Disney+ will overtake Netflix in India on launch day

disney ( SAY 0.09% ) is pushing ahead with plans to launch Disney+ in India through its Hotstar streaming service, despite the postponement of the Cricket World Cup. The big sporting event, which attracts hundreds of millions of viewers, would have been a huge launching pad to attract premium subscribers. Even so, Disney is poised to overtake the world leader in streaming video, netflix ( NFLX 0.20% )on launch day April 3.

Disney+ in India will be very different from the service in other parts of the world. In India, it’s Disney+ Hotstar, which will capitalize on the hugely popular streaming service that Disney took over when it acquired 21st Century Fox last year. the Over 3 million premium subscribers will instantly see their accounts updated to include new Disney+ content. This will put it well ahead of Netflix, which has around 2 million subscribers in the country.

Disney+ Hotstar VIP will increase the price from 365 rupees (about $4.78) per year to 399 rupees ($5.23) and add Marvel movies and other Disney films to Hotstar’s catalog of sports and original productions. Disney+ Hotstar Premium will cost 1,499 rupees ($19.63) per year from 999 rupees ($13.09) and will add all content from Disney+ to the range of American movies and TV shows from HBO, Showtime and Fox.

Image source: Disney

Crush the competition

Disney made a strong beginnings in the United States through a combination of its superior brand appeal and relatively low price. A Disney+ subscription can be purchased for less than half the price of a standard Netflix subscription.

Disney’s pricing in India takes the same approach. The Rs499 increase in an annual Hotstar Premium subscription is less than half the price consumers will pay for Netflix’s cheapest plan in India – its Rs199 a month mobile plan only. Plus, subscribers can watch Disney+ Hotstar on any device!

If Disney+ is a deal in the US and Western Europe, then Disney+ Hotstar Premium is a no-brainer, even for price-sensitive Indian consumers.

While Disney’s breadth of content is a concern in other markets, that’s certainly not the case in India. Netflix invests hundreds of millions of dollars in content for Indian audiences, but Disney already has top-tier content. Its crown jewel, Indian Premier League cricket, attracts huge numbers of viewers, setting new simulcast records every year. Not to mention its existing deals to license popular American TV shows and Bollywood movies.

Disney’s strategy of offering added value through HotStar should make the streaming service even more formidable. This resembles the company’s consolidation strategy in the United States, which Disney’s subscriber count has shown to be highly successful in attracting additional subscription revenue. ESPN+ notably ended the first quarter with 6.6 million subscribers, compared to 3.5 million at the end of the fourth quarter. Even with high price sensitivity among Indian consumers, the company is expected to see strong uptake of new offerings that include Disney+ content.

The Best Billboard Money Can’t Buy

Besides the great value that Disney fares offer subscribers, Disney has a unique advantage over the competition. It will be able to advertise new Disney+ offers to Hotstar’s 300 million monthly active viewers.

Netflix has a similar advantage when releasing a new series or movie. The ability to preview its latest title as soon as you log on to Netflix can have a profound impact on viewership and often leads Netflix to capture the cultural zeitgeist (see Netflix’s captivating new documentary tiger king).

With priority access to display advertising opportunities with its target audience, Disney should see strong adoption of the new Disney+ package among Hotstar streamers. Combined with the value it offers, this benefit should propel Disney+ subscriptions higher and drive marketing effectiveness in the country.

The impact on Disney’s bottom line

Disney is able to deliver such value in markets like India because the marginal cost to serve its viewers is relatively low. Rather than churning out content specifically for Indian audiences like Netflix, it relies on the global appeal of Disney’s back catalog. The company already has the streaming infrastructure to offer Disney+ through Hotstar. And customer acquisition spend should be relatively low thanks to its aforementioned built-in advertising advantage.

As such, investors should see this reflected in Disney’s bottom line. While Disney may report a significant drop in average Disney+ revenue per user when it releases its updated user count at the end of its third quarter, it should see an improvement in its profitability as it generates incremental revenue from mainly fixed costs.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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