Can Disney+ Hotstar’s belated recovery force a better deal out of Reliance?

Out of all the announcements made by The Walt Disney Co. in its Q1FY24 earnings call late-last week, what got everyone talking was the performance of its Indian streaming service Disney+ Hotstar. For the first time since the platform lost the digital rights of the Indian Premier League (IPL) in June 2022, Hotstar managed to grow its subscriber base in the Oct-Dec period of 2023, albeit marginally (2%), and arrest subscriber loss after four successive quarters of sharp decline.

This is significant, as it comes shortly before Disney Star and Reliance-owned Viacom18 sign on the dotted line for a proposed merger to create India's largest media conglomerate. The deal could be done as soon as the month-end, but India’s antitrust regulator, the Competition Commission of India (CCI), would have a 210-day window to review and either approve or reject the transaction.

Hotstar’s paid subscriber base stood at 38.3 million in the December quarter, up from 37.6 million in the previous quarter. Interestingly, this growth came at a time when Disney+ shed 1.3 million subscribers globally. (Disney follows an October-September fiscal). Media analysts are positive about the homegrown streaming platform, and reckon that its “subscriber loss has bottomed and may see mid-single-digit growth over the next few quarters based on new content offerings”. 

In the last quarter, Hotstar’s Average Monthly Revenue Per Paid User (ARPPU) also went up by an impressive ~83% from $0.70 (Rs 57.4) to $1.28 (Rs 104.96) but this may not sustain. "One cannot expect hefty growth of 15-20% because the market is moving towards free content. A lot of Hotstar's own content is now available for free. So, future growth will be led by connected TVs and original web series and the new programming," Karan Taurani, SVP at brokerage firm Elara Securities, told The CapTable.