Disney+Hotstar Loses 12.5 Million Subscribers Amidst CEO’s Cost-Cutting Strategies

Disney+ Hotstar reported a loss of 12.5 million subscribers in the recent quarter

Walt Disney’s streaming platform, Disney+ Hotstar, has experienced a decline in subscribers for the third consecutive quarter of 2023. 

The most significant blow came from losing 12.5 million Disney+ Hotstar subscribers by July 1, 2023

This decline is the steepest since Disney started sharing its subscriber count in April 2020.

In Q3 2023, Disney’s streaming division reported a loss of $512 million, pushing the total deficit since Disney+’s inception in 2019 to over $11 billion. The global subscriber count for Disney+ now stands at 146.1 million, a drop of 11.7 million.

Despite the challenges, Disney reported a 4% revenue increase this quarter. However, the company’s net profit took a hit, moving from a $1.4 billion profit last year to a net loss of $460 million this quarter.

Loss of IPL Rights Has Hit Hard

The primary reason behind the decline is Disney+ Hotstar’s loss of streaming rights to India’s popular IPL cricket tournament. This led to a 24% reduction in subscribers for the platform, now standing at 40.4 million. 

Viacom18, a joint venture between Network18 Group, a subsidiary of Reliance Industries, and Paramount Global, bagged the IPL streaming rights and offered the tournament free on JioCinema

According to estimates by Kotak Institutional Equities, JioCinema’s digital platform might have captured at least 55% of the entire ad revenues for the IPL 2023 season. This, coupled with JioCinema’s free subscription approach, has reportedly affected Disney Star’s revenue generation, even though they held the TV broadcasting rights for the tournament.

CEO Bob Iger Executes His Cost-Cutting Strategy 

Bob Iger returned as the CEO of Disney+ Hotstar in November 2022, taking over from Bob Chapek. Iger, who previously led Walt Disney in 2005, oversaw significant acquisitions during his 15-year tenure, including Marvel and Fox’s entertainment entities. 

Bob Iger was instrumental in launching the Disney+ streaming platform, later introduced in India as Disney+ Hotstar through a collaboration with Star India. 

This leadership change came after Disney+ Hotstar’s reported losses amounting to over $8 billion in the past three years, including a $1.5 billion setback in Q2, 2022.

On his return, Iger unveiled plans to reduce costs by $5.5 billion. This included cutting off $3 billion from non-sports content and another $2.5 billion in other expenses. 

As a part of this cost-cutting strategy, the company also laid off approximately 7,000 employees, about 3.6% of its global staff.

Reducing Spend on Content 

In the first move, Disney+ Hotstar released its IPL streaming rights but continued to hold the television broadcast rights. Viacom promptly secured these streaming rights. 

Insights from Kotak Institutional Equities show that, during the IPL 2022 season, Hotstar’s ad revenues reached ₹1,100 crore, averaging ₹15 crore per match. Their subscription revenues were not far behind, totalling ₹1,200 crore, or ₹16 crore for each match. 

Elara Capital’s research highlights the importance of the IPL for Star India, suggesting that as much as 70% of its ad revenue is IPL-centric, with subscription revenues essentially echoing this trend.

Related:  Disney+ Hotstar's New Approach: Curbing Password Sharing to Boost Subscriptions

Furthermore, Disney+ Hotstar announced it would stop streaming HBO content, including major hits like “Game of Thrones” and “Chernobyl”, from March 31. 

This decision came after HBO’s renewal proposal, which reportedly demanded $50 million for a five-year contract, a sum that Disney+ Hotstar was unwilling to commit to.

In its continuous move towards cost reduction, Disney+ Hotstar also chose not to renew its broadcasting rights for Formula 1 (F1) for 2023. 

This decision is particularly significant given that India ranks among the top five markets for F1 globally. Insiders suggest that the primary factors behind this decision were the steep pricing demanded by F1 and diminished interest from advertisers in the sport.

Other Strategies for Reducing Losses

Bob Iger is now focusing on maximizing value from existing Disney+ subscribers. The company plans to increase the monthly fee for its ad-free Disney+ subscription by $3, making it $14. The ad-free Hulu subscription will also see a similar price increase, making it more expensive than Netflix.

Disney’s crackdown on password sharing is set to begin in 2024. Analysts believe these changes could be pivotal in ensuring Disney’s sustainable growth in the future.

Iger is optimistic about the company’s restructuring efforts, aiming for improved efficiencies and creativity. He believes the company is on the right track, with potential savings of $5.5 billion and a significant improvement in direct-to-consumer operating income.

Disney is also reevaluating its TV business strategy. With the rise of cord-cutting trends, the company is considering various strategic options for its TV network portfolio. 

Iger believes Disney’s future lies in film studios, theme parks, and streaming services, moving away from traditional networks like ABC. ESPN, another Disney-owned network, is also exploring partnerships while maintaining control.

Rich Greenfield, an analyst at LightShed Partners, mentioned that Iger was clear about selling the linear TV assets, which include over 80 television networks. as Disney adapts to the changing media landscape.

Ragul Thangavel
Ragul Thangavel
Staff Writer

With over nine years of diverse professional experience, Ragul has made significant contributions across various domains, including Media Operations, OTT Technologies, Video Production, Ecommerce, and Social Media.

Holding an Engineering degree, Ragul's career took an unconventional turn when he discovered his passion for writing, leading him to begin his journey as a content writer.

His career has been exclusively dedicated to the growth and development of startups, where he has played a pivotal role. His unique blend of technical knowledge and creative prowess has enabled him to drive innovation and success in every venture he has been a part of.

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