Walt Disney is considering strategic options for its Star India business. People familiar with the matter confirmed the talks are in the early stages. The potential options, including a joint venture or sale, remain uncertain. The company has not disclosed its preferred course of action.
It acquired Star India and 21st Century Fox’s entertainment assets in 2019, encompassing Disney+ Hotstar. The Wall Street Journal predicts a 20% revenue decline for Star in the fiscal year ending September 2023, amounting to under $2 billion.
Compared to the previous year, Earnings before interest, taxes, depreciation, and amortization (EBITDA) are anticipated to decrease by roughly 50%, amounting to around $200 million.
The decline in revenue and EBITDA signifies a challenging period for Star India, raising concerns about Disney’s India business performance and profitability.
As per the report, Hotstar is expected to witness a decline of 8 million to 10 million subscribers in its third fiscal quarter.
Reliance Freemium Grabbing Attention and Viewers
Disney’s South Asian OTT venture, Disney+ Hotstar, faced significant setbacks with the dynamic entry of JioCinema during the IPL. In May, Disney reported a loss of over 4.6 million subscribers for Hotstar. Despite its status as India’s largest streaming platform, the company has encountered challenges in revenue growth and platform monetization.
Following the IPL, Disney was compelled to eliminate its HBO content from Disney+ Hotstar due to exorbitant renewal costs. Consequently, Reliance’s freemium model emerges as the most significant threat to Disney.
By providing IPL for free, JioCinema has captured attention. Moreover, Reliance’s ample cash reserves enable them to remain unconcerned about monetization and secure HBO and NBC Universal titles.
JioCinema strategically features popular shows like Succession, Game of Thrones, and Downton Abbey to captivate India’s English-speaking audience. Facing challenges in justifying the costly renewal deal with HBO, Disney made the decision to remove their content.
As Reliance continues to offer free content and acquire sought-after titles, its position in the streaming market strengthens.
This situation highlights the competitive landscape resulting from Disney’s removal of HBO content and Reliance’s acquisition of the same. Consequently, JioCinema’s assertive approach may impact Disney’s ability to retain subscribers and enhance monetization.
Target of Reliance
The Reliance camp targets streaming giants and the linear TV base in India. Uday Shankar, an investor and director in Viacom18, aims to rival television in scale with JioCinema. Uday emphasizes the competition between JioCinema and traditional television.
The goal is to attract a large number of people away from TV and towards JioCinema’s content. Top-tier OTT platforms struggle to expand their subscriber base beyond English-speaking urban hubs.
Netflix, for example, added advertisements to its lower-tier paid plans in India due to declining ARPUs. JioCinema’s threat highlights the challenges faced by OTT platforms in growing their subscriber numbers.
Until a significant number of people switch from TV to JioCinema, the mission remains incomplete. Moreover, OTT platforms struggle to attract non-English-speaking urban audiences unwilling to pay for content.
On the other hand, Reliance’s freemium model specifically appeals to the vast number of linear TV viewers in India. However, this subscription growth comes at the cost of declining Average Revenue Per User (ARPUs).
Netflix’s inclusion of advertisements in lower-tier plans exemplifies the impact on revenue. In contrast, the Reliance camp’s objective is to establish a platform with audience volumes rivalling television.
Their mission revolves around shifting viewership from TV to JioCinema and capturing a wide audience. Nevertheless, OTT platforms encounter challenges in penetrating non-English-speaking urban markets and effectively monetizing their services.
The approach taken by JioCinema aligns seamlessly with its goal of competing against television and acquiring a substantial user base.