Hotstar's subscriber base may further shrink by 10-12% before bottoming out in next quarter: Karan Taurani

Disney+ Hotstar has experienced a significant decline in its paid subscriber base over the last two quarters, and this downward trend is expected to continue in the next quarter, with an estimated loss of another 10% to 12% as the IPL season concludes, according to Karan

Taurani, Senior Analyst at Elara Capital.

Karan Taurani

“Disney+ Hotstar loses 15%-16% of India's paid subscribers base over the last two quarters. Expect this to bottom out next quarter as IPL season ends, which will see a subscriber loss of another 10%-12% next quarter, which in turn will mean a total paid subscriber loss of 25-30% largely in line with Elara Capital’s estimates of 30-35% subs loss,” Taurani said.

As a result, the total loss of paid subscribers will likely be around 25% to 30%, which aligns with Elara Capital’s previous estimates of a 30% to 35% decline in Hotstar’s subscribers, he stated. 

Taurani’s statement comes in the backdrop of Disney+ Hotstar witnessing a steep decline in the number of subscribers in the quarter ended April 1, 2023. The streaming service provider lost 4.6 million subscribers in the second quarter of FY23, leading to the subscriber base falling to 52.9 million on April 1, 2023, from 57.5 million in December 2022.

In the October-December 2022 quarter (Q1 FY23) its subscriber base had dropped to 57.5 million from 61.3 million.

“The average revenue per user (ARPU) may also see convergence, as IPL remains the most expensive property, which Hotstar has lost to JioCinema in the new media rights bidding last year. Expect a potential negative impact of 50% on overall revenue in CY23 for Hotstar, as IPL had a large share in the AVOD revenue base (approximately 60-65%) and also had a sizable share in the SVOD revenues (approximately 40%),” Taurani said. 

Taurani went on to add that Hotstar may be able to make up for the above loss of subscribers over the medium to long term, by investing heavily into original content (films and web series across languages). Hotstar also has a catch-up TV content catalogue, as they are one of the leaders on the linear TV front in key markets (urban GEC, regional GEC genres), he added. 

However, investment in original content is a long gestation strategy, as content has to click with the audience and the platform will need to invest into content marketing. 

“We thereby don’t expect a respite for Hotstar’s Indian ARPU (at $0.59 per month now), due to the loss of major content properties. In fact, there is a high probability of a reduction in ARPU due to loss of IPL and JioCinema giving IPL and other premium content (films, movies) for free,” Taurani said.

“We expect the net loss to remain for the platform, despite IPL moving away, as the negative impact of loss in revenue will not be able to offset the cost. The platform (Disney+ Hotstar) will lose substantial market share in India’s OTT market (down from 17% earlier towards 8-9% in CY23 - post IPL content moving away),” he added. 

Furthermore, he said that the loss of big market share by Disney+ Hotstar may pave the way for Sony/Zee to gain traction, post the merger if Sony Liv and Zee5 too are merged together, as digital businesses are all about scale (distribution, tech, user experience). 

He further said that ARPUs for Indian OTT platforms will remain under pressure due to Jio offering premium content free. There is also a potential for some experimentation around password sharing, restricting the number of users per subscription and TVOD models, in order to offset some negative impact created due to ARPU pressure/premium content being given free, as per him.

Meanwhile, Disney+Hotstar's average monthly revenue per paid subscriber dropped from $0.74 to $0.59 - due to lower per-subscriber advertising revenue.

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