Coronavirus Impact: How film acquisitions will drive subscription for video OTT platforms

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Published: July 3, 2020 9:59 AM

Disney+Hotstar recently launched a new tab ‘Multiplex’ on its app which will premiere Bollywood movies

According to industry sources, Disney+Hotstar bought Akshay Kumar’s Laxmmi Bomb for roughly about Rs 150 crore.According to industry sources, Disney+Hotstar bought Akshay Kumar’s Laxmmi Bomb for roughly about Rs 150 crore.

At a time when production of shows have been halted video streaming platforms have upped its ante when it comes to the acquisition of films. With most of the films being premiered behind a paywall – the aim of these acquisitions is essentially to drive subscription revenue. As per a senior industry leader, this is the best time for platforms to build a subscription business and for that, they need a strong library of content. “The recovery of the cost of acquisition will solely depend on the platform’s ability to drive incremental paid subscription,” he added. A move started by Amazon Prime Video and ZEE5 has now turned into a full-blown segment as Disney+Hotstar on Monday announced that it will launch a new tab ‘Multiplex’ on its app which will premiere Bollywood movies. “We announced the launch of Disney+ Hotstar Multiplex with the intent to change the way Indians watch and enjoy Bollywood movies. By releasing some of the biggest Bollywood movies directly on the platform, we are creating a network of virtual theatres across hundreds of millions of smartphones across the country, giving people the choice and convenience to catch these movies ‘first-day first show’,” Disney+Hotstar spokesperson, said in an email statement.

According to industry sources, Disney+Hotstar bought Akshay Kumar’s Laxmmi Bomb for roughly about Rs 150 crore. On average, the cost of acquisition for seven movies bought by the platform amounts to somewhere between Rs 500 crore – Rs 600 crore. Usually broadcasters tend to acquire both digital as well as TV telecast rights. Depending on the number of years the digital rights have been bought for the movies, the cost will be staggered over those many years on the platform’s financials. For instance, if the telecast rights have been acquired for five years – then Star India will pay that fee in a staggered manner over those many years. “We have partnered with the best directors and most talented actors and we feel that our initiative of launching Disney+ Hotstar Multiplex will dramatically increase the number of movies being made, giving cinema-lovers more films to enjoy and the creative community more films to make.” Disney+Hotstar spokesperson added.

At present, the cost of Disney+Hotstar VIP’s annual subscription is Rs 399. Taking 1.5 million new subscribers on an average, the platform will manage to earn Rs 59.8 crore this year. While, in the international market, the content will be available through Disney+Hotstar platform which is available to subscribers for $7 per month. Hence, if through the new content if the platform manages to bring on board one lakh subscribers, they will make Rs 62.1 crore. Hence, with the new deal and keeping in mind the fact that the platform adds 1.5 million subscribers in India and one lakh subscribers from the international market, Disney+Hotstar is looking at approximately Rs 121.9 crore worth of paid subscription money, which will cover the amortization of the first year. Hence, the platform will cover 24% of its acquisition cost in the first year itself. “Disney+Hotstar is leveraging its financial muscle to take advantage of the situation thereby creating a win-win deal for itself,” Ajay Trigunayat, founder and director, AQT Network, stated.

Industry experts believe that as viewers are starved of fresh content as well as theatre experience, the release of new movies on these platforms will pave way for a horde of new subscribers. Additionally, this move might propel a new revenue stream for OTT besides their annual and monthly subscription plans. “Since people have not watched new movies for a long time, this move could result in an increase in subscriptions and might also bring forth a new pay-per-view revenue model for platforms,” Ashish Pherwani, partner, media and entertainment, EY, said.

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