ICC digital rights expected to bring losses to Disney’s streaming business in Q3

The Walt Disney Company is expecting a loss in its streaming business in Q3 due to International Cricket Council (ICC) digital rights, which is held by Disney+ Hotstar. 

“We are forecasting a loss for Entertainment DTC in the third quarter, the vast majority of which is due to Disney+ Hotstar's ICC cricket rights,” said Hugh Johnston, CFO, Walt Disney during the earnings call. 

He also added that it is expecting to incur linear ICC rights expense at Star India in Q3.

Star India, the parent company of Disney+ Hotstar, has invested $3 billion in acquiring the ICC media rights until 2027. The television rights for the 2023-27 cycle were sublicensed to Zee Entertainment by Star India. However, due to the collapse of the merger agreement with Sony Pictures Networks India, Zee withdrew from the deal. 

The Entertainment Direct-to-Consumer business was profitable in the second quarter. While it is expecting softer Entertainment DTC results in Q3 to be driven by Disney+ Hotstar, it continues to expect its combined streaming businesses to be profitable in the fourth quarter, and to be a meaningful future growth driver for the company, with further improvements in profitability in fiscal 2025.

“And while we are anticipating a softer third quarter, due in large part to the seasonality of our India sports offerings, we fully expect streaming to be a growth driver for the Company in the future and we have prioritized the steps necessary to achieve this,” said Bob Iger, Walt Disney CEO.

Sports operating income declined from $794 million last year to $778 million this quarter. Star India’s loss in the sports segments reduced by 73% from $99 million in the second quarter last fiscal to $27 million this fiscal. This is due to lower programming and production costs attributable to the non-renewal of Board of Control for Cricket in India rights, partially offset by an increase in costs for Indian Premier League matches due to more matches aired in the current quarter compared to the prior-year quarter. 

Walt Disney's streaming entertainment services recorded a profit of $47 million in Q2.

Meanwhile, Disney+Hotstar’s paid subscribers have also declined from 38.3 million in Q1 to 36 million in Q2. The Average Monthly Revenue Per Paid Subscriber has also declined from $1.28 to $0.70 due to lower advertising revenue. International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.91 to $6.66.