Russian online video market set for dramatic growth, AVoD dominates

The Russian online video market is set to grow dramatically over the next five years, but take up of Netflix-type subscription VoD services will be slower, according to a new white paper compiled by leading players in the market.

Speaking at a panel session in London to highlight the White Paper’s findings, Egor Iakovlev, CEO and founder of leading online advertising-supported video-on-demand site Tvigle said he expected the online video advertising market to grow from a relatively low base of US$100 million (€73 million) this year. The white paper envisages growth to US$270 million by 2015, and Yakovlev said he believed this figure was conservative.

Piracy remains a problem across the country, but Iakovlev said he believed recent legislation would enable legitimate service providers to tackle this more effectively. Currently, he said, 10 billion video streams were consumed annually in Russia but only one billion of those were legitimate. “What we have to do is move from piracy to legal [sites],” he said.

Iakovlev said he was confident the new legislation would have an effect. He said that 50 illegal sites had been closed down since August, although there was still a struggle between content rights holders and large internet companies with different interests for the ear of legislators.

Speaking at the same event, Maxim Melnikov, CEO of investment company Media3, which backs Tvigle, said that he expected advertising-supported online video to grow as people began to look to digital alternatives to over-the-air TV. “We see that the VoD advertising market has doubled this year and will double again next year,” he said. Tvigle, with 25 million unique viewers a month, is well placed to capture a significant share of this growth, he said, adding that the company would also look to monetise content in other ways.

Iakovlev said he believed advertising supported models would continue to dominate in the near term as the public still had to be educated about the merits of subscription and transactional services. Nevertheless, Tvigle plans to develop transactional VoD next year to test the market. Speaking to DTVE after the session, Iakovlev said he planned to develop an offering based on rights to series from Russian and international content providers such as Fox and BBC Worldwide. He said Tvigle would implement the service via connected TV apps rather than as a purely online service.

Tvigle will also likely launch in Ukraine next year, said Iakovlev, with Kazakhstan also identified as a possible territory for the next stage of growth, However, he said, it was important to acquire local content for launches outside Russia.

Iakovlev said Tvigle also planned to commission its own content for the service. Tvigle currently commissions short-form cartoons but he said that over time it could move on to half-hour episodes of shows. “What we do will depend on the speed the market develops,” he said.

Iakovlev said that smart TV would play a more significant role in the development of the market than in western Europe. He said the number of connected smart devices in the Russian market had achieved “critical mass” in the fourth quarter of last year, with up to 45% of homes with smart TVs connecting them to the internet.

“We have skipped a stage of set-tops and pay TV and also what helps is that providers of smart TVs are providing smaller TVs with the technology built in that can be put in other rooms in the house,” he said.

Iakovlev’s comments on the relative strength of advertising based models was echoed by Angela Yakovleva, regional manager, Russia and CIS at Fox International Channels. “AVoD is working right now,” said Yakovleva, speaking at the same event. “Piracy means people are used to watching on free platforms, so the first stage is to get people on legal free platforms and then think about SVoD.”

Last week, FIC announced a deal with Tvigle to bring the fourth season of The Walking Dead to the platform straight avfter it aired on Fox’s own channel.