Why would Disney losing the streaming rights to cricket in India be described by the media as a ‘ticking time bomb‘ for Disney stock?

The Indian Premier League is massively popular in India — on par with the NFL in the U.S. And Disney has had the streaming rights for the past few years via the Hotstar bundle. In fact, many Disney+ subscribers in India subscribe just for sports, and analysts are predicting that they’ll unsubscribe should Disney lose the IPL streaming rights.

And they did.

Disney reportedly passed on renewing IPL streaming rights — losing them to Viacom — but still retained broadcast TV rights. Insiders believe that Disney passed because Disney+ subscribers in India don’t have the ARPU (Average Revenue Per User ) of subscribers in other countries because Disney+ is so cheap in India.

From TechCrunch…

Disney, which through its subsidiary Star India held the previous five-year media rights for IPL, has seen the sporting event help its streaming service Hotstar attract tens of millions of subscribers and break several global streaming records.

Some analysts, however, had recommended the firm to drop out of the bidding because Indian subscribers don’t bring much revenue to Disney, making it difficult to justify the high price tag for the rights.

“I would like nothing better than if they didn’t get the IPL rights and walked back their subscriber number,” Michael Nathanson, a senior media analyst at MoffettNathanson, told WSJ earlier this month. “It would indicate a focus on financial discipline and return on capital.”

However, much of Disney’s stock value has been tied to its overall Disney+ subscriber numbers, regardless of how much revenue each subscriber actually brings.

Variety speculated that losing IPL on Hotstar could trigger a mass exodus of Indian sports fans, and that Disney could see a scenario similar to Netflix’s catastrophic subscriber drop.

By folding Hotstar into Disney+ and then being able to claim total Disney+ subscribers as the larger figure, Disney succumbed to the pressure of demonstrating that its streaming service could be competitive with Netflix.

But Disney content is not the core driver for Hotstar subscriptions. That would be the streaming rights for the Indian Premier League, the massively popular domestic cricket league. For a U.S. equivalent, imagine if Hulu held exclusive NFL streaming rights for all games.

More Blood from Fewer Stones?

It remains to be seen if Disney stock will take another hit by losing IPL streaming rights. Perhaps in the short-term it will. But just like its theme parks, Disney+ seems to be honing on in customers who have a higher ARPU.

[Source: Variety, TechCrunch]