The 2018 season of the Indian Premier League (IPL) contributed to this significant increase in revenue, the company said. Moreover, the company’s operating losses as percentage of revenue improved to 6.7 per cent in the June quarter, compared to 66.5 per cent in 2017-18. In absolute terms, operating losses in first quarter of 2018-19 stood at Rs 379.6 million.
“We understand from the management that the significant increase is mainly on account of advertisement and subscription revenue from exclusive sports content of the IPL in the said period,” said the valuation report for Hotstar, which was compiled by corporate finance advisor Duff & Phelps.
But on an overall company level, Hotstar continued to remain in the red due to the high cost of content acquisition, advertising, and promotional expenses. Losses were at Rs 436.3 million in the June quarter; losses for 2017-18 were at Rs 3.89 billion.
Hotstar, which was estimated to have over 75 million users at the start of this year, continues to drive a majority of its usage through free online viewing unlike rivals Netflix and Amazon Prime Video. Just 2-3 per cent of Hotstar’s users are paying customers, while the others are monetised through video ads.
According to a KPMG report, India’s market for OTT video would grow from $400 million in 2018 to $1.5 billion by 2025. Moreover, advertising would be the largest source of revenue for the online video sector, driving $300 million in revenue in 2018 and $1.2 billion in revenue by 2025. Revenue via subscription is expected to grow faster to reach $1.1 billion by 2025, the report added.
Star-owned Hotstar currently has the lead over Netflix and Amazon Prime Video, but both the US firms are investing heavily to build more India-specific content to win over users. Amazon has said it will invest $300 million in programming for India and will have over 15 ‘originals’ for India by the end of 2019.
Netflix, too, said it was witnessing fast-paced growth in India and did not see itself hitting the ceiling in terms of adding customers any time soon, despite it being one of the more highly priced services in the country. Netflix subscriptions in India start at Rs 500 per month, far higher than what rival Amazon charges for a Prime subscription of Rs 149 a month or Rs 999 for a year.
“I would say we are far from reaching a limit in terms of the addressable market, given the pricing structures we have right now. We’ve got a lot of room to grow in a reasonably affluent part of society in India and other markets around the world,” Greg Peters, chief product officer at Netflix, had said during the company’s most recent earnings call.