Disney plans sale of India business valued at $3.9B – report

Disney reached an initial deal to sell a majority stake in its India business operations in an agreement that values the unit at much less than when it was first purchased, according to a Wednesday report by the Wall Street Journal.

The WSJ, citing unnamed sources familiar with the deal, said an agreement that would see Disney retain a 40% stake while giving India’s Reliance Industries 51% of the business and Bohdi Tree Systems a 9% stake, values the business at $3.9 billion.

Disney’s India business includes Star television networks and the Disney+ Hotstar streaming service, among other assets. Disney acquired operations in India when it purchased most of 21st Century Fox’s entertainment assets in 2019. The WSJ, citing estimates of people familiar with the deal and third-party analysts, said at the time the India business was valued between $7 billion and $16 billion.

The latest deal stems from a memorandum of understanding signed by Disney in December, sources told WSJ, to merge its India business with Viacom18, the latter which is a joint venture between billionaire Mukesh Ambani’s Reliance Industries, Paramount Global, and Bodhi Tree Systems.

According to the WSJ, it isn’t a done deal yet and could change, with Viacom18 reported to pay around $1.5 billion in cash, in addition to stock, for its share in the merged company.

Disney last year had previously been reported to be exploring a potential sale and other options for its assets in India - a market that despite having a massive population, has not materialized in growth for the company.

One aspect that has hurt its growth there is the loss of Indian Premier League (IPL) cricket rights for streaming. Cricket is a massive sport in India and Disney held TV and digital rights for IPL when it first acquired the business nearly five years ago. However, as the cost of sports rights climbed, the company wasn’t willing to dish out top dollar to retain them in a market where it derives less revenue per subscriber compared to other areas. In June 2022, Viacom18 outbid Disney, paying a reported $2.63 billion for a five-year deal for IPL regional digital rights. Although Disney still spent around a reported $3 billion to retain IPL broadcast rights, the loss of the popular sport hurt Disney’s streaming subscriber growth in India.  

Once Disney failed to renew IPL rights starting in 2023 it saw Disney+ Hotstar subscribers drop drastically. That includes losing 4.6 million in the first three months of 2023, followed by a whopping 12.5 million in the quarter ending July 1. Disney had warned investors about subscriber losses for Hotstar as the company looked to pivot away from low-margin subscribers.

It then lost another 2.8 million, and as of September 30, Disney+ Hotstar had around 37.6 million subscribers. That represents a 7% decline over the previous sequential quarter and nearly 40% drop (or almost 24 million fewer subscribers) from the 61.3 million subscribers the service had a year prior as of October 1, 2022.  

As Disney continued to shed subscribers in India it looked to shift strategy away from users that don’t drive as much revenue, with streaming services in India unable to command as high of prices as they can in certain other markets. And as its base dwindled, Disney has struggled to monetize the paid subscribers in India it has left. At the end of Disney’s fiscal year 2023, Disney+ Hotstar average monthly revenue per paid subscriber (ARPU) for the full year was down 25% to just $0.66, which the company attributed to lower advertising revenue. That compares to fiscal 2023 full year domestic and international (excluding Hotstar) Disney+ monthly ARPU of $6.97 and $5.93, respectively.

In the final quarter of Disney’s financial 2023, ending September 30, Disney+ Hostar monthly ARPU did rise 19% thanks to higher advertising revenue and a lower mix of wholesale subscribers, but was still just $0.70.