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Can Disney+ Really Blow Netflix Away in This Critical Market?

By Harsh Chauhan - Apr 17, 2020 at 8:33AM

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A closer look at the battle between Disney and Netflix in India's streaming market shows one has an advantage.

Disney (DIS 6.96%) caused quite a flutter last week when it revealed that it's streaming service Disney+ had clocked 8 million new subscribers within days of its launch in India. The streaming service officially launched on April 3, and it took less than 10 days for the service to reach that mark in India.

At first glance, this looks extremely impressive. Disney+ rival Netflix (NFLX 1.88%) reportedly had 1.2 million subscribers in India in March 2019, taking over three years to breach the 1 million mark since its launch in January 2016. Now granted, comparing the initial growth of Disney+ to Netflix isn't exactly an apples-to-apples comparison as the former had a few solid advantages during launch. But the bad news for Netflix is that Disney+ can build upon those advantages and score more subscribers in the long run. Let's see why. 

Person streaming video on a mobile phone.

Image source: Getty Images

Disney+ is riding on Hotstar's impressive base

When Disney paid $71 billion to buy Twenty-First Century Fox last year, the company also got Indian television network Star as a part of the deal. As a result, Star's online video streaming service -- Hotstar -- also fell into Disney's lap.

Hotstar was already a popular streaming service in India with a monthly active user base of 300 million. This gave Disney+ a massive pool of users to tap into once it decided to offer the new streaming service as a bundle. But Hotstar never revealed the actual number of paying users.

So, it is difficult to judge how many additional subscribers the launch of Disney+ has brought into the company's fold, as existing Hotstar subscribers have been upgraded to the new Disney+ Hotstar bundle. What's more, Hotstar has been present in India since early 2015, so it is likely to have more subscribers than Netflix as it had first-mover advantage and more time to accumulate them. At the same time, a Hotstar subscription was much cheaper than a Netflix subscription, giving the former a big advantage in a price-sensitive market.

Additionally, the fact that India enforced a COVID-19 lockdown on March 25 may have helped Disney acquire more users. Indians are reportedly spending 12% more time streaming online video content in India during the lockdown phase, according to a report by the Broadcast Audience Research Council (BARC). The novelty factor of the Disney+Hotstar bundle may have given Disney an upper hand during this time as it gave users access to new streaming content.   

However, the new Disney+ Hotstar bundle has been launched at a higher price point. Will this play in Netflix's favor in India -- a market where the company aims to hit 100 million subscribers in the long run?

Can Netflix fight back?

The basic Hotstar annual plan that was priced at 365 rupees a month earlier has now been hiked to 399 rupees (around $5.25) a month. The premium plan now costs 1,499 rupees (roughly $19.70) a year as compared to 999 rupees earlier.

Netflix's basic mobile-only plan in India costs 199 rupees (roughly $2.60) a month. The streaming specialist does not have any annual plans for the Indian market, so its basic plan will set a subscriber back 2,388 rupees (just over $31) for an entire year. That compares unfavorably to the Disney+ Hotstar premium plan.

This is probably the reason why Netflix has seen a drop in in-app spending in India of late. According to app research firm Apptopia, Netflix's in-app revenue on app stores in India fell by a third over a one-month period that began on March 13 and ended on April 12. The in-app revenue of the Disney+ Hotstar app jumped nearly 90% over the same period.

This indicates that the value proposition offered by Disney+ in India is helping it win more subscribers. That's not surprising as the Disney+ Hotstar premium subscription gives users access to original content, new Indian movies, latest episodes of both Indian and American shows, sports, live news, and a host of popular movies from Pixar, Marvel, Star Wars, and Disney itself.

As someone who subscribes to both platforms, I can attest to the advantage that Disney+ Hotstar has over Netflix in India because of a wider content variety. Also, Disney+ Hotstar could be a better bet for anyone looking to cut the cord thanks to its live TV offerings. Add a cheaper price point to the equation and it is easy to see why Disney+ is gaining over Netflix -- a trend that may continue in the future.

Harsh Chauhan has no position in any of the stocks mentioned. 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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