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Welcome to The Impression, your weekly primer on the business of media, entertainment, and content.

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The entertainment industry is still abuzz with speculation over last week’s big news break. The Wall Street Journal reported that Disney is seeking a buyer or partner for its India business. This includes Star India, a sprawling media empire with TV, movies, a streaming service, and more.

Many have dug into why Disney might want to get rid of Star just four years after inheriting it via its 2019 acquisition of 21st Century Fox. One big reason is the decline in Disney+ Hotstar’s fortunes ever since Star lost the streaming rights to the Indian Premier League, which brought in most of the streaming service’s paying customers. Bob Iger, who returned as Disney CEO in November after less than a year in retirement, is also keen to put his house in order rather than worrying about traditionally high-volume/low-profit markets like India.

But what of Disney’s existing business in India? Forget Star India and Hotstar; all’s not well with what Disney India has already.

Digging Under the House of Mouse

Disney has tried to enter India a few times, starting with a joint venture with the KK Modi Group in 1993, which ended 10 years later. In 2006, Disney bought a stake in UTV, the movie and TV studio that Indian entrepreneur Ronnie Screwvala founded in 1990. It began with the acquisition of entertainment channel Hungama TV and ended with Screwvala selling the entire company to The Walt Disney Company (Southeast Asia) in 2012. Then, in 2019, Disney’s acquisition of Rupert Murdoch’s 21st Century Fox kicked in, and Star India became part of the House of Mouse.

But, in the last five years, Disney India (UTV) has had a steady decline in fortunes.

In FY19, UTV had a big jump in net profits. This was for two reasons. One, it deferred tax expenses worth over ₹340 crore (~$41.4 million). Second, it nearly halved its cost of materials consumed: in this case, primarily the cost of producing movies and TV shows. But since then, there has been a steady decline in the size of the business.

In FY18 and FY19, Disney also shut down two UTV subsidiaries. Among them was gaming studio UTV Indiagames, which was best known for its cricket mobile games that were officially licensed by the International Cricket Council and the Indian Premier League. Hotstar was already becoming the number one online destination for sports, and Disney had a cricket gaming arm in the bag already. But it didn’t work out.

In 2015, NDTV reported that the gaming studio was shutting down. Disney had reportedly decided the studio’s revenue projections were unrealistic and that outsourcing game development made more business sense.

The result is clear: since then, UTV’s revenue from the gaming and interactive vertical has dropped to a negligible amount.

But this isn’t just a Disney India problem.

A Shift in Priorities

In the 2010s, Disney struggled to make gaming work. This story in Collider has a timeline of the company’s failed attempts to run Disney Interactive before shutting down parts of the business and exiting in-house game development altogether in 2016.

But gaming wasn’t a particularly big part of the UTV business. Its bread and butter was movies and TV. And Disney took over, only to downsize or shut these down in the next few years.

In 2016, Disney exited the Hindi film production business entirely. It focused on Hollywood film distribution, TV, and licensing and merchandising, The Economic Times had reported then. The Ranbir Kapoor and Katrina Kaif starrer Jagga Jasoos (2017) was UTV Movies’ last Hindi production. As a result, revenue from the movies business fell from ₹337 crore in FY18 to just under ₹20 crore in FY22.

UTV’s television and media segment had been growing before the pandemic, but very slowly. However, once the pandemic hit, the division’s revenues fell by a third to ₹378 crore (it was just a little lesser in FY22). However, it improved its profit margin.

But the writing was soon on the wall. Disney began changing priorities and exiting the linear TV business altogether in Asian markets. In 2021, it shut down 18 TV channels in Hong Kong and Southeast Asia. It also retired the UTV brand of TV channels in India. In March this year, it switched off all its English general entertainment channels (GEC), including Star World. In June, the company closed its six remaining linear TV channels in Southeast Asia, Hong Kong, Taiwan, and Korea, moving all that content to Disney+ instead.

What’s left? Disney has licensed merchandise, part of the Disney Consumer Product business under UTV. But it has grown by just ₹4 crore in five years to ₹14.66 crore in FY22, UTV’s filings show.

The only thing that has ballooned is UTV’s support services business. The division offers financial, admin, and IT-related services to Disney’s group companies in India.

There’s an argument that perhaps Disney just doesn’t get the India market, and was unable to let UTV function in a way that worked for local preferences. Veteran media journalist Vanita Kohli-Khandekar spoke more about it in this episode of The Signal Daily.

But none of this should have mattered, because Disney had acquired Star.

Boarding the ‘Star’-ship

While UTV declined, Star India grew steadily across subscription, advertising, licensing, and the movie distribution businesses, consolidated filings show. Once the pandemic hit, everything took a beating (except subscription). But come FY22, everything is back to 1.6x to 2x of FY18 revenues. Only film distribution is still a fraction of pre-pandemic levels, a problem plaguing the entire movie business, from producers to exhibitors like PVR-Inox.

Meanwhile, Hotstar has grown steadily in India, reaching over ₹3,200 crore (~$390 million) in total revenue and over 40 million subscribers in FY22. That financial year was also its biggest year of growth: advertising revenue doubled, subscriptions grew 1.6x, and even relatively minor licensing revenue increased by a massive 15x.

But despite all these efforts, the business failed to make a profit. In FY21, it had made ₹600 crore (~$73 million) in losses after tax. It managed to nearly halve that to about ₹343 crore (~$41.7 million) in FY22. That was Hotstar’s final year of streaming the IPL, and FY23’s figures will likely look a lot worse. Disney reported it lost four million streaming subscribers globally, largely due to Indian users who abandoned Hotstar after IPL 2022.

Hotstar’s parent could have steadied the ship as its ad and subscription revenues from TV channels improved after the pandemic. But Star made significant losses after tax well before the pandemic. It posted a loss of ₹1,216 crore (~$148.1 million) in FY19 and ₹489 crore (~$60 million) in FY20, the first year after the merger with Disney kicked in.

The Wall Street Journal had reported that Star India is expecting to lose money in Disney’s financial year 2024 (from October 2023 to September 2024) and a 20% drop in revenue in the 12 months ending September 2023. Star aired IPL on television only this year, but a bruising fight for ads with rival Viacom18’s JioCinema meant it lost out on potential revenue, even airing some matches on free-to-air channels.

Meanwhile, Star didn’t seem to have a backup plan for its streaming service Hotstar once the IPL was gone. It did not consolidate on the live sports proposition by investing heavily in other properties, except in cricket. The fiction content pipeline was also a little dry. In this edition of The Intersection, I wrote about Hotstar’s changing priorities from expensive web shows to cheaper, TV-like content that isn’t behind paywall.

JioCinema, meanwhile, was ready with a plan to hold on to viewers it acquired during the IPL season. Since the end of the tournament, it has been releasing a new show or movie every Friday; it also brought premium libraries from HBO and Universal to the platform for ₹999/year.

So, who fumbled the ball? Disney already tore down one business it acquired under Iger’s leadership. UTV is a shadow of its former self, but it shouldn’t have mattered because Fox-Star was supposed to take its place. That, too, could not live up to the demands of the House of Mouse.

Last Scroll Down📲

Cloud, Silver Lining: It’s been a rough couple of years, but India’s media and entertainment industry may still be good to go. It’s expected to grow 9.7% every year to be worth $73.6 billion by 2027, financial consulting firm PwC predicted in a report. This is despite a decline in advertising revenue worldwide because of dropping consumer spending. This week, Sony India reported its net profits grew 11% in FY23, although its advertising revenue fell. Some dealmaking may help these companies boost growth.

Speaking of which, now that Zee’s promoters are banned from holding top management positions in listed companies, Zee Entertainment has set up an “interim” committee to manage affairs. The fate of the Zee-Sony merger, meant to be run by Zee CEO Punit Goenka, still hangs in the balance.

That was fast: Whatever happened to the “Twitter killer”? The number of daily active users on Meta’s Threads, released earlier this month, has halved in just one week. Users are spending a lot less time on the app after the initial frenzy when 100 million people signed up in record time. Research firm Sensor Tower came to the same conclusion: after a golden 72-hour period, active users and time spent have been declining. The Musk vs. Zuckerberg cage match is still very much on. Here’s Musk, tweeting that Zuckerberg “doesn’t seem to care” about Threads because he’s stopped posting on it.

Snip Snip Police: They’re at it again. India wants to independently review all streaming content for “obscenity” before release, government officials told streaming services like Netflix and Disney, according to a Reuters report. The meeting was held last month and the government has proposed an independent panel to remove “unsuitable” content, much like the censor board does for films released in theatres. Platforms are objecting, but the officials have asked them to consider it. In a meeting this week, the minister for information & broadcasting drove home the point again.

Last month, India’s health ministry told streaming services to insert at least 50-second long anti-tobacco warnings at the start and in the middle of any scenes of tobacco consumption. Platforms are challenging the rules.

Rage Against the Machine: Actors have joined the writers’ strike in Hollywood. Last week, the actors’ negotiations with studios fell through over a list of unmet, common demands, including better compensation from streaming and pushback against AI. Variety argued that for the strike to end, studios will need to have a transparent industry standard for measuring viewership on streaming platforms. That data will determine how actors, writers, and other entertainment industry professionals are paid residuals every time their content is streamed. But studios, locked in competition and trying to make streaming profitable, are reluctant to make numbers public.

Trumpet 🎺

There is so much to explain in this one that I’ll just get right to it. American TikTok has discovered an old Japanese live-streaming trend called NPC (non-playing character) streaming. Young women go live on the app, cosplaying as the background character in a video game.

But the attraction (rather, fetish) is that a user sends a virtual gift to the live-streamer, and she responds with a pre-set action, sometimes also acknowledging your gift by calling out your name. So, an ice cream cone gift gets an “Ice cream, yum!” response, while a cowboy hat and moustache gets you a “Hee Haw!”.

This explanation delves a little more into why users enjoy such content. The bottomline: it’s a rush to feel like you’re controlling someone online.

For everybody else, this is a money churner. In just an hour-long livestream, a creator can be bombarded with hundreds of gifts. She keeps the money and the platform gets a cut, all to please some people looking for a reaction to a virtual rose, hat, or ice cream.

How soon before this kind of content becomes popular here? In India, virtual gifts are now everywhere on short-video platforms, from Instagram Reels to YouTube Shorts to homegrown apps like Sharechat’s Moj, in both live streams and regular videos. And if there’s anyone who’s always willing to pay on social media, it’s a man with a fetish.

That’s all this week. If you enjoyed reading The Impression, please share it with your friends, family, and colleagues. And please write to me anytime at [email protected] with thoughts, feedback, criticism or anything you’d like to see discussed in this space. I'd love to hear from you.

Thanks for reading, and see you again next Wednesday!

Note: A previous version of this edition incorrectly stated the price of a JioCinema subscription as ₹999/month. It’s priced at ₹999/year.