1.  Disney’s India Advantage

Disney unveiled some seriously impressive Q4 2021 subscriber numbers this week, particularly when compared with Netflix’s recent anemic numbers. While the 18% year-over-year USCAN (what the cool kids call US-Canada) rise was impressive, the real star of the show was Disney’s India-based Hotstar property, which shot up a full 57% YOY.

India, if you remember, is where the likes of Netflix have been struggling, and it’s not too hard to figure out why: A Hotstar subscription can cost less than 50 cents US each month, ($0.50) while Netflix had been charging around $5.00 for a reduced mobile-only plan.

Meaning the placement of that decimal point makes a world of difference.

Why It Matters

Disney has a lot of things going for it: near universal name recognition in particular. They also have a lot of IP that resonates regardless of region, which explains why their overall international growth was up 40% YOY. 

If you total up all three of Disney’s main Flixes (Disney+, Hulu and ESPN+) they are now at 196.4MM subscribers worldwide, or within spitting distance of Netflix, which has 221.8MM

And that’s without Hotstar.

Granted, the ARPU on Hotstar is notably low ($1.03/month vs $6.68 for Disney+ in USCAN), but the volume would seem to more than make up for it.

Hotstar, I should note, was not a brilliant idea cooked up by Disney, but rather, something they inherited in the 2019 deal with Fox. But it may prove to be their most valuable property yet.

The Indian market is but one of many emerging economy markets where price is going to be a huge factor. So while Netflix may be in every country on earth save China, Syria and North Korea, I’m going to go out on a limb and say that there are many people in Burkina Faso, Bangladesh and Bolivia (to stick with the Bs) who cannot swing a $5/month Netflix subscription, but who will happily pay fifty cents for a localized version of Disney+ Hotstar, as the company is officially known.

That’s a massive market and one where many of the other Flixes are dead in the water unless they also roll out low-priced ad-supported properties.

It’s why we think that NBCU and ViacomCBS can make real inroads in those regions by leading with their FASTs (Peacock/Xumo and Pluto) and allowing for one-time purchases of specific series. Ditto Fox and Tubi, which doesn’t even need to worry about upgrading viewers to a subscription product (for now, anyway.)

In the interim though, it’s all about Hotstar, as the service gives Disney an advantage that Netflix simply does not have.

Side Note: Hulu Live TV, the service’s vMVPD, added another 300K subscribers last quarter, bringing their total to 4.3 million. That makes it the #5 MVPD of any sort in the US, behind Charter (15.9MM), Comcast (15.5MM), DirecTV (15MM) and Dish (8.4MM). That said, the service’s content acquisition costs are starting to be a drag on Disney’s bottom line, something Disney CFO Christine McCarthy actually noted in this week’s call.

What You Need To Do About It

If you’re Disney, an international rollout of Hotstar is not necessarily a slam dunk. Part of the reason it’s so successful in India is that it has rights to things like Premier League Cricket and so you will need to find similar hooks in other regions. Still, it’s a nice problem to have.

If you’re Comcast or VCBS, your roadmap is three paragraphs up. You’re welcome.

If you’re Netflix, you need to figure out a way to compete in all those markets where price is an issue. Ads are the obvious answer, but since that’s not in your DNA, you need to figure out a Plan B. I have some thoughts.

2. Linear Ratings Continue To Tank

While there has been much focus on the ratings of live events like the Olympics and Super Bowl at a time when so much viewing takes place on streaming services (and NBCU’s decision to look beyond Nielsen for those ratings), there’s an even bigger story in just how massively linear ratings continue to decline and how much live events like the Olympics provide a massive boost from where the non-tentpole numbers are now.

To wit, NBCU’s award-winning This Is Us, is now seeing about half the L+7 viewership it saw in 2018, while ABC’s Grey’s Anatomy is down 40%. 

Granted, that may be partially due to the fact that the aforementioned series have been on-air forever and ratings (like many other things) decline with age. But linear ratings are down as viewers increasingly turn to streaming in all its many flavors.

Why It Matters

There are a whole lot of things to unpack here.

Let’s start with viewers. They may not be watching as much linear TV but they have not gotten to the point where they’re ready to give it up. 

Yes, cord cutting is increasing, but it’s still happening in dribs and drabs as it seems that viewers like having the option of knowing they could watch cable…if, you know, they wanted to.

That’s something that will eventually change, though it would be foolish to discount the number of people who will still be happy to pay for 1000-channel TitaniumPlus packages even five years from now.

There’s also a shift in how and when people watch. 

One little observed effect of streaming is that people will often pick one or two shows and focus on those, regardless of whether the shows are linear or streaming, because you tell me the difference between linear and tuning in at 9pm on Sunday to catch White Lotus on HBO Max. So while people may be watching Yellowstone and Abbott Elementary on linear, they are not sitting down in front of the TV each night and consuming the networks’ entire prime time lineup. 

So there’s that and there’s what’s going on in ad-land.

Old habits die hard and because CTV is still such a wet hot mess to buy, advertisers are clinging to linear TV, despite falling ratings, because they understand the value and how it works.

This is resulting in rising prices in some areas—the price of a Super Bowl spot is up a full million this year, from $5.5MM to $6.5MM, and overall there does not seem to be a decline in advertising prices that maps to the decline in eyeballs.

While the next few years should see an attempt at greater standardization in the CTV space, the shift of advertiser dollars is likely to continue to move slower than the shift in eyeballs.

And let’s be real: if you’re a national advertiser with a brand whose audience is “everyone with a mouth”, there’s something very appealing about the notion of reaching tens of millions of viewers with the same message at the same time. 

While it’s possible that some of the LLCs (Linear-Like Channels) on CTV can one day recreate the large audiences of network prime time, it’s far more likely that that value of live tentpole events like the Super Bowl, will continue to grow, as the ability to deliver on the aforementioned value proposition (reaching millions at the same time with the same message) will remain very limited.

What You Need To Do About It

If you have the rights to one of the big tentpole events, don’t be put off by falling ratings. You’re not just competing with other TV networks anymore, but with podcasts, websites, YouTube, video games and a host of other media options. As well as with the ratings on a normal evening. Just remember that there are advertisers who value those large live audiences and they will be happy to pay huge sums to reach them. For now, anyway.

If you are producing linear TV, all is not lost. We’re seeing more and more evidence that viewers prefer weekly release schedules and the success of Yellowstone, which is not even on a well-known broadcast network, proves that the platform still has life in it yet and may actually see something of a revival.  If nothing else, the industry has not put much focus on the value of shows with 25 or 30 episode seasons, versus just 10 or 12. 

I suspect there is a sizable audience who wants to be able to connect with their favorite characters for nine months, not just three. (Not to mention that longer seasons provide much greater stability for all the actors, writers, producers and crew members who work on those shows.)