Disney + Hotstar reported sales of INR 1628 Cr for FY2020, with decreasing losses compared to the previous year
The company saw relatively slower subscription revenue growth in FY20, compared to more than 50% growth in ad revenue
Disney + Hotstar could become the second highest revenue-earning video platform in India by 2025, according to a recent study.
India has become the pole star for streaming service Disney + Hotstar, which has reached 86.8 million paid subscribers worldwide. The home country for video streaming platform Hotstar currently makes up a whopping 30% of the total Disney + subscriber base. And this growth has come after the company reported a nearly 50% increase in sales, with 35% lower losses.
Disney + Hotstar, which was acquired by Disney in 2019, reported sales of INR 1628 Cr in FY2020, an increase from INR 1123 Cr in FY2019, according to documents from Novi Digital Entertainment, the streaming platform’s parent company.
However, Hotstar again failed to make a mark on profitability like Netflix India. Although the revenue is more than INR 700 Cr higher than Netflix India INR 923.7 Cr, Hotstar reported a loss of INR 361.8 Cr, 35% lower than last year.
The loss has decreased despite an 18.6% increase in expenditure to INR 1990 Cr. Hotstar reported sales of INR 1123 Cr with a cost of INR 1677 Cr leading to a loss of INR 554.3 Cr in FY2019.
Netflix India, on the other hand, reported a gain of INR 8.92 Cr with costs rising to INR 909.3 Cr. It should be noted that not all of Netflix India’s releases are driven by the Indian company as the company’s global marketing budgets would also include allocations for the Indian market. Thus, the profit and loss situation is not the best indicator of growth, and evidence of traction is best seen in the growth in the number of subscriptions.
Disney + Hotstar subscription grows slower than ad revenue
Hotstar is India’s largest streaming platform with subscriber base (both paid and unpaid) of 300 Mn. The company also earns through its unpaid subscriber base through advertising. The company earned approximately INR 1593 Cr through its operations in FY2020, which represents a 43% increase over FY2019’s INR 1112.7 Cr.
In FY20, the company earned approximately INR 974.23 Cr through advertising and INR 618.79 Cr through subscriptions, growing more than 50% ad revenue of INR 622.75 Cr and approximately 30% growth in subscription revenue of INR 466.64 Cr in FY2019. The relatively slower growth in subscription revenue is largely due to Hotstar’s model which, unlike Netflix or Amazon Prime, has an ad-supported tier.
More than INR 350 Cr of the higher income for the business comes from advertising, which accounts for more than 70% of the total revenue growth in the year.
Since OTT subscriptions are still a monthly expense for much of the Indian population and considered an indulgence, it was always expected that subscription revenue growth would be slower. It remains to be seen if this particular part has changed since Disney acquired Hotstar and brought its Disney + library to India.
In contrast, Netflix has reported significant sales growth in India from INR 58.04 Cr in FY2018, to INR 470 Cr in FY2019 and then INR 900 Cr in FY2020. India falls in the Asia-Pacific region to the US-based company, which is the second largest contributor to the annual count with 93 new Lakh subscribers in 2020. The company had added a record number of 3.7 Cr paid memberships last year. The company had also offered a two-day free streaming offering in India, leading to 8 Lakh downloads from the Netflix app
In terms of expenses, Hotstar spent INR 1383.30 Cr or 70% of the total costs for the year on operating costs, which was about 58% last year. Apart from that, the company has managed to reduce all other major expenses, including advertising promotion costs, by 29% to INR 286 Cr and employee benefits by 8.5% to INR 166 Cr. The company’s depreciation, exhaustion and amortization costs have increased by 500% to INR 34.84 Cr.
Will Lockdown Blues Boost Disney + Hotstar?
In addition to Netflix and Disney + Hotstar, Amazon Prime Video, MX Player, Zee5 and ALTBalaji are the leaders in the Indian video streaming market in the Indian market. Most of these also take the same approach for subscriptions + ad revenue, but Disney + Hoststar remains the largest platform, at least in terms of numbers and revenue. And the OTT market saw major adoption growth in all categories and platforms in 2020.
However, it is difficult to predict whether Hotstar will be able to keep up with revenue growth in FY2021, ending March 2021. The company claims in its financial statement that its operations were affected during the pandemic due to health in sports. events worldwide. The interruption of show recording between March 19 and July 13, 2020 also impacted the company’s revenues.
While Hotstar claims that since the restrictions were relaxed, show production has resumed and many have been released on the platform, it added that the impact of the pandemic will be continuously assessed.
According to a study by consulting firm Media Partners Asia, Disney + Hotstar could become the second largest video platform in India by 2025, after just YouTube. Disney + Hotstar’s revenues are expected to grow from $ 216 million last year to $ 902 million by 2025, despite the projected shrinkage to $ 175 million by 2020, due to the economic impact of the pandemic.
That does not mean that Hotstar or other OTT players do not face threats from the policy or even the changing nature of the Indian demographics. Last year, the OTT and digital news media segments were introduced under the auspices of the Ministry of Information and BroadcastingThis change threatens to bring regulation and censorship into the OTT segment, and in addition to Disney + Hotstar, international platforms such as Netflix and Amazon Prime will also be affected.