iWorld
Disney India to scale down it’s linear TV business
Mumbai: Reportedly, Disney India may scale down its linear TV business or seek strategic options. It reported an EBITDA margin (with OTT losses) of four per cent (average of FY19-22), due to hefty investments/losses in high-cost cricket content. Zee’s (Z IN) average EBITDA margin (with OTT) was 24 per cent in FY19-22. As per our assessment, unit economics of the TV business is strong, led by healthy profitability margin (~30-32 per cent EBITDA for larger broadcasters core Tv business, ex OTT losses).
Digital has gained sharp traction since the launch of affordable 4G data, as the India OTT market has posted a CAGR of 19 per cent in FY19-23 to USD 2.1bn. Also, TV industry CAGR declined one per cent in FY19-23, on: 1) regulatory concerns on ARPU, 2) tepid ad environment in linear TV and 3) consistent drop in viewership and consumption patterns. Despite this, TV is still the largest medium after digital, with an ad market share of 34 per cent in FY23 (dip of 330bp from FY20).
We continue to believe that despite converging growth rate, linear TV medium is a key mode of mass campaigning for larger advertisers (FMCG contributes 45 per cent to TV ad revenue), given the reach/scale it has. Digital has the potential to grow, but unit economics are not yet proven. No larger OTT platforms in India have turned profitable despite: 1) launch
since 2017 (post 4G data becoming cheaper), and 2) strong adoption/during Covid, which increased time spent/consumption. Also, India OTT has many concerns such as: 1) price sensitive market (lower APRUs), 2) higher distribution costs (heavy dependence on telcos/OEM, 3) higher content costs, 4) lower wired broadband penetration and 5) fragmented nature of the OTT market (multiple languages). This further makes break-even or profitability is difficult for any OTT platform, in the near- or medium-term. We, thus, prefer the linear TV business from a profitability standpoint and believe it will be a win-win for India despite tepid growth rates, as digital is an expensive medium. This may be a challenge to scale at mass – Digital ARPU for a consumer with major OTT platforms subscriptions and data costs is Rs 1,500, 4x higher than that of TV ARPU (Rs 350).
We believe an exit or a strategic change by Disney in India may augur well for peers such as Zee, Sony, Viacom18, SUNTV, enabling a strategic shift in the ‘go to market’ strategy, in turn benefitting other players to gain market share. Subject to regulatory approvals (NCLT), Zee-Sony merger may be the biggest beneficiary of any changes in Disney management or market strategy, as Zee-Sony commanded an ad market share of 25 per centin FY22, slightly below Disney’s 32 per cent. The merged entity (subject to approval) may thus see a big valuation re-rating , on likelihood of market share loss by market leader, Disney India. Disney India enjoys strong recall across genres such as urban GEC, Tamil, Telugu, Marathi, and sports, which together contribute 65 per cent to India’s TV revenues. TV may become further consolidated post Z-Sony merger with top two players (Z-Sony and Disney India) commanding ~60 per cent ad market share, leaving little or no potential for peers to gain (or spike) market share. We believe there is also a likelihood of Viacom 18 (73 per cent owned by RIL/TV18, 11 per cent TV ad market share)- the third largest broadcaster after Zee/Sony and Disney, becoming a strategic partner with Disney India as the former is aggressively seeking to make inroads in the media segment (TV via TV18/NW18; digital via Jio Cinema).
This scenario too may not be very disruptive for the Z-Sony merged entity as it leaves with two players having an even larger share in the TV ad market. India OTT market is a long haul – Expect early signs of consolidation in the medium term, but broadcaster-based OTTs (Zee, Sony, Disney), Jio Cinema (largest telecom player) and global giants such as
Amazon and Netflix may eventually command a lion’s share in this market. We expect smaller OTT platforms to tie up with these larger platforms for distribution/scale. Consolidation is the only way OTT platforms in India may move closer to break-even or profitability helped by 1) lower content cost 2) tech cost efficiency and 3) bargaining power with distributors. OTT is a business of scale/depth as platforms with a large customer base and strong content library may be the first ones to attain profitability due to efficiency on technology and distribution costs.
The credit of this article goes to Elara Capital SVP Karan Taurani.
iWorld
X launches XChat messaging app on iOS with calls and encryption
Standalone app marks shift from “everything app” vision, adds E2E messaging.
MUMBAI: From one big app to many small chats, X seems to be splitting its ambitions. X has rolled out its standalone messaging app, XChat, to iOS users, opening up a new front in its evolving product strategy. The app allows users to connect with existing X contacts through private and group messages, file sharing, as well as audio and video calls. The launch follows a limited beta phase, where the platform tested the product with a smaller user base to refine the experience. Now available publicly, XChat marks a notable pivot from earlier ambitions championed by Elon Musk to turn X into a single “everything app” combining messaging, payments, commerce and more.
Instead, the company under xAI ownership and backed by SpaceX appears to be building a suite of standalone applications, each targeting specific use cases while expanding its broader ecosystem.
At launch, XChat includes end-to-end encrypted messaging, PIN-based access, disappearing messages, and features such as message editing, deletion for all participants, and screenshot blocking. The company has also said the app is free from advertisements and tracking mechanisms, positioning it as a privacy-first alternative in a crowded messaging space.
However, security claims around the platform are likely to face scrutiny. Earlier iterations of XChat drew criticism from experts who argued it fell short of established encrypted platforms like Signal. With the wider rollout, the app is expected to undergo fresh evaluation to assess whether those concerns have been addressed.
Beyond messaging, XChat will also house X’s Communities feature, which is being discontinued on the main platform due to low usage and spam concerns. Migrating these users could provide an early boost to adoption, effectively turning XChat into both a communication and community hub.
The move underscores a broader recalibration at X less about cramming everything into one app, and more about spreading bets across multiple touchpoints, one message at a time.
