There’s a silver lining for Hotstar in losing IPL digital rights – here is how it can strengthen its counter-strategy

• In the recently concluded Indian Premier League media auctions, Star bagged the television rights and Mukesh Ambani’s Viacom18 won the digital rights.
• Now that Disney+ Hotstar has lost one of its flagship properties – the IPL – to Viacom18, it will have to come up with a strong, fool-proof counter-strategy to sustain its subscriber growth in the OTT landscape.
• As per Elara Capital’s estimates, 70% of Star India’s advertising-based revenue is IPL-led, with subscription-based revenue largely following suit.
• We try to decode how big of a dent losing IPL could make in Hotstar’s business operations.

When Disney-Star bought the digital streaming rights of the Indian Premier League (IPL) in 2018 for ₹16,300 crore from the Board of Control for Cricket in India (BCCI), it had hit a gold mine.

Star had the most sought-after cricketing property in its lap for five years. However, it put all its eggs in one basket.

Now, after losing the mandate to Mukesh Ambani’s media giant Viacom18, Disney+ Hotstar will have to pull up its socks to sustain its growth.

Why losing IPL will make a dent in Hotstar’s business

Disney+ Hotstar has been one of India's top OTT platforms in terms of subscribers and market share, thanks to IPL. Now the tables have turned and Viacom18’s Voot, which currently has a share of 2% of the OTT landscape as per asset management firm CLSA, is likely to jump ahead.

As per a Kotak Institutional Equities report, Hotstar garnered ad revenues of ₹1,100 crore (₹15 crore per match) and subscription revenues of ₹1,200 crore (₹16 crore per match) for IPL 2022 season. It currently has a total of 50 million paid subscribers.

Considering that Hotstar’s crown jewel generated 70% of Star India’s advertising-based revenue, as per financial advisory firm Elara Capital, the streaming platform will likely face the crunch come 2023.

Hotstar’s plan B after losing IPL media rights

In a statement sent to the media, the chairman of international content and operations at The Walt Disney Co, Rebecca Campbell explained why Disney+ Hotstar chose to let go of the digital mandate.

“We made disciplined bids with a focus on long-term value. We chose not to proceed with the digital rights given the price required to secure that package,” she said.

Now the platform has started working on its Plan B, which, surprise-surprise, revolves around cricket and other sports.

"We will be exploring other multiplatform cricket rights, including future rights for International Cricket Council (ICC) and Board of Control for Cricket in India (BCCI), which we currently hold through the 2023 and 2024 seasons, respectively,” she underlined.

“Additionally, we hold Pro Kabaddi League rights, Indian Super League football rights, as well as various international sports rights, including the Wimbledon Championships and the English Premier League,” Campbell shared in a media statement.

Campbell also shared that Hotstar currently has more than 100 local original titles in its content pipeline – with over 80 local originals slated to premiere this fiscal year.

Sports bring the subscribers, say experts

Brand expert and founder of Trust Research Advisory (TRA), N Chandramouli, said, “Sports viewership is known to increase OTT subscribers and Disney-Hotstar, having lost the digital rights of IPL to Viacom should be using their investments in other sporting franchises to build their global subscriber base.”

Chandramouli also said that while Disney+ Hotstar had bet big on the IPL digital rights, it was "not big enough".

“It is likely that they [Hotstar] have losers' remorse and will try harder to get rights of other global sports franchises. The question of whether IPL media rights will make profits is still out there,” he added.

A silver lining in losing IPL rights

While Hotstar did win the lottery ticket with IPL’s digital mandate for the previous cycle of 2018-2022, it did not have a material impact on its profits.

Despite adding new subscribers and reporting incredible growth in advertising revenues, Disney+ Hotstar’s overall revenue of ₹1,500 crore was less than Netflix's at ₹1,700 crore.

As per industry estimates, Netflix’s subscribers in FY21 were nearly 7x less than Disney+ Hotstar's.


Source: Elara Capital, Comscore, Media Partners Asia

According to another report by Elara Capital, the winner of the media rights has to foot hefty content production and marketing costs.

The report says, “Star and Hotstar financials suggest that winning the broadcast rights in the previous cycle does not seem to have had a material positive impact on profitability.”

So, not winning the IPL streaming rights might actually turn out to be a boon in some ways for Hotstar as it did not make any profits in the previous cycle.