FOCUS: Growth of paying viewers number promises brighter future for e-cinemas

By Yekaterina Yezhova

MOSCOW, Dec 25 (PRIME) -- Online cinemas, occupying over two thirds of the Russian market of online video services, see huge potential in the pay model as people are getting less reluctant to spend cash on films and series. Revenue of e-cinemas could gallop up to 40.5% in 2017 to some 11 billion rubles, while the whole market gained only 16% to 13.64 billion rubles, experts and companies said.

“The figure of 13.64 billion rubles is a preliminary one,” Maria Saykina, an analyst at the Russian Association for Electronic Communications (RAEC), told PRIME. Online cinemas accounted for 70% of the 2016 online services market, or 7.83 billion rubles, according to a research conducted by RAEC jointly with online cinema Okko.

Revenue of online cinemas increased 45% on the year in January–June, Saykina said, citing researcher J’son & Partners Consulting.

“All major online cinemas reported an increase in January–September revenue. For example, Ivi’s turnover reached 1.7 billion rubles, which is more than for the whole 2016, the trend was also mentioned by Megogo. TVzavr hopes to raise its turnover to 500 million rubles in 2017 from 275 million rubles in 2016. In total, the sector of online cinemas could be from 9.6 to 11 billion rubles this year, which makes its share of the online video services market even bigger than in 2016,” the RAEC analyst said.

The biggest players as of the end of 2016 were online cinemas Ivi with 33%, Okko with 16%, Megogo with 13%, Amediateka with 8%, and TVzavr with 5%.

The market of online cinemas is well consolidated, and the main players tend to keep their positions as of the end of 2017, although slight changes are possible. “Ivi maintains leadership by revenue and audience. Okko and Megogo follow. Amediateka and TVzavr also keep their footing,” Saykina said.

Okko’s General Director Ivan Grodetsky said it can be concluded from the RAEC study that the market of online video services working in the legal segment has a significant potential to advance on the local market in the coming years.

The audience of online video in the country was at 69.3 million people or 47% of the country’s population as of the end of 2016. The experts also noted how the audience of legal online cinemas has expanded, rising to 39.6 million people as of the end of 2017 from 21.7 million people in 2013.

“Despite the fact that the bulk of big online cinemas working in Russia mostly use the advertising model of monetization, multiple experts and spokespeople for online cinemas see a growing number of those paying for content,” RAEC said in the research.

As of the end of March, 3 million people paid for content, and the number of pay transactions in 2016 was at 15–20 million. On the whole, user payments in local online cinemas reached 2.34 billion rubles in 2016.

“The upward trend of a pay model is in the focus of the business related to digital video content. If compared to Western analogues, due to certain historical reasons, we’re far behind by pay model monetization, but we will actively catch up with Western markets,” Ivi’s Director for strategic analytics Ivan Grinin said, as quoted in the RAEC presentation on the 2017 digital economy.

“The first half of 2017 witnessed a historic moment when the pay model exceeded the advertising one by money. We see several main drivers in this process. First, it is content. Exclusive digital premieres, own production, deals with television channels. Second, it is an active use of big data for a better understanding of consumer demands, in particular, the development of a recommendations service.

“One more key driver is the evolution of smart TV (a television set with the integrated Internet and interactive features): almost all TV sets will turn into smart ones and will be connected to the Internet during the nearest years. Already now smart TV is the best platform to monetize paid content. War on piracy also plays an important role.”

However, the level of illegal content consumption is still high. According to consulting company EY, 4.5 million people, or 80% of a daily audience of long and medium-length videos watch films and series on illegal Web sites.

Meanwhile, a poll conducted earlier in 2017 by non-commercial Regional Public Center of Internet Technologies (ROCIT) showed that 71% of users are ready to pay for legal content, and 38% already to buy or rent out film or series watching.

RAEC counted that 83% of viewers of online cinemas prefer a free model of content consumption with advertisements, and only 3% buy a paid subscription. An average price most of users are ready to pay for a unit of content is 50–100 rubles.

Digital windows, or timeframes between the release of a film in cinemas and in the Internet, shortened to six–eight weeks at present from 16 weeks five years ago, RAEC said.

The experts and market players earmarked growth drivers for the online video services market, which comprised deepening of Internet penetration and development of 3G and LTE connection standards; development of payment systems; a higher level and a wider range of services; poor quality of piracy Web sites; and evolution of new technologies, like virtual reality, and others.

Restricting factors include an insufficient level of digital literacy of users; a high level of illegal consumption; relatively high costs of content and services; competition among other online entertainment and services, like games and social networks; and excessive regulation.

(58.3152 rubles – U.S. $1)

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