The Walt Disney Company (DIS) is planning to shutter the United States operations of Hotstar—its streaming service aimed at the South Asian diaspora—in the next two years. Hotstar content, which includes live broadcasts of sports events and entertainment series, will be distributed between ESPN Plus and Hulu.

Both networks are part of the Disney streaming services bundle. Existing Hotstar subscribers will be able to access the Disney bundle until the end of their subscription period and will have the option to renew into the Disney bundle after expiration. The Disney streaming bundle consists of Disney Plus, ESPN Plus, and Hulu. It costs $13.99 per month. Hotstar is available in the United States for $49.99 per year.

Key Takeaways

  • Disney plans to phase out U.S. operations for Hotstar, its streaming service focused on the South Asian diaspora, by late 2022.
  • Starting Sept. 1, Hotstar content will be available on ESPN Plus and Hulu.
  • The move will streamline Disney's operations in the U.S. and boost subscription numbers for its streaming bundle.

Disney has not provided an exact date to cease Hotstar's operations in the United States, merely stating that it will stop functioning by late 2022. "The move from Hotstar, a premium brand for South Asian content, to ESPN Plus and Hulu in the U.S. expands upon the rich and diverse catalog of live events and stories delivered across the Disney bundle and provides a platform for South Asian content to reach broader audiences," Disney stated while making the announcement. It did not reveal the number of Hotstar subscribers in the United States.

A Mixed Blessing for Disney  

Launched in 2015, Hotstar was originally part of 21st Century Fox. It was owned by Star India and targeted toward overseas Indians. The service's main audiences are in India and Southeast Asia, including Thailand and Malaysia. Hotstar became part of Disney after it acquired 21st Century Fox in 2019.

The service has been a mixed blessing for Disney's streaming bundle. On the one hand, it has bulked up overall streaming subscription numbers for Disney. Hotstar subscribers accounted for 40% of streaming audiences for Disney in the last quarter and were responsible for a majority of new additions during the second and third quarters this year.

But the streaming service's audiences in Asia pay much less than the average fees charged in more developed markets. As a result, Disney earns much less average revenue per user (ARPU) when Hotstar subscribers are taken into account. During the company's latest earnings call, chief financial officer Christine McCarthy said that overall ARPU for streaming fell by $1.96 to $4.16 when Hotstar subscribers were taken into account.

Disney's move in the United States will boost its subscriber figures for Hulu and ESPN Plus. The former already has a slate of fresh and existing content from Hollywood, and Hotstar's Bollywood focus will help diversify its offerings for new audiences. It will also help Disney Plus compete with streaming behemoths like Netflix, Inc. (NFLX) and, Inc.'s (AMZN) Prime Video, which already offer movies and fresh content from South Asia.

While it has reported an increase in the number of subscribers, ESPN Plus has been struggling to gain traction among sports fans and is considered a "companion app" for its linear cable counterpart. Even in earnings calls and news conferences, Disney CEO Bob Chapek has refused to put a timeline on migrating ESPN content from cable to streaming. With its slate of cricket programming and broadcast of cricketing extravaganzas like the Indian Premiere League (IPL), Hotstar content could provide a fresh spurt of growth and engagement for the sports network streaming operations.   

Hulu had 42.8 million subscribers in the latest reported quarter from Disney. ESPN Plus reported 15 million subscribers, up 75% from a year ago.