The Walt Disney Company’s recent foray into streaming entertainment profitability might be short-lived. Analysts predict a loss for Disney+ Hotstar’s entertainment segment in the upcoming quarter, largely due to the hefty price tag of the platform’s International Cricket Council (ICC) digital rights.
ICC Rights Cast Shadow on Disney+ Hotstar Profitability
During their recent earnings call as per The Economic Times, Disney revealed that their entertainment direct-to-consumer (DTC) segment, which includes Disney+ Hotstar, is projected to lose money in Q3. CFO Hugh Johnston attributed the majority of this loss to the high cost of acquiring the digital rights for International Cricket Council (ICC) tournaments like World Cups, Champions Trophy, WTC Final and more.
Profitability Delayed due to ICC Rights
While Disney+ Hotstar may experience a dip in profit, core subscriber growth isn’t expected to see a significant rise in Q3. However, analysts anticipate a rebound in subscriber growth by Q4. This suggests the cricket rights may be a short-term financial hurdle, not a long-term roadblock.
Streaming still growth engine for Disney
Despite the anticipated Q3 loss, Disney CEO Bob Iger remains confident in streaming’s long-term potential as a growth driver for the company. He emphasized their commitment to the streaming market and the ongoing strategies they have in place to ensure future success.
Costly ICC Cricket Rights: A Risky Investment?
Star India, the parent company of Disney+ Hotstar, acquired the ICC media rights for a staggering $3 billion, covering the period until 2027. The high cost of these rights raises questions about the return on investment.
While cricket enjoys immense popularity in India, it remains to be seen if the massive investment will translate into enough new subscribers and viewer engagement to offset the cost.
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Legal battle with Zee adds complexity
Star India had initially sub-licensed the ICC TV rights to Zee Entertainment. However, the collapse of a proposed merger between these two companies led Zee to back out of the expensive TV rights deal. This resulted in a legal dispute, with Star initiating arbitration proceedings against Zee for failing to fulfill the agreement.
The outcome of this legal battle will have further implications for the overall profitability of Disney+ Hotstar’s cricket rights acquisition.
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