FOCUS: E-cinema market may have few core names, lose 20% in 2022

By Yekaterina Yezhova

MOSCOW, May 30 (PRIME) -- The Russian market of legal online video services, valued at 55 billion rubles in 2021, is undergoing a reshuffle as Sber sold Okko and MTS is reported negotiating an acquisition of ivi, and analysts said it will have few major players and may lose up to 20% of revenue in 2022.

“The changes will lead to the market’s consolidation, and three to four players will control some 60–70% of total revenue of the market of legal online video in Russia. It is clear already now that upon results of 2022 they will be Kinopoisk, Wink, and the third one that can acquire ivi,” news and research agency TelecomDaily General Director Denis Kuskov told PRIME.

Earlier in May, bank-turned-ecosystem Sber sold its online cinema Okko, among other assets, which it explained by an update of its strategy. Sber said the deal was made under market conditions with no further details. The assets were sold to little-known firm New Opportunities, media reported.

Sber added that it will keep its partnership relations with the sold companies and continue joint marketing and operating activities.

Media also reported that the country’s major mobile operator MTS, which develops own online cinema Kion, had been in talks to acquire ivi, which has about 15 funds shareholders, including Baring Vostok, RTP Global, and VTB.

Speaking about the possible deal, Kuskov said that “it is quite a real option because MTS had invested huge money in progress of its online cinema that still has only 1% of revenue of the country’s total market, which cannot cheer them up.”

Investment company IC RUSS-INVEST senior analyst Roman Blinov views chances of the deal as high “given our expectation of enlargement of many operators through friendly and unfriendly mergers and acquisitions.”

“With the scale of MTS and its place in the Russian reality taken in consideration, it would bring the operator a rise in the number of users, growth of sustainable payments, and strengthen its cash flow and profit. Advantages from the deal for MTS are direct. The operator’s capacities may cover a wider audience and in the future it would enable it to shape a range of new products on the base of the already existing service,” Blinov told PRIME.

TelecomDaily estimated earlier that total revenue of legal online video services in the country jumped 41% to 54.962 billion rubles in 2021, and the services earned 14 billion rubles, which is comparable to the 2018 market revenue.

The 2021 top five online services were ivi with 20.5% of total revenue; Kinopoisk, owned by Internet company Yandex, had 16.4%; Okko had 11.4%; Wink, developed by state-controlled telecom operator Rostelecom, had 9.7%; and U.S. streaming giant Netflix had 8.9%. Netflix suspended its service in the country in early March because of Ukraine.

As to January–March, Kuskov said that Kinopoisk approached ivi, and Wink left Okko behind.

“If we take the market on the whole, I would say we will see changes in the top three players that will control over 50% of the market as of the end of 2022. The market could plunge up to 20% in 2022 to 45–47 billion rubles,” Kuskov said.

Blinov said that the online cinema market will see objective changes and rearrangements of the players. “We do not rule out that mergers and acquisitions will take place by the end of 2022 and the market will transform,” he added.

It is complicated and too early to say what the market has gained and lost from the recent restrictions and retreat of a number of Western providers of services, and the situation may change, although unlikely, by the end of 2022, the IC RUSS-INVEST analyst said.

“We won’t be surprized by the fact that growth rates of small players will slip insignificantly in the current conditions, while the leaders would keep their dynamics in the future,” he added.

(66.4029 rubles – U.S. $1)

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