Disney+ Hotstar loses 12.6M subscribers in June quarter

Reeling under the impact of reduced advertising revenue and negative foreign exchange, Disney+ Hotstar, the Indian arm of entertainment giant Walt Disney Co, lost 12.5 million subscribers in the third quarter that ended July 1, 2023.

This is the third consecutive quarter in which the video streaming service has lost subscribers.

The platform witnessed a drop in paid subscribers from 52.9 million in April 2023 to 40.4 million in June 2023.

The international channels segment also faced significant challenges, with a 20% decline in revenue, totalling $1.2 billion. Operating results also took a hit, shifting from a $166-million income in July 2022 to a $87-million loss.

Disney has attributed the loss to reduced advertising revenue, primarily influenced by lower rates related to the Indian Premier League (IPL) cricket programming, along with a negative foreign exchange impact.

This comes a year after Viacom18 secured the digital rights for the IPL, taking it away from Disney+ Hotstar. Viacom18 paid Rs 20,500 crore for the rights, while Disney Star obtained the television rights for the Indian subcontinent for approximately Rs 23,600 crore, according to reports.

"There are some markets we'll invest less in local programming but still maintain the service. There are some markets that we may not have a service at all. And others are considered high potential markets where we'll invest nicely for local programming marketing and basically full service content in those markets," said interim CFO Kevin Lansberry, talking about the subscriber losses at Hotstar during a call with analysts.

"Not all markets are created equal. And in terms of our March profitability, one way we're going to do that is by creating priorities internationally," he added.

Disney posted a loss of $460 million, at a loss of $0.25 per share. In the same period last year, the company had achieved a net income of $1.41 billion, translating to $0.77 per share.

On the positive side, it witnessed a 4% growth in revenue, reaching a total of $22.33 billion.

Disney's direct-to-consumer (DTC) segment revenue reached $5.5 billion in the quarter, marking a 9% increase from the previous year. The operating loss for the DTC segment narrowed by 52% to $512 million.

To improve profitability, Disney said it will focus on making more money from existing subscribers and cut down on marketing cost for these services while increasing subscription fees.

The company also revealed its plans to emulate the success of Netflix in the subscriber growth front. It said it is actively considering options and strategies to tackle password sharing and improve content recommendation engines.

Disney said it believes there are significant number of users who share passwords, but whether a crackdown will successfully translate into subscriber growth is not clear. Lansberry said the company will tackle the problem in the 2024 calendar year.

Disney is looking for partners who can provide content, distribution, or marketing support in a bid to transform its sports arm ESPN into a streaming service as linear TV business dwindles. Reports suggest that ESPN has signed a $2-billion contract with PENN entertainment to spin off a sports betting website.

The streaming platform also expects to exceed $5.5 billion in savings that it had estimated after returning CEO Bob Iger cut almost 7,000 jobs earlier this year.