+ or a hybrid platform similar to Disney+ Hotstar. The joint venture is also expecting changes in the coming months with the joining of James Murdoch-backed Bodhi Tree Systems as a major shareholder. Bodhi Tree Systems reportedly will invest approximately $1.78 billion in Viacom18 if the deal is approved.

Viacom18-owned Voot is predominantly an ad-based VOD platform, and the subscription bases of its paid services Voot Kids and Voot Select are still minimal. We estimate Voot Select's total subscriber base to be less than 2 million as of year-end 2021 — around the same amount as local services Hoichoi and aha. Paid subscription growth remains a top priority for Viacom18. The IPL rights acquisition could serve as a catalyst for subscription growth and encourage a gradual migration to a subscription-based model.

Disney+ Hotstar followed a similar path. Advertising was the only monetization model of Hotstar when it launched. The service later rolled out paid tiers to satisfy the demand for uninterrupted sports streaming before migrating to the current freemium-oriented SVOD model. Sports is the only genre that is streamed ad-free for all of Disney+ Hotstar's tiers including the lower-cost mobile and super plans.

The success of Disney+ Hotstar also lies in low-cost pricing, but this has hindered the growth of ARPU, which we estimate was 91 cents per month in 2021. Promotional discounts and the difficulty of introducing a price hike in the price-sensitive market have depressed ARPU. The IPL and other premium sports are expensive propositions. By shifting its focus to cheaper content, Disney+ Hotstar has a chance to increase its profits in the market in the long run.

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