Return of IPL will help Disney+ Hotstar reclaim subscribers, says Bop Chapek
The Disney boss was speaking at Goldman Sachs 30th Annual Communacopia Conference
Walt Disney Chief Executive Officer Bob Chapek has said that the split of the Indian Premier League (IPL) 2021 season into two halves due to Covid-19 and the restrictions imposed by the Reserve Bank of India (RBI) on recurring payments or auto-renewals had impacted the company's streaming platform Disney+ Hotstar's subscriber growth.
Speaking at Goldman Sachs 30th Annual Communacopia Conference, Chapek noted that the expiry of Disney+ Hotstar's annual pack for many subscribers coincided with the postponement of the tournament in May.
"Well, in terms of IPL, what we are doing is seeing the combination of two things happening at once in India. Number one, there is that shift of timing of the IPL season, which is really an important factor, and it happened to be coincident with the annual expiration of a large cohort of subscribers. And I think, as you know, in India, their annual subscriptions, but when they end, there's no auto-renewal," he noted.
However, the company is confident that the Indian streaming giant will regain its lost subscribers with the return of the second part of the IPL. "So every time you lose a cohort, you've got to get that cohort back. And so we've got sort of the – the good news is we've got IPL coming, so it's going to be plenty of incentive to get some of those folks back, but you have to take a step back before you take a step forward in terms of those renewals. So it takes a little bit of time for people to resubscribe, so you've sort of got those things all happening at the same time," Chapek said.
The Disney CEO also advised that the streaming business should not be looked at from the lens of quarterly numbers. He also said that the D2C business requires a more global approach. He was referring to expectations of the stock market that Disney+ will add a certain number of subscribers every quarter to attain the target of 230-260 million paid subscribers by 2024.
In December 2020, Disney senior executive vice president and CFO had said that Disney+ is projected to reach a paid subscriber base of 230-260 million by 2024 with Disney+ Hotstar expected to contribute 30-40% of the overall base. It also expects to become profitable in the same year.
"The thing I think that's really important about sort of taking a more global approach to our direct-to-consumer business, and this is one thing that I think we are not exactly aligned with the street on is the quarter-to-quarter business is not linear. I think people looked at our projections last December and said, they want to get to 230, 260 or whatever the numbers are, and they divided by the number of quarters, say they need to add X per quarter," Chapek stated.
He also said that these numbers tend to be a lot noisier than a straight line. "They are not a straight line relationship quarter-to-quarter-to-quarter, and indeed we've seen some of that this current quarter. We are very confident about our long-term sub growth, as we have been."
According to Chapek, the company's global paid subscriber base will increase by low single-digit in Q4 versus Q3. Disney follows 1st October to 30th September financial year. "But importantly, our core market sub growth will continue both domestically and internationally in Q4, but we hit some headwinds. Two of the headwinds I already talked about. Latin America, again, trying to mobilize the partners, get that thing going, just like we saw with Disney+. In India, the IPL shift and the fact that you have got to go back and reclaim all your subscribers all over again, which we are confident we can do, but obviously, it's sort of a day-by-day, it's a clawback, if you will," he pointed out.
He also said that the impact of Covid-19 induced production delays has impacted it globally as there is a kink in the supply chain from new content coming to the service. However, this is a short-term phenomenon. "In fact, it's so short-term that right now, our studio alone has 61 new movies in production, and they've got 17 different episodic programs that are in production. Our TV group has hundreds of new programs in production, and we've got 200 local productions across the globe in production."
Talking about Disney+ Hotstar's success in India and Southeast Asia, Chapek said that the company follows different strategies for different markets. He also said that Disney+ Hotstar has an unparalleled content line-up. "We've got sports. We've got 18,000 hours of local content that we create a year for that market, but it's not just about the content, it's primarily about the content because it's also about having those distribution arrangements with the local mobile carriers. And then even once you have that, you've got to have the consideration to deliver your product with low bandwidth because that's what that market requires."
Chapek also pointed out that IPL is an important asset for the company in the Indian market. "So again, it's far different from what we are seeing, but we are making more and more core Disney products available to the consumers there, which is also what they love, but there are things that are unique. And I think it's really being sort of tuned into what's required and hey, let's not forget all the sports offerings that we have at the same time. IPL is really an important asset there, and we are lucky to have it."
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