By providing free cricket on cellphones, Walt Disney is seeking to turn around the fortunes of its streaming business in India. The company is banking that this move would increase advertising revenue and lessen the effects of a customer exodus.

For the year ending in March 2022, the India streaming business, which by number of subscribers were Disney’s largest worldwide the previous year, reported a loss of $41.5 million on sales of $390 million.

The Burbank-based entertainment giant’s financial performance in the nation is only anticipated to get worse as subscriber exits quicken and reduce the user base by a third between October of last year and July.

Disney’s struggles serve as a warning lesson for the Indian market, where consumers’ extreme cost-consciousness frequently frustrates hopes of a growing middle class.

When the corporation paid $71 billion for some of 21st Century Fox’s global assets in 2019, it also acquired the Indian streaming provider Hotstar. With the Indian Premier League (IPL), the wealthiest cricket league in the world, streaming rights secured, Disney turned cricket on Hotstar into a subscription service in 2020 and said it would attract up to 100 million subscribers within a few years.

However, Indian tycoon Mukesh Ambani stole the IPL’s rights last year with a $2.9 billion offer and subsequently aired matches for free. From 61 million customers in October, only about 21 million remained by July, and Disney subscribers quickly deserted.

According to two Disney sources, Disney internally acknowledges that it underestimated Indians’ willingness to pay – when Hotstar featured the IPL, people signed up, but they didn’t stick around to purchase further premium subscriptions to view other programming.

“We were bullish on Indian subscribers’ propensity to pay. That’s not worked out,” said one of the sources. “Free cricket is the only bullet left.”

With 600 million smartphones in the cricket-crazy nation, the business will stream live matches of the Asia Cup beginning on August 30 and the World Cup in October-November.

The new approach comes as Disney is looking into possibilities such as selling its India business or possibly forming a joint venture.

Disney paid over $3 billion to extend its licence to broadcast events of the International Cricket Council in India from 2024 to 2027. Although it still has digital streaming rights, a source said that last year it paid about $1.5 billion to Indian company Zed Entertainment to licence the TV broadcast rights.

The business has determined that the strategic shift required to stabilise revenues is returning to the free-cricket model on mobile devices and tablets. It describes the move as a new “hybrid model” to increase smartphone viewership and promote advertising revenues while aiming to get new customers for the Hotstar TV app, where cricket will continue to be available only through subscription plans.

Sajith Sivanandan, head of Disney+ Hotstar, said in an interview that this plan is about “how we build a model which will allow us to drive two revenue streams more meaningfully,” and that Disney is sure that its user base will increase in the next years.

A “Festival of Cricket 2023” Disney presentation made for advertisers and viewed by the media claimed that making cricket free on mobile will help “450 million-plus customers to tune in” over 48 days of the 50-over World Cup that is being hosted by India, as opposed to 300 million during the previous World Cup in 2019.

According to the document, the business hopes to break its own record of 50 million concurrent viewers during the World Cup, which would be twice as many as in 2019. Additionally, it will be 56% more than what Ambani’s JioCinema recorded during the IPL finals in May of this year.

According to Sivanandan, the business would target clients with advertising budgets as low as 200,000 rupees ($2,421).

Interactive commercials that link viewers to a brand’s WhatsApp chat so they may buy the merchandise are another innovative strategy.

The Disney paper revealed a new subscription-growth agreement reached with Coca-Cola. Disney hopes 80,000 individuals would use the Hotstar trial offered by the estimated 400 million Coke bottles’ QR codes before upgrading to premium subscriptions.

However, there is no assurance that Disney’s strategy change will be successful.

Free cricket is not a definite thing, according to Daoud Jackson, a senior analyst at the UK research firm Omdia who specialises in the streaming industry. Companies spend billions of dollars for streaming rights, but it takes years for corresponding advertising revenue to show up.

Despite the sizeable middle class in India, the country with the largest population “narrows sharply” when it comes to paying users, according to VC company Blume Ventures in April.

The cost of a monthly membership to the ad-free Disney+ streaming service will increase by 27% to $13.99 in the US. In contrast, the monthly fee of the Disney+ Hotstar service in India is $3.62.

According to Disney’s most recent quarterly earnings report, the average revenue per user (ARPU) for the Disney+ Indian service is incredibly low at just $0.59, as opposed to the $7.31 for the Disney+ U.S. service.

Disney’s leadership on a worldwide scale has pushed India to quicken the “path to profitability” for Hotstar. Nancy Lee, the chief of staff for CEO Bob Iger, visited the nation earlier this year and reportedly asked the country’s business executives whether streaming operations could be viable by the end-2024 global deadline.

She was informed that moving closer to the target would be impossible.

However, research firm Media Partners Asia predicted that by 2027, the Indian streaming business will be worth $7 billion, with competitors including Netflix and Amazon.com’s Prime Video. The conflict between JioCinema and Viacom18’s JioCinema, though, may be the most heated.

Ambani emphasised on the fact that fans could watch matches on their cellphones anywhere and did not need a TV when he advertised the IPL on his streaming apps in March. Disney at the time ran advertisements arguing that cricket was best viewed on television, for which it still owns IPL rights, to combat that.

Disney altered course last week with fresh advertising efforts.”Now watch all matches of the world’s biggest tournaments, anywhere, on your mobile, absolutely free,” it said.

(Adapted from DeccanHerlad.com)