Reliance deal damaged Disney India business by $2 billion

Delhi: In its financial report for the second quarter of 2024, Walt Disney disclosed over $2 billion in charges resulting from goodwill impairments associated with Star India and linear entertainment networks in India.

The company said in its report, “Recorded charges of $2,052 million due to goodwill impairments related to Star India and entertainment linear networks.” 

It further wrote that the impairment at Star India was a result of the company entering into a binding agreement with Reliance to merge Star India and Viacom18.

On February 28, 2024, The Walt Disney Company sold its India business to Mukesh Ambani’s Reliance Industries at a $3.5 billion valuation, which it bought from Rupert Murdoch for $14 billion seven years ago.

If regulators and shareholders approve, the merger will create a Rs 70,000 crore behemoth.

In the JV, Reliance and its affiliates will hold 63.16 per cent while Disney will hold the remaining 36.84 per cent.

According to Investopedia's definition, “Goodwill impairment occurs when a company decides to pay more than book value for the acquisition of an asset, and then the value of that asset declines. The difference between the amount that the company paid for the asset and the book value of the asset is known as goodwill. The company has to adjust the book value of that goodwill down if it becomes impaired.”

Further, Walt Disney informed that Hotstar’s paid subscribers reduced by 6% to 36 million in the second quarter ended March 30, 2024, from a 38.3 million subscriber base in the previous quarter. 

This represents a reversal of subscriber losses following a quarter of paid member growth.

The streaming service gained 0.7 million paid subscribers in the first quarter ending December 30, 2023, following four consecutive quarters of subscriber decline.

At its height, Disney+ Hotstar reported 61.3 million subscribers in the fourth quarter ending October 2022 (Q4FY22).

Hotstar’s average monthly revenue per paid subscriber was down by 45% to $0.70 in the March 2024 quarter vs $1.28 in the December quarter of 2023. 

Disney said that Hotstar’s average monthly revenue per paid subscriber decreased due to lower advertising revenue.

It further reported that Star India’s revenue from sports broadcast reduced by 17% to $105 million in the March quarter versus $127 million in the corresponding quarter of the previous year.

However, Star India’s operating loss in sports improved by 73% to $27 million in Q2, in comparison to $99 million in the corresponding quarter of the previous year. 

Disney said that the decrease in operating loss at Star India was 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.