FOCUS: E-cinema market expands 30-40% in 2018 on richer offers, anti-piracy war

By Yekaterina Yezhova

MOSCOW, Dec 17 (PRIME) -- A widening range of options and a tightening grip on piracy helped Russia’s legal online cinema market expand by a third to over 10 billion rubles in 2018, and the industry still has a lot of potential, experts and market participants said, adding that users are now more willing to pay for content thanks to low prices and multiple offers.

“The total volume of the country’s online cinema market could increase 30–40% in 2018 to more than 10 billion rubles,” investment company Freedom Finance analyst Anastasia Sosnova told PRIME.

“The e-cinema market is far from the saturation point, especially in the segment of pay services. Nevertheless, growth rates can slow down in the next few years. The Russian market is beyond any comparison with the U.S., where Netflix alone earned U.S. $11.6 billion in 2017.”

Dmitry Kolesov, director of the TV and content department at researcher J’son & Partners Consulting, said revenue of online cinemas grew 55.5% on the year in January–June thanks to subscription, technological progress, inter-segment partnerships.

The researcher defines an online cinema as a content aggregator providing options to watch video on own websites, via applications for mobile platforms and Smart TV.

The market is led by ivi and Okko with market shares of 35% and 20% respectively in 2018, Sosnova at Freedom Finance said, adding that Amediateka and MEGOGO have 15% of the market each.

MEGOGO Russia General Director Viktor Chekanov said the market of video services grew in 2018 thanks to several core trends: blocking of piracy websites; cooperation of various market players, like telecom operators, video services, and TV channels; and a widening range of user devices for video watching.

“I’m guided by figures of J’son & Partners, which expects the volume to increase by 21% on average per year to more than 34 billion rubles in 2021, value-added tax excluded. Pay monetization models will dominate,” he said.

Sosnova at Freedom Finance said that incomes of online cinemas from the pay model outperformed for the first time advertising revenue in 2017 thanks to growing popularity of pay content, which was largely contributed by expansion of services. “In 2018, the share of income from the pay model could exceed 60%,” she said.

Chekanov at MEGOGO said that advertising video on demand (AVoD), when a video is provided for free along with periodic advertisements, is the most popular model in the country so far, but the share of pay models has actively widened over the recent years. In terms of income, these two models are almost equal.

“Content rent or purchase works well with new releases. Prices are lower and the choice is enormous. For our subscribers, we offer personal discounts,” he said.

According to J’son and Partners, the country’s total market of legal video services soared 48% on the year to 10.27 billion rubles in January–June, value-added tax excluded.

“It is the result of active work of players on widening of video libraries, shorter digital release windows, and constant technological improvements. Inter-segment partnership has become particularly successful: broadcasts of TV channels in e-cinemas, joint anti-piracy war, expansion of a subscription service,” the researcher’s expert Kolesov said.

Chekanov at MEGOGO said the market had closely watched the battle between Yandex and copyright holders, which ended amicably with signing of an anti-piracy memorandum. “It’s a milestone for the industry. All interested parties will have to think how deletion of links to unauthorized content from search results will function in 2019,” he told PRIME.

In August, four television companies of Gazprom-Media Holding filed lawsuits to block pirate links to their series that were given in Yandex’s search results.

Threatened with muting of its video service, the Internet company deleted links to the disputed content, but said that users would not be able to see links to copyrighted content as well because the search mechanism does not distinguish authorized websites from illegal.

Valid through September 1, 2019, the memorandum of cooperation was sealed on November 1 by 12 companies, comprising such copyright holders as television broadcasters Channel One, VGTRK, and CTC Media, as well as Gazprom-Media Holding. The Internet services were presented by Yandex, Mail.Ru Group, Rambler Internet Holding, and cinematographic resource KinoPoisk, among others.

(66.4337 rubles – U.S. $1)

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