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Star Wars: Will Disney Star be forced to sell its India operations in the light of Jio’s massive expansion?

By Shirish Nadkarni

At the start of Diwali, the Hindu Festival of Lights, on November 11 this year, the market was rife with rumours that Walt Disney’s business in India, hit by mounting losses, was up for sale, and that a number of Indian media giants, including Reliance Jio, were keen on getting in on the ground floor.

Disney’s sports business in India, owned by Disney Star, had reported an operating loss of US$444 million for the nine-month period ending July 1, 2023, the most recent period for which financial figures are publicly available – as per its report filed on October 18.

For the fiscal quarter ending on September 30, 2023, Disney+ Hotstar had 37.6 million paid subscribers, which was a 7% decrease from the previous quarter, when the company boasted 40.4 million subscribers.

The setback came on the back of a $237 million loss suffered during the full financial year 2022, during which the broadcaster covered various sporting events on its network, including the Indian Premier League (IPL) in April-May, the ICC T20 World Cup in October-November, and a slew of India’s international matches at home.

Despite earning $637 million in revenue from sports during the nine-month period ending July 1, 2023, the Indian unit continued to struggle financially. In contrast, ESPN, owned by Walt Disney, generated an operating profit of $1.8 billion on revenues of $12.5 billion for the same period. Over-all, the sports business recorded an operating profit of $1.4 billion on revenues of $13.2 billion. 

While ESPN is renowned globally for being Walt Disney’s cash cow, the American media conglomerate’s sports business in India continues to be a loss-making proposition.

It has been reported that Disney is in talks with Mukesh Ambani’s Reliance Jio, and also with the Ahmedabad-based industrial baron, Gautam Adani, and with Kalanithi Maran’s Sun group. A number of private equity firms, as well as private equity groups, are also understood to be in the running to either buy out Disney in India, or get into a joint venture with its Star assets.

It will be remembered that Disney had acquired 20th Century Fox, including Star India, in 2019 for $71 billion. Star India held the broadcasting rights for the cash-rich Indian Premier League (IPL) cricket matches, though it lost the streaming rights to Mukesh Ambani’s Jio Cinema, a sister company to Jio, which has become the largest telecom operator in India. 

With deep pockets backing it, Jio Cinema very cleverly streamed the IPL matches free, resulting in a big exodus of subscribers from Star Sports. Jio Cinema has been on a huge expansion drive, offering customers a vast bouquet of streaming products, and literally cutting the ground from under Disney Star’s feet. And it has also believed in “sleeping with the enemy”.

One of the deals that Jio has offered the 388 million subscribers of its “bundled service” of TV cable, landline telephone and Internet is a free subscription on its three-month package to the streaming service of Disney+ Hotstar. At the same time, Jio Platforms inked a “first of its kind” deal with Netflix to bundle the streaming service with the carrier’s two pay-as-you-go plans.

Badly stung by these tactics of India’s premier industrialist, who runs the most technologically advanced telecom company in India, Disney Star has tried to fight back – and has been aided in its struggle by the cricket-mad Indian public, for whom the game is virtually a religion. The ongoing ODI World Cup, which reaches its conclusion on November 19, has come to the rescue of the beleaguered sports broadcaster.

 “We have regained many subscribers and attracted millions of non-paying users to our platform, thanks to the ongoing ICC (International Cricket Council) ODI (one-day international) World Cup,” K Madhavan, Country Manager and President of Disney Star, told APB+.

Madhavan drives the strategy and growth of the company, and is responsible for the Disney, Star, and Disney+ Hotstar businesses and operations across General Entertainment, Sports, Direct-to-Consumer and the Studios business.

While refusing to specifically mention Reliance Jio as the main reason for his company’s operating loss, Madhavan insisted, “The predatory practices of some of our rivals gave them an initial advantage, but over the last quarter of the ongoing year, we have regained many subscribers and will most probably report a significant increase in our subscriber numbers.” 

Madhavan, who has been with Star since 2009, and whose current assignment includes channel distribution and advertising sales, is non-committal about the advent of a new partner for Disney Star’s Indian operations, but does not entirely exclude the possibility in the light of the ongoing discussions with several media entities. 

He, however, pointed out that sporting extravaganzas like the ICC ODI World Cricket Cup are not the sole backbone of the channel’s offerings. “We have a thriving local content production business, with nearly 20,000 hours of original content every year across 70+ TV channels in nine languages, reaching around 700 million viewers a month,” he said. “We command a leadership position in both linear television as well as the streaming business, as we offer high-quality content to diverse viewers across geographies.”

Madhavan’s views on the sustainability of Disney Star’s business in India were backed by remarks made during a recent earnings call by Walt Disney’s CEO, Bob Iger. “We are committed to the Indian market,” he said firmly. “We have the biggest studio in India and a big TV business in the fastest growing mega-economy in the world; and you think we would want to sell it because the annual revenue per subscriber is low?

“That hardly makes sense.

“In India, which is the world’s most populous nation, our linear business actually does quite well, and makes decent money. We would like to stay in that market.

“We know that other parts of that business are challenged for us and for others. But we are considering our options there. We have an opportunity to strengthen our hand, and to improve our bottom-line.”

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