“We are forecasting a loss for entertainment direct to consumer (DTC) in the third quarter, the vast majority of which is due to Disney+ Hotstar’s ICC cricket rights,” Walt Disney CFO Hugh Johnston told analysts during the earnings call for the March quarter.
He added Disney+’s core subscriber growth is not expected to be significant in Q3, but sub-growth is anticipated to return in Q4.
Walt Disney’s streaming entertainment services, comprising Disney+ and Hulu, recorded a maiden profit of $47 million in Q2. The company’s sports streaming service, comprising ESPN+, reported a $65 million operating loss.
The aggregate operating loss from the streaming portfolio including entertainment and sports stood at $18 million during the quarter.
Walt Disney CEO Bob Iger, who was brought back in November 2022 to shepherd the company out of difficulty, said the company expects a weaker Q3, owing in large part to the seasonality of Indian sports rights.”We fully expect streaming to be a growth driver for the company in the future, and we have prioritised the steps necessary to achieve this,” he noted.Star India, which is the parent company of Disney+ Hotstar, has paid $3 billion for the ICC media rights until 2027. The value of ICC TV and digital rights is split almost equally.
The ICC TV rights for the 2023-27 cycle were sublicensed to Zee Entertainment by Star India. However, the failure of the merger deal with Sony Pictures Networks India forced Zee to back out of the expensive cricket rights deal.
Star has initiated arbitration proceedings against Zee with the London Court of International Arbitration for failing to fulfil the ICC TV rights agreement.
Zee has contested Star’s charges of breach of contract, claiming that the agreement is null and void.