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Hotstar has the potential to become a subscription-driven service, says 21st Century Fox CFO

MUMBAI: As the Indian market gets flooded with ad-supported video-on-demand (VoD) services, 21st Century Fox chief financial officer John Nallen has hinted that Star India’s VoD service Hotstar has the potential to become a subscription-driven service in the future.

The VoD service, which debuted in February 2015, is free and ad supported. Sports and entertainment comprise the driver content on the platform.

While there is still some time for the platform to make the transition from ad supported to subscription, the immediate task is to drive engagement.

John-Nallen1Talking about Hotstar, Nallen said, “It’s the kind of product that over time could become a subscription product. But that’s not what we’re doing right now. And most of the focus right now is on active engagement, principally on the Star entertainment product.”

He added, “We had, I think in the first week, 40 million downloads of the Hotstar app, and we continue to get very significant engagement.”

Star produces and owns all of entertainment programming, except movies that are on the movie channel. “Everything else is owned and produced. We have all the IPs for Star,” he said at the Deutsche Bank conference recently. He further stated that Hotstar has put 40,000 hours of programming on Hotstar.

Talking about the entertainment business, Nallen said that Star has invested almost all of its $300 million profit in 2015 from the entertainment business into sports, which is a growing yet loss-making business for the network.

However, Nallen is bullish about both the businesses as the network has reached peak investments in sports.

“We have launched the sports business, where in 2015 we took almost entirely the profits we generated on the entertainment side, which was nearly $300 million, and invested it into the sports business, to launch the sports business. And what you’re now seeing, as I said earlier, is that the peak investment is gone, the entertainment trajectory continues and now sports is continuing to grow,” he noted.

He also said that Star would reap the benefits of India’s growing ad and pay TV market. The India subsidiary is also getting all the support from the parent company to allow it to grow further.

“The beauty of it, at least the way we’re looking at it, is we are providing a bit of a canopy to Star to allow it to grow, so I don’t have to and go through quarter-by-quarter metrics and how its performance is going. This is because that will just get in the way of its growth. The ad market is growing by 20% a year, cable and satellite households will grow by over 45% over the next three or four years, and Star will enjoy that ride along the way as the leader in the market,” he asserted.

Summing up, Nallen said that Star is one of the top three growth engines for the company. He also sounded confident that the India business is on track to achieve two key milestones of touching $500 million EBITDA by 2018 and $1 billion by 2020.

“So we have a high degree of confidence around the two milestones we set for Star of $500 million in EBITDA in 2018 and $1 billion shortly thereafter. Star is really, when I look at the growth engines of the company overall, one of the top three,” he averred.