MUMBAI: “At Linear Networks, we expect that first quarter operating income will decrease by nearly $500 million versus the prior year, reflecting factors including higher contractual sports rights costs for college football and the NFL, timing of cricket expenses at Star India…” That was Christine McCarthy chief financial officer at The Walt Disney Company on an investors’ call on Wednesday.
As for the reference to “timing of cricket expenses at Star India”, it is worth examining said cricket expenses.
Before getting into that, it bears noting that Disney’s financial accounting year is from October 1 to September 30. Therefore, the period Ms McCarthy is referring to is October 1 to December 31 2021.
Now for the expenses. First off there would be the $400 million that constitutes Star’s media rights payout to the ICC as host broadcaster of the T20 World Cup 2021, which kicked off 17 October and concludes on Sunday, 17 November. SportzPower is sticking with its earlier assessment that India being locked out of the mega-event’s knock-outs, puts the losses that Star will perforce incur at Rs 100 cr ($13.43m) MINIMUM.
The question could be asked here that if less than 5% inventory was left over by the network for “last-minute” spot buys, where is the question of a Rs 100 cr loss? A valid point no doubt, but as SportzPower noted earlier, there is no getting away from the reality that advertisers who paid top dollar will now demand compensation for the ratings tumble that followed India’s flop show at the World Cup. And since there are India series back to back coming up immediately after the World T20 is done and dusted, Disney-Star will have no option but to compensate. Or else? The advertisers will play hardball, especially as New Zealand and South Africa will be visiting back-to-back immediately after the T20 World Cup is done and dusted. And seeing as the reality is that the advertiser pool on big ticket cricket is extremely narrow, the option of the network “standing its ground” pretty much rules itself out.
The New Zealand tour involves 3 T20Is and 2 Tests. After that the Proteas land in India for a 3-Test series, two of which will happen in the second half of December, while the third is scheduled to run from January 3-7 2022.
Translated, this means that in the first quarter of Disney’s 2022-2023 fiscal, aside from the T20 World Cup, there are 7 international cricket fixtures that will be included for making P&L calculations. Star’s payout to Disney for each international played in the 2021-22 season is a massive Rs 77.4 cr ($10.4m). As noted earlier on SportzPower, Star’s payout in the previous season was at Rs 42 cr per international. So not only is there a massive jump in the service commitment, but compensatory ad spots for the “losses accrued” from the World Cup will have to be factored in to Disney-Star India’s accounting.
Turbulent times for India’s largest broadcast network.
FOOTNOTE: Disney’s avowed focus going forward is its direct-to-consumer business. The numbers reported from India on Disney+ Hotstar do NOT make for happy reading. Ms McCarthy again from the same investors’ call: “Subscribers across our domestic and core international markets, excluding Disney+ Hotstar, grew by almost 4 million from Q3 to Q4. Disney+ Hotstar subs decreased versus the prior quarter and accounted for about 37% of our total Disney+ paid subscriber base as of the end of the fourth quarter. Disney+’s global ARPU in the fourth quarter was $4.12. Excluding Disney+ Hotstar, it was $6.24 or an increase of about $0.12 versus third quarter, continuing to benefit from recent price increases.”
As an article in New York Times made note of while analysing the financials presented by The House of Mouse during its investors’ call: “Disney+ needs to get hot again.” This applies even more so to Disney+ Hotstar wethinks.
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