"Where do we watch Succession now?" First the IPL and now HBO, it's clear that Disney is going to going to lose Hotstar subscribers in India. This is intentional. It's a story about activist investors, a new-old CEO, how Hotstar is essentially cable TV and a myth of bundling.

First, you need to understand what Disney the company is going through right now. On the left is Bob Iger, who served as Disney CEO from 2005 to 2020, widely considered as one of the company's most successful leaders. On the right is his namesake, Bob Chapek, who succeeded him.

Chapek took over as CEO at the worst possible time — in February 2020, one month before the coronavirus hit the world. Many companies thrived during the pandemic. Not Disney. That's because Covid shut down one of Disney's most lucrative revenue streams. Theme parks.

Faced with growing losses, the new CEO, Bob Chapek made an ambitious bet. He chose to focus on streaming. Specifically Disney Plus.

In 18 months, the bet paid off. By August 2022, Disney+ crossed Netflix in paid subscribers.

But all this came at a huge cost, and Disney's profits started to narrow and its expenses grew and grew. And all this time, Disney and Chapek were telling investors, "Forget that, just look at our subscriber numbers". But investors weren't buying the subscriber numbers story.

One reason why investors were sceptical about subscribers is actually very simple. It's in two tables. On the left -> Disney's paid subscribers On the right -> Disney's average revenue per subscriber Just look at the highlighted number. That's Disney+Hotstar.

You know what this does? It makes Hotstar look exactly like cable television. Like I wrote last year.

Sidenote : If you want to understand more about this, I *highly* recommend reading this phenomenal thread by the excellent @gauravsabnis who breaks this down.

Anyway, so back to Disney. By 2023, the situation got so dire that it got the attention of an activist investor named Nelson Peltz, who started buying millions of dollars worth of Disney shares so he could get himself a board seat. And people were saying it was a great idea.

Faced with the situation going out of control, Disney's board did the unthinkable in November 2022. It fired its CEO, Bob Chapek. And brought back the 71 year old Bob Iger, out of semi-retirement. "Maybe the old hand on the tiller is what's required," said one analyst.

One of the first things that Iger did when he came back was he cut cut cut everything. He announced cost cuts of $5.5 billion, and laid-off 7000 employees. And the markets loved it. All of this culminated on Feb 9th, when he led Disney's first earnings call after his return

In a departure from history, he announced that Disney would no longer provide guidance on subscriber numbers. And then he said something fascinating that revealed a lot about Disney's bundling strategy.

Which brings us, finally, to Hotstar. What makes Hotstar unique is that it's the only OTT platform that deliberately chose a bundle that was closely aligned with India's consumer pyramid.

If you want to understand more about the pyramid of online shoppers, I wrote about it two years back. It's the most popular edition of The Nutgraf, and I have referenced it multiple times to show India's consumer market is smaller than what it appears.

Consider the facts. Disney had killed the content for India's California users i.e HBO. Disney killed content for India's middle users i.e IPL. Expensive content. But as you can see it all makes sense for Disney.

What happens now? Will HBO's new streaming service take away India's California users? Unlikely. And that's because of a common misunderstanding of how bundling works.

For this, you must read @shishirmehrotra 's phenomenal piece "The Four Myths of Bundling". Essentially, he argues that the best bundles are those that combine different things. This is counterintuitive, because we think that bundles work when the products in them are similar.

Here's @shishirmehrotra making his point about this specific myth.

Now go back to Hotstar. Go back and see how they had the greatest bundle of them all. None of these had anything in common. If anything it maximises casualfan overlap and minimises superfan overlap. Very simply, every subscriber got some value from Hotstar.

And look at the ARPUs that Hotstar made in India, with the so-called "dream bundle". Again, and I can't stress this enough, this includes advertising revenue.

Oh, and Disney's activist investors, guess what happened when they found out about Iger's new-found path to choose profitability and to cut down content costs. Well...

And that's why, very simply... Hotstar must die for Disney+ to live. That's what I wrote about today in The Nutgraf, India's leading business newsletter. Every week, I tell one story about connections and consequences.

@peegeekay Maybe you are trying to say Monthly Subscription cost and not annual. What advert revenue are you talking about. Disney+ do not show any advert either overseas or India except a new low priced Subscription that is much cheaper than normal Subscription cost.

@anuragjain25 Yes correct this is monthly my bad. Everyone sees ads on Hotstar, esp for live events.

@peegeekay Annual subscription is $1 in India?

@peegeekay Soooo… bit torrent???