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Disney+ Has a Secret Weapon in India

By Danny Vena – Feb 10, 2020 at 8:55AM

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The company already has a back door into hundreds of millions of homes in India.

For many companies, India is the holy grail when it comes to business potential, falling just behind China as one of the world's most populous countries. With more than 1.3 billion people, it also represents one of the largest untapped markets, and businesses are scrambling to tap into this large and growing opportunity.

Disney (DIS -2.78%) has only just entered the streaming wars with the debut of Disney+ in November, but it recently showed its hand. During its first-quarter conference call, CEO Bob Iger said the House of Mouse will be launching its streaming service in India much earlier than initially expected. While it was previously scheduled for the second half of the year, Disney+ will now debut in India on March 29.

Even as competitors work to gain momentum in India, Disney has a secret weapon its rivals simply can't match that will give Disney+ a massive advantage in the market.

A man in an armor suit holding a gun while taking fire and hiding behind a concrete wall

Pedro Pascal in a scene from the Disney+ original series The Mandalorian. Image source: Disney.

When you wish upon a Star

While it may not be a household name in the U.S., you'd be hard-pressed to find anyone in India who hasn't heard of Star India, a company Disney acquired with the assets of 20th Century Fox. The media conglomerate has a network of 61 channels that are broadcast in nine different languages and reach nine out of 10 households in India. In addition to its TV and Bollywood film production and distribution assets, Star has the broadcast rights to the most popular cricket tournament -- the Indian Premiere League Finals -- which was watched by 411 million people last year. Star India is also the proud owner of Hotstar, the largest streaming platform in India.

Hotstar has close to 400 million monthly active users, and many of them view the free, ad-supported content. The platform also has two subscription tiers, Hotstar VIP, which offers original programming and some sports, and Premium, which boasts premium English-language content and live sports, in addition to everything from the VIP package. The VIP tier is priced at 365 rupees per year (about $5.10 at current exchange rates) while Hotstar Premium costs 999 rupees ($13.97). Analysts estimate that Hotstar has between 4 million and 5 million VIP subscribers and about 2 million in the Premium tier. 

Betting on the hometown favorite

Iger said Disney plans to rebrand the VIP and Premium tiers as Disney+ Hotstar, and while the company isn't providing pricing details at this point, the service will offer "two primary products" to customers in India:

One will be more premium in nature that will include the entire library of original [Disney] programming, and the other one will be more basic that will have the library and not the original programming, priced for the market and launched at a very peak period in time for the IPL [Indian Premiere League] Cricket.

Iger went on the say that Disney sees this as "an opportune moment" that capitalizes on Hotstar's place in the market, with millions of its own subscribers, while also tapping into the wild popularity of cricket, the most popular sport in India. Additionally, customers are already comfortable with the existing interface and billing technology. Disney sees this as a trifecta that will allow Disney+ to launch "under very, very optimal circumstances" and potentially result in millions of new subscribers.

Two cricket players on the field during a game

Faf du Plessis of Chennai Super Kings stumped by Quinton de Kock of Mumbai Indians during the IPL 2019 finals. Image source: Indian Premiere League.

Disney isn't alone

Streaming video is just getting started, and the biggest players are making moves to secure a foothold in the Indian market. Netflix (NFLX -3.25%) CEO Reed Hastings has previously acknowledged the enormous opportunity in India, pointing to the country's "phenomenal" growth in internet connectivity and increasing adoption: "Given the consumer base, the next 100 million [subscribers] for us is coming from India." 

To address that opportunity, the streaming pioneer is planning to spend $420 million on original local language content. Netflix went even further last year, introducing a number of new pricing plans. The first was a mobile-only streaming plan for 199 rupees per month ($2.78), and later offering three-month, six-month, and 12-month plans with discounts of 20%, 30%, and 50%, respectively, off its regular subscription price.

Netflix doesn't break out subscribers by individual country, but estimates place its Indian subscriber base between 1 million and 1.2 million early last year, while local revenue grew by more than 700% to about $65 million between 2018 and 2019. With the mobile-only plan and additional pricing options, the subscriber numbers are likely significantly higher by now.

The battle is just beginning

Disney has already proven the value of bundling. In conjunction with the debut of Disney+, the company announced that it would offer U.S. subscribers a package that included Disney+, Hulu's ad-supported tier, and ESPN+ for $12.99 per month, a $5 discount off the regular price. Hulu and ESPN+ have quickly added nearly 2 million and 4 million new subscribers, respectively, in the three months since Disney+ launched, and many of those additions can be chalked up to bundling.

The House of Mouse is planning to use the same strategy in India, something its rivals simply can't do. This will give Disney+ a distinct advantage as it establishes a foothold in the country, and that should help this blue-chip stock keep gaining ground.

Danny Vena owns shares of Netflix and Walt Disney and has the following options: long January 2021 $85 calls on Walt Disney. The Motley Fool owns shares of and recommends Netflix and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short April 2020 $135 calls on Walt Disney. The Motley Fool has a disclosure policy.

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