Disney will make cricket free to watch with ads on smartphones in India, in efforts to revive its ailing Indian business, following an exodus from the Hotstar streaming service.
Disney Star, the company’s media business in India, holds the digital streaming rights to all International Cricket Council (ICC) tournaments through to 2027, having paid an estimated $3 billion when the rights were auctioned last summer.
As reported by Reuters, the company will show matches on mobiles and tablets for free, using advertising to plug the revenue gap vacated by subscription fees. But customers watching on the Hotstar TV app will have to pay, making the strategy a “hybrid model” that allows the company “to drive two revenue streams more meaningfully,” according to Hotstar chief Sajith Sivanandan.
The pivot to free-to-air (FTA) is designed to attract over 450 million viewers to the ICC World Cup later this year, according to Disney, up from 300 million for the 2019 edition.
The company is also aiming to attract smaller advertisers to the tournament, said Sivanandan, targeting minimum spend of around 200,000 rupees ($2,421). And using mobile devices additionally enables interactivity, suggested the company, proposing interactive ads that can take users directly to a brand’s WhatsApp chat, where they can be directed towards purchasing products.
Reports further revealed that Disney has struck a deal with Coca-Cola, whereby QR codes are placed on about 400 million Coke bottles, which link users to a Hotstar trial sign-up page. Disney hopes to gain 80,000 new subscribers through this promotion.
Ampere Analysis notes that internet users in India use their smartphones more than any other device for video viewing. “Given the size of the Indian market and the growing usage of smartphones to watch video content, offering cricket for free via smartphones is likely to generate massive viewership for Disney across these tournaments,” Dan Harraghy, Senior AnalystAmpere Analysis, tells VideoWeek.
A sticky wicket
The new tactic is quite the change of pace for Disney’s cricket strategy. Cricket rights are notoriously costly due to the sport’s popularity in India. But the company’s recent moves in the field have left Disney struggling to balance those costs with new subscribers and revenues.
Disney acquired Hotstar for $71 billion in 2019, and with it the global media rights to the Indian Premier League (IPL), which its owner Star India had bought for a record-breaking $2.55 billion in 2018.
In 2020, Disney introduced a subscription cricket service on Hotstar, with the aim of amassing 100 million users within years. But in 2022, the entertainment giant lost the IPL streaming rights to Viacom18, majority-owned by Indian billionaire Mukesh Ambani. Disney retained the TV rights, with both companies paying around $3 billion for their respective packages.
Unfortunately for Disney, Viacom18 streamed the IPL games for free, leaving Hotstar without its big draw. The SVOD service lost over one-third of its subscribers in nine months, with around 21 million customers cancelling their subscriptions between October 2022 and July 2023.
According to Reuters, Disney internally acknowledges overestimating Indian consumers’ willingness to pay for cricket. “We were bullish on Indian subscribers’ propensity to pay. That’s not worked out,” said a Disney source. “Free cricket is the only bullet left.” And customers were not sufficiently drawn to other Hotstar content to stick around without the IPL, the insiders said.
The subscriber exodus is expected to financially hit the already struggling Indian streaming business, which posted a loss of $41.5 million in its March 2022 results. As a result of those struggles, Disney is exploring a potential sale of its Indian business.
Breaking the duck
Last month’s earnings also revealed that Hotstar subscriptions deliver lower average revenue per user (ARPU) than Disney+ plans in other markets, due to the Indian service’s low price point. Hotstar ARPU in the last quarter was $0.59 per month, compared with the Disney+ average of $4.44.
And advertising has been shown to drive ARPU, with Disney, Netflix, Paramount, Warner Bros. Discovery (WBD) and NBCUniversal all reporting that ARPU is higher on their ad-supported tiers than ad-free plans, according to Sparrow Advisers.
The hybrid approach could therefore bolster Disney’s cricket strategy. “Having such a large addressable market is likely to drive a significant boost in advertising revenues for Disney+ Hotstar, which the company will hope can cover some of the losses driven by the drop in subscribers since losing the digital rights to the IPL,” says Ampere’s Dan Harraghy.
That said, as Netflix has found, advertising revenues can take a long time to affect balance sheets, so Disney could be playing a long game with this new approach.