20 Million Subscribers Lost, Guidance Cut Incoming

By Senad Karaahmetovic

Analysts at Media Partners Asia estimate that Walt Disney (NYSE:) could see as many as 20 million Disney+ subscribers leave the service after the company was outbid for the streaming rights to Indian Premier League cricket games.

The company was outbid by a consortium consisting of  and India’s .

“IPL drives customer acquisition. It’s regarded as entertainment, not just sports by Indian households – women and men,” Vivek Couto, executive director of the research firm, told Bloomberg.

Disney+ potentially losing as many as 20 million subscribers could prevent the entertainment giant from reaching its goal of having 260 million global Disney+ subscribers by 2024. The company’s product Hotstar attracts about 50 million subscribers globally with cricket being the critical part of the expansion.

Still, Disney has managed to retain the rights to show cricket games on traditional TV networks after it agreed to pay almost $3 billion over the next five years.

“We made disciplined bids with a focus on long-term value,” the company said in response to the auction results.

Disney CEO Bob Chapek commented earlier this year that Disney+ won’t “evaporate if we don’t get” the streaming rights.

Barclays analyst Kannan Venkateshwar said the IPL catalyst could offer the company a way to reset its expectations.

“It is important for Disney to use IPL to reset expectations in a more manageable range,” Venkateshwar wrote in a research note.

A guidance cut wouldn’t necessarily impact Disney stock that much, he added, as investors are already pricing in the auction results.

Evercore ISI analyst Vijay Jayant reflected positively on the results.

“With the new aggregate IPL rights renewal expected to be ~2.7x the previous rights deal, Disney was in a position to either pay up with questionable returns on that investment or lose it and have some risk to long-term D+ Hotstar subscriber estimates – a perceived lose-lose situation. We believe Disney keeping the lower-risk and substantially more valuable linear rights demonstrates good financial discipline as it is significantly easier to see a path to making a return on the linear rights, and ~90% of Star’s revenues come from the legacy linear and studio businesses (rather than D+ Hotstar), making the linear rights more important for the company,” Jayant told clients.