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Business News/ Companies / News/  Why Disney ended a content deal with HBO

Why Disney ended a content deal with HBO

The two entertainment giants’ inability to agree on the value of the content was the primary hurdle to reaching a deal despite several rounds of negotiations

In line with Disney’s plan to enhance profitability under CEO Bob Iger, the company decided against renewing the deal. (Photo: Reuters)Premium
In line with Disney’s plan to enhance profitability under CEO Bob Iger, the company decided against renewing the deal. (Photo: Reuters)

Disney Star, the Indian unit of the Walt Disney Co., has decided against extending its longstanding content deal with Warner Bros. Discovery, resulting in the removal of 144 HBO Originals, including popular series like Game of Thrones, House of the Dragons, The Last of Us, and Succession, from Disney+Hotstar on 31 March.

The two entertainment giants’ inability to agree on the value of the content was the primary hurdle to reaching a deal despite several rounds of negotiations, three people familiar with the development said, requesting anonymity. The point of contention was HBO’s $10 million a year asking price for a five-year deal, with Disney+Hotstar reportedly deeming it to offer insufficient value.

In December 2015, Star India (later acquired by the Walt Disney Co. as part of its acquisition of Rupert Murdoch-owned Fox’s entertainment assets) entered into a programming deal with the then Time Warner-owned HBO (now owned by Warner Bros. Discovery) for exclusive rights of the HBO content. The deal was later renewed for five years for $10 million a year till 31 March 2023.

“There were three rounds of talks in the last six months, where Warner Bros. Discovery officials told they were keen on continuing with Disney+Hotstar as the preferred destination for HBO Originals. They also informed Disney Star that while there are other OTT players, who were keen on streaming HBO content, they would rather continue their longstanding association," a person with direct knowledge of the development said.

However, in line with Disney’s plan to “enhance profitability" under CEO Bob Iger, the company decided against renewing the deal.

“There were less than 480,000 subscribers watching HBO content on Disney+Hotstar," said a company executive, requesting anonymity. “Even at the same price, Disney+Hotstar would have to pay 80 crore per year for the content, which was watched by a small audience. And even if they all pay for the top package, which is 1,499 annually, the revenue is less than the asking price."

He further said that the overall watch time of HBO content per user was also less than 1/5th of the other Disney+ content, which includes films and originals of the Marvel Studio, Pixar, Disney Animation and Lucasfilm (Star Wars franchise).

Both Disney Star and Warner Bros. Discovery declined to comment on Mint’s queries.

Earlier this month, in a social media post, Disney+Hotstar informed its users that the HBO content would move out of the platform. “Starting 31 March, HBO content will be unavailable on Disney+ Hotstar. You can continue enjoying Disney+ Hotstar’s vast library of content spanning over 100,000 hours of TV Shows and Movies in 10 languages and coverage of major global sporting events."

This made a lot of users demand a refund from the streaming platform on social media, and many industry pundits said the move would result in Disney+Hotstar losing subscribers.

The company, however, is not perturbed as it is gearing towards a path to profitability for its direct-to-consumer business. Last month, in an investor call, Iger announced a company-wide restructuring aimed at $5.5 billion in cost savings, including $3 billion in content cost (non-sports). The move also resulted in the firing of 7,000 employees globally.

In October-December 2022, Disney+Hotstar reported a 6% drop in its paid subscriber base to 57.5 million, down from 61.3 million. While the company had given a guidance of drop as it lost the digital rights of the Indian Premier League (IPL) to rival Viacom18, the company executive cited above said that the drop was mainly in countries where existing Hotstar subscribers moved to Disney+ service.

“In India, the numbers have remained stable, and we are witnessing a move from sports viewership to general entertainment viewership. Earlier, a major chunk of subscribers used to watch sports content only, but in the last 18 months, amongst the new subscribers, there has been a strong pivot towards entertainment-oriented content, backed by Hotstar originals as well as catch-up TV content," the person said.

While India is the primary market for Hotstar, it is also available in select Southeast Asian countries, including Thailand, Indonesia, and Malaysia. In the US, its content is available on Hulu.

In India, the company offers multiple subscription plans—two mobile plans (ad-supported) for 149 (three months) and 499 (annual), a Super ad-supported plan ( 899 per year) and premium ad-free plans— 299 (monthly) and 1,499 (annual).

A senior executive at a rival streaming service said that Warner Bros. Discovery is in talks with almost every OTT service in India, as it has no plan to launch on its own in India. “After it was acquired by Discovery, HBO didn’t have a direct-to-consumer strategy in India, so they are talking to many OTT players. Last year, they licenced some shows to Amazon Prime, but they also don’t want the entire catalogue. The issue is perception and pricing. While HBO content is good for the perception of a premium OTT, it is also a loss leader. If I can’t price the service at a premium, say 5,000 annually, it won’t make business sense," he said.

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Gaurav Laghate
Gaurav Laghate is the chief of Mint's Consumer Bureau that covers FMCG, consumer durables, retail, media, advertising, hospitality, luxury and the business of sports. An accomplished business journalist with a career spanning over 15 years, he has reported on the significant advancements in the media and entertainment industry, as well as the business of sports. Beyond his role as a journalist, Gaurav is recognised as a steadfast observer of the media landscape, having spoken at several industry events and panels.
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Published: 15 Mar 2023, 10:22 PM IST
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