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FOCUS: Rising number of eager video payers to fuel market by 21%/yr till 2021

By Yekaterina Yezhova

MOSCOW, Apr 9 (PRIME) -- The Russian market of legal video services will double to 34.27 billion rubles in 2021 from 2017 because a rising number of viewers prefer subscribing for films and series to skip commercials amid the absence of global giants and the existence of free niches, experts and players said.

The online video industry grows all over the world. Thanks to a stable exchange rate, the share of the Russian market in global incomes rose to 0.6% in 2017 from 0.5% in 2016, Json & Partners Consulting said in a research note. The market of legal video services grew 42% in 2017 to 15.89 billion rubles and is seen at 20.75 billion rubles in 2018 with a further annual growth by 21% through 2021, value-added tax (VAT) excluded.

Ivan Grodetsky, general director of online cinema Okko, agreed with the researchers estimations. The revenue structure of players will change with pay models of monetization to advance ahead. Competition will intensify in the coming years, and online cinemas will rival in service quality, technologies, elaboration and improvement of automatic recommendation systems, he told PRIME.

The issue of fighting against piracy is still unresolved. The market and the government should do a lot to alienate the consumer from illegal content.

In its research, Json & Partners split 49 companies into online cinemas, like ivi and Okko; TV channels selling their content in the Internet, like Channel One and CTC; pay TV operators, like Rostelecom and MTS; and platforms of digital distribution, or aggregators of video content, like iTunes and Google Play.

Online cinemas accounted for 71.6% of the market in 2017, or 11.37 billion rubles, VAT excluded. Television channels had 12%, or 1.91 billion rubles. Operators had 11.5% of the market, or 1.83 billion rubles. Platforms of digital distribution had 4.9% of the market, or 780 million rubles.

The experts studied four models of video services monetization. They are advertising video on demand (AVOD) free provision of video services for viewing a certain number of advertisements; transactional video on demand (TVOD) a pay model of renting out a unit of content to viewers for a limited period of time; subscription video on demand (SVOD) a pay model of giving access to a library of content without any limitations for viewing; and electronic sell through (EST) a pay model of purchasing of a digital copy of content.

The figures revealed by Json & Partners show that the market underwent significant changes in 2017. The share of AVOD, still the most widely-spread model, declined along with the share of TVOD to the benefit of SVOD with a slight rise in the number of those willing to own content.

The market structure by models of monetization as calculated by Json & Partners:

2016, % 2017,%
AVOD 60.5 58.5
TVOD 17.3 12.3
EST 11.0 11.1
SVOD 11.2 18.1

According to Json & Partners Consulting, AVOD stays the most widely spread model of content monetization with the share of 58.5%. But this figure includes revenue of video services and social networks of such resources as Mail.Ru Group and Yandex, among others. If we take only online cinemas, revenue from the pay model has exceeded the advertising model for the first time in 2017. In the future, we expect the share of the pay model to expand further, Grodetsky said.

By revenue, the countrys market of transaction pay VoD, or TVOD and EST, is one of the top 10 on the global scale. By SVOD, we are farer behind, but strong growth rates allow us to hope to reach leading positions in threefive years, he added.

The Russian market is unique by several parameters. The share and importance of Smart TV is several times higher in our country than on developed markets of the U.S., the U.K., Europe, frequently used for comparison. Our users prefer owning content, rather than renting it, this is why the share of revenue from EST is higher than in Europe.

Okkos users paid 1.38 billion rubles in 2017, or 1.18 billion rubles without VAT. The bulk of it came from the EST model, by which Okko leads in Russia. Okkos revenue from SVOD quadrupled in 2017 to 480.4 million rubles, VAT excluded. The online cinemas revenue from TVOD amounted to 122.7 million rubles, Okko chief told PRIME.

In addition to growing revenue from pay models of monetization, Json & Partners also singled out some other trends of 2017, comprising cooperation between pay TV operators, online cinemas, and TV channels; an increase in the volume of 4K content; and production of own content by online cinemas, among others.

Okko head Grodetsky said subscription products will remain one of the core growth drivers for the Russian market, which will be also influenced by a strengthening trend of regular viewing, a deeper penetration of Smart TV sets and improvement of quality of services provided by online cinemas.

Global players, like Amazon and Hulu, are almost not presented in Russia. We have Netflix, but its share is extremely small. Another interesting case, which is absent from Russia so far, is premium home theater (PHT), or premium releases for home viewing at a high price, Grodetsky said.

(57.8332 rubles U.S. $1)


09.04.2018 10:26
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