Why is Jio buying Disney+ Hotstar?
Is Jio repeating the classic devil pricing?
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Disney is planning to sell its Indian entity to Reliance (it's rival) for US$10 Billion. How did we get here & what's under the deal, here's the story ⏬
2015 was when Star India officially launched Hotstar. It coincided with the 2015 Cricket World Cup & IPL, in which Star acquired the IPL streaming rights. By 2019, Hotstar had become the #1 OTT player in the country. Core insight → Cricket. 4.6 Cr subscribers.
That's a massive when you compare it to Netflix, which entered India in 2016 and is sits at 80L subscribers today
Star, and in turn, The Walt Disney Company acquired Hotstar, in 2019, as part of its acquisition of their US parent company 21st Century Fox. That made Disney+ Hotstar own 116 million paid subscribers globally.
Disney's global revenue last year was ~₹650,000 Cr & its India business made ~₹3200 Cr in the same time frame. That's <0.5% of the overall business.
It's a well-calculated move to sell India's operations. It makes little sense to divert resources and focus on India when it can make 10X average revenue per user in the West - period.
Why is Reliance buying its rival?
It's not the distribution, surprisingly.
First, the supply of content ✨
Sports & serials are two media products that have a high user frequency in India. Sure, Reliance acquired the streaming rights to one of the biggest sporting events in India - the IPL. But it is seasonal and doesn’t have a consistent frequency across the year.
Hundreds of serials, sporting events like Kabadi, Football, and drama categories like Big Boss, and Koffee with Karan create the perfect balance for an OTT product that can build daily watch habits.
Second, world-class infrastructure 🤯
The last IND vs NZ match had 4.3 Cr concurrent live viewers. For context, the Chandrayan 3’s launch had just 0.8 Cr viewers & was already YT’s biggest live stream in the world. Hotstar’s current infra can support 5X of that number. And, we’re still just getting started.
And the market is growing. OTT subscribers are projected to 2X next year. That's wild numbers. The market ceiling for a cheaper/ad-based product is great. With this acquisition, Jio Cinema is buying "speed to scale".
What’s the game here?
We all have seen what Reliance did to Telecom by changing the rules of the pricing game and expect that to repeat with the OTT game. Pure devil pricing with a clear right to win - unlimited cash at a fingertip.
The biggest value creation in OTT isn't content, it's attention and what we see in China with social commerce will come to OTT eventually. Interesting times and hybrid ad e-commerce models coming soon.
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a) I dont think Disney is selling only Hotstar (the OTT) for $10bn. They are selling entire Star India and from that stand point the revenue # of 3200Cr doesnt seem right. Should be upwards of 12k Cr...