The Walt Disney Company is expecting International Cricket Council (ICC) digital rights, which is held by Disney+ Hotstar, to cuase losses in its streaming business in Q3.
“We are forecasting a loss for entertainment direct to consumer (DTC) in the third quarter, the vast majority of which is due to Disney+ Hotstar’s ICC cricket rights,” Walt Disney CFO Hugh Johnston told analysts during the earnings call for the March quarter.
He added Disney+’s core subscriber growth is not expected to be significant in Q3, but sub-growth is anticipated to return in Q4.
Johnston further added that Disney is expecting to incur linear ICC rights expense at Star India in Q3.
Star India, the parent company of Disney+ Hotstar, has invested $3 billion in acquiring the ICC media rights until 2027. The value of ICC TV and digital rights is split almost equally.
Walt Disney’s streaming entertainment services, comprising Disney+ and Hulu, recorded a maiden profit of $47 million in Q2. The company’s sports streaming service, comprising ESPN+, reported a $65 million operating loss.
The aggregate operating loss from the streaming portfolio including entertainment and sports stood at $18 million during the quarter.
“And while we are anticipating a softer third quarter, due in large part to the seasonality of our India sports offerings, we fully expect streaming to be a growth driver for the company in the future and we have prioritized the steps necessary to achieve this,” said Bob Iger, Walt Disney CEO.
Sports operating income declined from $794 million last year to $778 million this quarter. Star India’s loss in the sports segments reduced by 73% from $99 million in the second quarter last fiscal to $27 million this fiscal. This is due to lower programming and production costs attributable to the non-renewal of Board of Control for Cricket in India rights, partially offset by an increase in costs for Indian Premier League matches due to more matches aired in the current quarter compared to the prior-year quarter.
Meanwhile, Disney+Hotstar’s paid subscribers have also declined from 38.3 million in Q1 to 36 million in Q2. The Average Monthly Revenue Per Paid Subscriber has also declined from $1.28 to $0.70 due to lower advertising revenue. International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.91 to $6.66.
