Business Model: How Does Disney+ Hotstar Make Money?

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Imagine – It’s a lazy Saturday evening, and you’re lounging on your sofa, scrolling through your phone, trying to find something to watch. You’ve already binged through all your favorite TV shows and movies, and you are in desperate need of something new to keep you entertained.

Suddenly, you come across an ad for Disney+ Hotstar, a streaming platform that promises to offer an extensive collection of movies, TV shows, and live sports events. Intrigued, you decide to give it a try and get convinced that you signed up for a subscription.

As you start exploring the platform, you find yourself transported to a world of wonder, filled with endless possibilities of entertainment. From classic movies to the latest Hollywood blockbusters, from popular TV shows to live sports events, there is something or other to watch. 

But what sets Disney+ Hotstar apart from other streaming OTT platforms is its focus on original content. You find yourself hooked on gripping TV shows and movies that you never knew existed, with intriguing storylines and relatable characters that keep you coming back for more.

And as you continue to explore, you realize that the Disney+ Hotstar business model is built on a foundation of original content. By investing in creating high-quality TV shows and movies, the platform is able to attract and retain subscribers who are willing to pay for exclusive content.

Now that we understand a bit about the OTT platform business model, let’s take a closer look at how the Disney+Hotstar earns money and what are the primary revenue sources for the platform.

What Is Disney+ Hotstar?

Disney+ Hotstar is a subscription-based streaming service that offers a diverse selection of movies, TV  programs, and live sports events across the globe. It is a joint venture between the Walt Disney Company and Star India, which was acquired by Disney in 2019. 

Since its launch in India in 2015, the platform has gained a massive user base due to its extensive content library and attractive pricing strategy. In addition to this, Disney+ Hotstar is known for its user-friendly interface, which makes it easy for users to navigate through its offerings. 

Apart from this, the platform allows users to customize their viewing experience by creating watchlists, downloading content for offline viewing, and setting up profiles for multiple users. All in all, with its seamless user experience and extensive content offerings, Disney+ Hotstar has become a go-to streaming platform for millions of users across the globe.

The Vital Need For Original Content In 2023 

As stated in the preceding sections, a number of OTT platforms have been significantly investing in producing original TV shows and movies, which is assisting them in differentiating themselves from competitors and attracting more loyal subscribers. 

Indeed, Disney+ Hotstar has produced several popular shows in the past, which have been well-received by audiences and have helped to increase the platform’s subscriber base. According to a report by FICCI and EY, the Indian OTT market size is expected to grow to $8.4 billion by 2024, and original content is expected to be a key driver for this growth.

Moreover, original content not only helps to attract and retain subscribers and generate more revenue, but also allows Disney+ Hotstar to have more control over the content. By producing their own shows and movies, they can ensure that the produced content aligns perfectly with their brand values and resonates with their target audience. 

Nevertheless, this can also help to avoid licensing and copyright issues that can arise when acquiring content from external or third-party sources. Thus, the need for original content is vital for any online video streaming platform that is craving for long-term success and growth.

The Rise Of Disney+ Hotstar

Since its collaboration, Disney+ Hotstar has taken the online video streaming industry by storm with its captivating collection of movies, TV shows, and live sports events. The streaming service has managed to win the hearts of millions by providing a vast range of entertainment options that cater to their diverse tastes. 

From popular TV shows to Hollywood hits and from cricket matches to football games, Disney+ Hotstar has something for everyone. One of the key reasons behind the popularity of this platform is its focus on delivering localized content. Yes, you read right. 

The streaming service offers content in several regional languages. This has helped to reach a wider audience and cater to the diverse tastes of viewers. Along with its content library, Disney+ Hotstar has also been able to attract users through its partnerships with telecom operators. 

The OTT streaming service has tied up with several telecom providers to offer bundled subscriptions to users. This has helped Disney+ Hotstar to increase its user base significantly and stay ahead of its competitors in the OTT space.

What Does It Cost To Run Disney+ Hotstar?

The cost of running Disney+ Hotstar depends on various factors such as content licensing agreements, production, infrastructure expenses, R&D expenses, marketing expenses, and other operational costs. Let’s go over each one in detail. 

1. Licensing Cost

The Disney+ Hotstar business model is heavily dependent on its vast collection of licensed content. Acquiring licenses for movies, TV shows, and live sports events involves a high cost for the streaming platform. However, the licensing cost varies depending on the popularity and demand for the content. 

In the case of popular sports events like the Indian Premier League (IPL), the licensing fees can go to hundreds of crores. Despite the high licensing cost, Disney+ Hotstar continues to invest in acquiring new content to provide its subscribers with an unmatched entertainment experience.

2. Production Cost

Apart from licensing fees, Disney+ Hotstar also incurs significant production costs for creating original content. In recent years, the streaming platform has been investing heavily in producing its own original shows & movies. It is worth mentioning that producing original content involves significant expenses related to production, pre & post changes, marketing, distribution, etc.

Despite the high production cost, the Disney+ Hotstar business model has been successful in attracting subscribers who are looking for exclusive content that cannot be found anywhere else. All in all, by producing original content, the platform has been able to differentiate itself from others and is aiming to become a market leader.

3. Marketing Cost

No doubt, marketing is an essential part of any business, and Disney+ Hotstar is no exception. The streaming platform invests heavily in advertising and promotions to attract new subscribers and retain existing ones. This includes expenses related to advertising campaigns, social media promotions, influencer marketing, and other marketing or promotional activities. 

By doing strategic marketing campaigns, Disney+ Hotstar has attained success in reaching out to its target audience. In other words, by investing in marketing, the streaming platform has been able to create brand awareness and establish itself as one of the leading players in the OTT space.

4. Research And Development Cost

Innovation is required to stay ahead in this highly competitive OTT industry, and almost every OTT platform recognizes this fact. That’s the reason Disney+ Hotstar invests heavily in research and development to come up with new features, technologies, and content formats that can enhance and give an immersive user experience. 

As a whole, the research and development cost includes expenses related to hiring OTT app developer skilled professionals, developing new technologies, conducting market research, and testing new features. By putting money into research and development, Disney+ Hotstar has been able to create new revenue streams, improve user engagement, and stay ahead of its rivals. 

5. Technology and Development Cost

We all are aware of the fact that Disney+ Hotstar is a technology-driven platform that is constantly innovating and improving its user experience. The platform tries its best to ensure that the subscribers have a seamless streaming experience. 

The cost includes expenses related to developing and maintaining the platform’s infrastructure, building new features, and upgrading existing ones. In the past too, the investment in technology has paid off, as the platform was able to offer its subscribers a high-quality streaming experience with minimal to no disruptions. Yes, you will agree to this. 

6. General and Administrative Cost

Apart from the above costs, Disney+ Hotstar also incurs general and administrative expenses related to running its day-to-day operations. The cost includes expenses related to salaries and benefits for employees, office rent and utilities, legal and accounting fees, and other miscellaneous expenses. 

These costs are absolutely necessary to keep the business running smoothly and efficiently. By managing these expenses effectively, Disney+ Hotstar has been able to maximize its profitability and earn more money. After all, it is a testament to its strong business model, which has helped it become one of the strong players in the OTT space.

How Does Hotstar Make Money?

Like other OTT streaming services, Disney+ Hotstar makes money primarily through subscriptions, advertisements and partnerships/sponsorships. In fact, data say that subscription fees alone account for over three-quarters of Hotstar’s total revenue.  

Let’s discuss how Hotstar makes money in detail in this section.

1. Subscriptions

So as we have seen, Disney+ Hotstar primarily earns revenue from subscription fees paid by its users. Subscribers pay a fee and gain access to Disney+ Hotstar’s content library, like exclusive and premium shows, movies, and live sports. 

The subscription model is modeled based on a tiered system. Meaning, it offers different plans with many diverse features and pricing that cater to a diverse user base.
For example, Disney+ Hotstar offered three subscription plans (in Q2 2024) — they are mobile (₹499/year), super (₹899/year), and premium (₹1499/year). 

Unlike other monetization models, subscriptions are not just a stable and consistent source of income but also mean recurring commitment from a consumer’s point of view. 

Hotstar will invest this subscription fee to create high-quality original content and acquire exclusive rights to popular shows and other sporting events (like the Indian Premier League).

2. Personalized Advertisements

Hotstar employs personalized ads to add to its existing revenue streams. Just like YouTube, Disney+ Hotstar customizes advertisements to individual user preferences. To achieve this, the streaming service taps into the data-driven insights from video analytics. It helps the platform to increase user engagement and ad effectiveness by multiple times. 

Advertisers thus benefit greatly from targeted campaigns and take their messages to the most relevant audience. 

Hotstar’s extensive user base also plays a major role in targeted ads. As of Q1 2024, the platform has 61.3 million users. This massive user base means advertisers are left with a large, diverse demographic to showcase their products or services. 

This advertising model enables Hotstar to offer a free, ad-supported version of its service while still making a huge amount of money (almost ~1700 crores in 2023) from advertisements alone.

3. Partnerships/Sponsorships with Major Brands

Disney+ Hotstar strikes strategic partnerships with major brands (like Mahindra, and Kingfisher Premium). And this further helps the streaming service diversify its revenue streams. 

For example, during IPL 2023, the Disney-owned streaming service signed partnerships with brands like Dream11, CRED, Swiggy, Zepto, Ather Energy, Parle Agro, Spotify, Livspace, and Spinny to endorse their products along with key features (like Super 4s, Super 6s, Fall of Wickets, key Milestones, etc.).
These collaborations sometimes also involve co-branded content, exclusive premieres, or sponsored events. 

By aligning with reputable brands like these, Hotstar gets better market visibility and credibility, which in turn helps the platform attract both users and advertisers. 

In fact, these partnerships often extend beyond mere financial transactions. They foster synergies that benefit both parties and they go on to work for something big in the future.

And this ability of Disney+ Hotstar to forge meaningful collaborations adds to its brand equity (in the long run) while also contributing to the financial success of the platform (in the short run).

Is Disney+ Hotstar Profitable?

While the exact profitability of Disney+ Hotstar is not publicly disclosed, it is believed to be a major contributor to Disney’s overall profits. The company has reported strong growth in its streaming business, with subscriptions to its services growing significantly in recent years. 

In the fiscal year concluding in September (2023), Walt Disney witnessed a 6% growth in operating profit, reaching $12.8 billion, accompanied by a 7% rise in revenue to $88.8 billion. The streaming segment, encompassing Disney+ Hotstar, notably contributed to this success, with a 12% increase in revenue to $21.9 billion. Impressively, the operating loss for this streaming business decreased by 35%, totaling $2.6 billion. These financial indicators reflect the positive trajectory of Disney’s overall performance, with the streaming sector playing a substantial role in the company’s robust fiscal outcomes.

Wrapping Up 

As you are getting ready to turn off your TV and call it a night, you receive a notification on your smartphone from Disney+ Hotstar. They are promoting a new series or TV show that has been receiving rave reviews, and they are offering a free trial for all their loyal subscribers.

You decide to give it a try, and before you know it, you are hooked. The show is unlike anything you have seen before, with a gripping plot and captivating characters. As you sit and watch the entire series in one sitting, you realize just how invested you have become with Disney+ Hotstar.

And that’s the beauty of Hotstar’s business model or strategy. By investing in original content that captures your attention and keeps you coming back for more, Disney+ Hotstar has built a loyal customer base who are willing to pay for the content.

In simple words, by creating compelling and relatable stories, Disney+ Hotstar has been able to attract and retain subscribers who are willing to pay for exclusive content. This revenue model has proved to be highly profitable, and other OTT streaming platforms are learning from it.

“With the entertainment industry continuing to evolve, it will be exciting to see how Disney+ Hotstar adapts and innovates to stay ahead of the curve.”

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