Good morning! There's a glitch in the Disney+ Hotstar matrix. After losing streaming rights to IPL, the platform has hit a rough patch. Walt Disney's decision to slash $3 billion in content costs will weigh down heavily on its Indian outpost. Budgets for original web series are trimmed and top execs have left for greener pastures. In today's edition of The Intersection, we look at why Disney+ Hotstar is in a sitch. We’ve also handpicked a list of weekend reads for you. | | If you enjoy reading us, why not give us a follow at @thesignaldotco on Twitter and Instagram. | |  | HamZa NOUASRIA/Unsplash.com |
| Last week, Disney+ Hotstar went unexpectedly off air, bang in the middle of the India vs Australia test match being held at the Feroz Shah Kotla Stadium (now the Arun Jaitley Stadium) in New Delhi. Then, rival Reliance Jio grabbed a chance to subtly shade Hotstar with this tweet reminding viewers they could watch the match on their set top box. |  | Mehul Fanawala @MehulFanawala |  |
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Hotstar is down and Jio TV has grabbed the opportunity. Mauke ke fayda uthana toh koi inse sikhe. 🫡 |  | | | Feb 17, 2023 | | |  | | | 372 Likes 23 Retweets 7 Replies |
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| Then, to add insult to injury, some folks on Twitter discovered that Hotstar’s domain name had been updated that very day. It looked like the domain had expired and hastily renewed when the platform went down. | Just one week earlier, Disney+ Hotstar had reported it lost 3.8 million paying subscribers quarter-on-quarter (in the December 2022 quarter). This is Hotstar’s biggest quarterly decline to date. This decline dragged down Disney+’s global subscriber numbers, but Hotstar did earn a higher average revenue per user (ARPU) in the same period. It was up 27% to $0.74 because of higher ad revenue (not more subscribers) coming in during the ICC T20 World Cup. | Disney’s management had warned investors back in August 2022 that a drop in subscribers was coming, when they lost the streaming rights to the IPL to Viacom18, the joint venture between Reliance-backed TV18 and Paramount Global. Some of this decline may also be because top telecom operators dropped Hotstar’s bundle deals from time to time last year. Both Reliance Jio and Airtel scrapped free Disney+ Hotstar bundles, though the latter reinstated them in December last year. | More important: all this is happening at a time when Disney is shifting focus to build a “durable streaming model” and prioritise profitability, along with settling all succession troubles dogging the CEO position, the company said in its latest investor presentation. Yet, Disney’s management maintains that Disney+ will be profitable by the end of “fiscal 2024”—which, for Disney, will end in September 2024. | What does that mean for Hotstar back home in India? In conversations with The Intersection, creative producers, writers, and streaming industry executives said Hotstar is changing its priorities in line with what its global headquarters has outlined. | Why? Because Hotstar is besieged with multiple troubles apart from the IPL’s loss: shrinking streaming commissioning budgets, the impending loss of HBO TV originals, a shift toward more ‘TV-like’ web content led by ads, and the loss of top talent especially to the Jio-Viacom streaming ecosystem, after Viacom18 bagged IPL rights. | As one media industry executive puts it, “Hotstar was known for two things, cricket and HBO. Without that premium stuff, what is left for a subscriber to pay for?” | Hotstar India did not respond to requests for comment. | Cut! | First, the good news. In FY22, revenues for Hotstar’s parent firm Novi Digital Entertainment Pvt Ltd nearly doubled to ₹3,220 crore (~$389 million), per company filings. Advertising accounted for 52% of this revenue, while subscriptions brought in 42%. In the previous fiscal year, these revenue streams were almost equal at about ₹830 crore (~$100 million) each. As long as IPL and premium content remained with the platform, Hotstar’s growth in India looked steady. | Now, Hotstar’s changing priorities in India include budget cuts in commissioned content. | “Budgets for original web series that are being commissioned have now been slashed,” the owner of a production house said, requesting anonymity. “All the shows you see releasing now on Netflix, Hotstar, and Sony are from a previous batch. These platforms are commissioning originals at a much lower cost. It is difficult to put an industry-wide number to it, but it may have come down by at least 20%.” | Writers and producers The Intersection spoke to said creative producers at streaming platforms have realised that the cost of producing high-quality content is not sustainable in India, where subscription prices are relatively lower (compared to markets like the US), as are digital ad rates. Besides, much of streaming distribution in India is dependent on telecom bundles, meaning the return on investment in big faces and ‘international level’ films and series tends to be low over time. | Disney’s management said in its February 8 investor call that it was targeting $5.5 billion of cost savings, a solid 6.6% of its total revenue earned in 2022. Some of that will come from the 7,000 layoffs Disney announced this month, and the company said it expected to save $3 billion in content “over the next few years, excluding sports.” | Hotstar’s biggest saving so far has been to let go of streaming rights for the IPL that were sold separately from TV broadcast rights this time around. It has also monetised a part of its rights to all ICC cricket content from 2023-27: Disney made a deal (for an undisclosed amount) to licence TV broadcast rights to ICC men’s cricket, including under-19 matches, to Zee. Disney had paid a total of $3 billion for combined TV and streaming rights. | Now Hotstar is also set to lose its other big draw among premium, paying subscribers in India, namely, its library of HBO TV originals. HBO Max originals already stream through Amazon Prime Video in India, including DC original Peacemaker, reboots of cult classics Sex And The City and Gossip Girl, and breakout hit The Sex Lives of College Girls, among others. | Some of Hotstar’s biggest ad campaigns in recent times in India have focused on driving potential subscribers to the platform by dangling HBO’s biggest hits: Game of Thrones and more recently, its prequel House Of The Dragon. These ad blitzes included a ‘Spoilers’ special ad campaign for the final season of Game Of Thrones in 2019, and another outdoor ad campaign last year for its much-awaited prequel. With ad revenue generating IPL already gone, where will the loss of these massive crowd-pleasers leave Hotstar’s attempts to sell premium subscriptions? | When it comes to budget cuts, though, Disney+ Hotstar isn’t alone. Rival Netflix laid off 300 employees last June just as it reported that it lost 970,000 subscribers, its largest-ever quarterly decline. Meanwhile, Warner Bros Discovery has been aggressively cutting costs since its merger. It scrapped plans to start HBO Max streaming in several geographies, including India, canned a number of high-profile movies and TV shows (including completed projects), and upped its cost savings target from $3 billion to $3.5 billion in November last year. | Warner Bros Discovery is also combining the two streaming services, HBO Max and Discovery+, in a single offering ready for a launch this year. It will also include an ad-supported tier. Netflix also launched ads in November last year in some key markets in a cheaper-priced tier (but not free to view). | A stab at ads | Hotstar’s creative team is also shifting focus away from commissioning 40-minute long, eight-episode “premium” web series that have flooded the Indian market over the last few years. “Hotstar has been looking at more ‘TV+” kind of content with shorter, more episodic content,” the founder of another web series production house said, requesting anonymity. “This content is closer to what TV shows are like, with the series running into 30, 40 episodes. These web series aren’t headlined by some big star, so their cost of production tends to be lower.” | Among Hotstar’s recent specials that follow this format are serial killer drama Aashiqana (released 2022) and romantic comedy Dear Ishq (2023). These shows have daily episode drops (on weekdays), each of 30 minutes or so, just like prime-time television soaps/shows. Season 1 of Aashiqana, for instance, has 60 episodes in season 1 and 66 in season 2. For viewers on Hotstar’s ‘Super’ plan (₹899 a year), these shows are interspersed with ads. | Ads have always accounted for a higher chunk of Hotstar’s total revenue, but with the loss of IPL, that ad revenue is expected to take a hit. Globally, Disney+ is taking ad revenue seriously. It launched an ad tier of the streaming platform in December last year in the US, priced $3 lower than the monthly ad-free tier. | But advertising-led fiction content is not new to Hotstar. It already tried this experiment in 2021 when it launched ‘Quix’, hosting web series with anywhere from 2-10 episodes per season, but of 15 minutes each (or less). This service was to compete with Amazon’s miniTV, a similar ad-funded streaming service in the Amazon shopping app that hosts comedy, drama, and reality TV shows with 10-15 minute long episodes— shorter than the average prime-time TV show episode. | Since early-mid 2022, Hotstar does not seem to have introduced new Quix content. Web series writers who have worked with Hotstar told The Intersection that the platform had initially circulated creative briefs for Quix in 2021, but none have reached creatives in the market in the last several months, at least. Hotstar India’s financial filings for FY21 refer to Quix in its roundup of the platform’s offerings, but it is missing in filings for FY22. | People troubles | Budget cuts and focus on ads are just half of its woes. Hotstar’s immediate headache is also to fill in crucial positions after two waves of exits and a worldwide layoff as part of the global management’s budget cuts. Hotstar lost a considerable portion of its technology team once Viacom18 (and Jio) became the new home of the IPL, an industry executive aware of the developments told The Intersection, requesting anonymity. In the run-up to the new IPL season, Reliance has been teasing new tech features for the cricket viewing experience, from personalised camera angles to outdoor viewing experiences. | Among other exits from the Disney-Star-Hostar universe to the Jio-Viacom stable are Gulshan Verma (now CEO, JioAds), Anil Jayaraj (now CEO Sports, Viacom18), and a host of sports content creators and sales executives. Meanwhile, there were other top exits at Hotstar during this time, including Sunil Rayan (president and head, Disney+Hotstar) and Nikhil Madhok (executive vice president and head of original content). | That’s all domestic. At the global headquarters, these problems may have barely registered as the battle of the Bobs played out. Bob Iger and Bob Chapek reportedly had a falling out early last year and by November, Iger had replaced Chapek as Disney’s CEO in a move that surprised markets and media executives. Chapek and Iger did not agree on basic strategic decisions, such as how to price the Disney+ streaming service. Chapek was also not as keen on spending on live sports as a core streaming proposition and that may have led to Disney’s reluctance to spend on the IPL, leading to Hotstar’s current situation, the industry executive quoted above told The Intersection. Iger had approved Hotstar’s last set of spends on acquiring IPL rights. | Disney has set up a four-member succession planning committee to pick a new CEO. Until then, media executives are expecting Iger to undo several of Chapek’s strategic initiatives that could affect international operations, including India’s. How much power will the local Hotstar team have to pursue a strategic direction as it sees fit? Not much, as per the media executive quoted above. | In light of blunders such as the alleged domain name expiration, the team here is expected to be hauled up for not paying enough attention to day-to-day operations. Until then, as Disney figures out the best way to hit that 2024 profitability target for its streaming service, the low ARPU, cricket-crazed Indian viewer may even become increasingly less important to Disney+Hotstar. | | ICYMI | | A scandal in Bombay: In February 2021, during the height of the pandemic, explosives were found in an SUV parked outside Indian billionaire Mukesh Ambani’s 27-story vertical mansion in Mumbai. What ensued was one of the most extraordinary scandals in the history of India’s financial capital. One person’s body was found in a creek; the head of the Mumbai Police’s Crime Intelligence Unit was arrested for criminal conspiracy, extortion and murder; the city’s police commissioner lost his job; and the ruling political party, the Shiv Sena, is no longer the same. This feature in Bloomberg Businessweek brilliantly breaks down the entire scandal. | Hospital grift: Angioplasty and coronary stents are medical terms that are so common and easily understood that you barely give it a second thought. This ProPublica story, constructed from court documents, details how medical devices maker Medtronic gamed the US medical system to profit from vascular diseases. Medtronic representatives colluded with hospitals and wined and dined doctors who acquiesced to implant their stents and intravenous balloons—often dozens of them in a single patient—even if it heightened the risk for limb amputation for patients. Interestingly, India is one of the few countries to cap prices of stents after this racket was exposed in some hospitals. | Untangling the web: Last week, Ashutosh Varshney, Sol Goldman professor of politics at Brown University, told The Intersection that international scrutiny on India in general and the Adani Group in particular will rise in the coming days. Varshney had said that after the Hindenburg report, the next wave of revelations would come from western financial media. That has begun to happen. Bloomberg has dug into the web of companies and visited multiple offices in Dubai and Mauritius occupied by Vinod Adani, the Adani Group founder Gautam Adani’s brother, in an attempt to map intra-group capital flows and control structures. The 74-year-old Vinod, who is a Cyprus citizen, is alleged to be managing an opaque network of shell companies that invest in Adani Group companies in India from tax havens. | White-washed: The white wall—a fail proof shade—is never out of style. Sought-after interior designer Shea McGee's colour palette is limited to shades of white. White, or the lack of colour, has also seeped into Instagram, with influencers almost always shooting behind the neutral white wall. But this love for white hasn’t always been without blemish. Throughout history, white was associated with cleanliness. It's why slum walls were whitened in the 19th century, and why "vivid colours" were often associated with "savage nations". This story in The Baffler points out why the obsession with the "clean aesthetic" comes with its share of problems. | Growing gains: Emma Chamberlain, the 21-year-old influencer with 12 million YouTube subscribers, is (more or less) done with the platform that made her famous. Not so much because of her entrepreneurial pursuits—read podcasting, cosmetics endorsements, and owning a coffee brand—but because the internet is a frightening place. In this candid interview with The New York Times, Chamberlain talks about loss of identity and “severe perfectionism”, consistency versus creativity, and why influencers can’t “do YouTube forever”. Pair this with Elaine Moore’s column about why de-influencing, the newest trend in the now-struggling creator economy, is an eyewash. | All that glitters is not gold: You’ve heard about blood diamonds, but have you heard about blood gold? This longread details the horrors of illegal gold mining in South Africa, a country that once mined over 40% of the world’s precious metal. The epicentre of that rush was the town of Welkom, those segregated townships helped lay the foundation for apartheid. Welkom today is decrepit and so are its decommissioned mines… or so you’d think. Illegal mining on the backs of zama-zama labourers—thousands of whom are extorted, forced to live underground, and even left to die—accounts for a tenth of South Africa’s gold production. Much of that makes its way into everything from phone circuit boards to wedding rings. |
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