Kritti Bhalla [] | 13 Sep?19?|?3 min read

With 300 Mn monthly active users, Hotstar leads the Indian OTT market

Subscription-based revenue is a paltry 7-8% currently

Market conditions have forced higher spending in original programming

Just a few months after it acquired live-streaming platform Hotstar via 20th
Century Fox, Disney hasreportedly
[] laid out an aggressive plan to push revenues for the streaming platform. The
entertainment giant plans to put an end to Hotstar?s ad-driven revenue model and
push for more subscriptions or user revenue.

Currently, subscriptions make up a mere 7-8% of the total revenue generated by
Hotstar. Disney has set a target to increase subscription-based revenues to 50%
of the total revenue for the streaming platform, formerly owned by Star India.

Hotstar Faces New Competition
According to App Annie?sState of Mobile 2019
[]report, India tops the
list in terms of consumer spending for video streaming. That also means the
competition in India is also though. Starting from nine video streaming
platforms in 2012, the number has reached around 33-35 these days with many
international platforms yet to come to India.

Apple TV+ will be most prominent new entrant this year, and it?s likely to be
one of the reasons for Disney?s major push for revenue now. Apple will launch
its streaming service at INR 99 per month, which undercuts most of the
competition, but the lack of Indian content is a big disadvantage for Apple TV+.

On the other hand, Hotstar has managed to emerge as the largestOTT platform
[] in the market with 300 Mn monthly active users, thanks to its live sports
programming. But Hotstar?s mix of free and paid content means its reliance was
largely on non-subscription revenue. The platform has an extensive catalogue of
non-premium shows that is open to all viewers without subscribing, subsidised by

Both Netflix and Amazon Prime combined have not managed to overcome Hotstar?s
stronghold when it comes to monthly users, but they are both fully paid
services. In terms of daily subscribers, Hotstar has around 3 Mn paid
subscriber, compared to Amazon Prime?s 2.5 Mn and Netflix?s 1.2 Mn.

Can Hotstar Delivery Subscriptions And Original Content
Hotstar?s lead in users may not translate into healthy subscription numbers
especially if it continues to employ the freemium model. The high cost of
content acquisition, advertising, promotional expenses and low subscription fee
leaves Hotstar at a disadvantage. The company had registered losses ofINR 436.3
[] in Q2 2018.

Star India and Star US Holdings infusedINR 1,066 Cr ($153 Mn)
[] into Hotstar earlier this year. Star India invested INR 832 Cr, with the rest
coming from Star US Holdings.

Hotstar has spent over INR 4K Cr for content, including sports in 2017, states a
report by theBoston Consulting Group
[] (BCG), compared to INR 500-600 Cr spent by Netflix and INR 500 Cr by Amazon in
the same year. Other players such asSonyLIV
[] and ErosNow spent in the range of INR 450 Cr.

But as Netflix ramps up its India content library and Amazon is also clear on
spending more for original programming for the market, Hotstar is under pressure
to compete. It has delivered a few original shows, but these have largely been
remakes of international properties. That?s not a strategy it can rely on for
very long.

Disney is piling on the pressure to deliver the subscription revenue growth,
while market conditions are squeezing more investments out of the company in
content creation. Will Hotstar?s lead help it ride this tumult or will rivals
take the lead in the subscription revenue race, which ultimately determines
long-term success?

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