Television and on-demand audiovisual services in the Russian Federation

Television and
on-demand audiovisual
services in the Russian Federation
A report by
J’son & Partners Consulting
for the European Audiovisual Observatory

Conducted for European Audiovisual Observatory

2

The structure of Russian television, 2010

Total households – 52,2 mln (100%)

Households with TV – 50,6 mln (96,9%)

Pay TV – 16,3 mln (31%)

Cable TV Satellite TV
6,3 mln (12%)
9,6 mln (18%)
IPTV
Источник: J’son & Partners Consulting
0,44 mln (1%)

Source: J’son & Partners Consulting

Every third family in Russia watches pay TV.

3

Classification of TV services and
technologies

4

Marketing and technological classification of TV services

Why is new classification necessary?
 The boom of new television technologies and services, abundant new marketing terms
 Linguistic incompatibility of two fixedly approaching “continents” that are terrestrial and non-terrestrial
TV
 Forthcoming total TV digitalization in Russia and new approaches to the commercialization of TV
services
The example of linguistic confusion: What is pay TV?

☹ Pay TV is television, a subscriber pays
for!
Definition in incorrect, because there is also a fee for conditional-free channels that propagate
via networks of shared access and don’t relate to “pay TV”.

☹
Definition is twice incorrect. Firstly, there are terrestrial services of “pay TV”, for instance in
Pay TV is cable, satellite and IPTV! DVB-T networks. Secondly, cable and satellite TV provide such types of services that include
free channels only.

☹
Definition is incorrect, because “pay TV” services can be provided in analogue networks as
Pay TV is digital TV!
well.

☹
Definition is close to the real situation in the Russian TV market, however there are also
Pay TV is TV with conditional access!
examples of “conditional-free TV” with conditional access.

5


Free, Conditional-free and Pay TV services
Type of TV services
Free channels Free TV Conditional-free TV
Technical support Pay TV
Paid channels

The main players on the conditional-free and pay TV markets

In Russia there is a significant volume of analogue TV
consumption. Many operators provide both digital and
analogue TV services, and they all have the analogue TV
subscriber base, significantly exceeding the number of
digital TV subscribers.

6

Маркетинговая и технологическая классификация ТВ

Linear and non-linear TV
Linear TV Non-linear TV
User terminals
Closed systems Open systems Closed systems Open systems

IPTV

Cable TV Analogue
VOD for TV Connected TV
TV terrestrial TV
Satellite TV

Digital TV OTT
PC, PAD IPTV Web TV VOD for PC Web-portals

VOD for
Smartphones TV to mobile
smartphones
Video to mobile


New technologies and programs and new types of subscribers’ devices move TV market
more and more actively to non-linear TV

7

Linear terrestrial TV

8


Analogue broadcasting in Russia
Average daily audience federal channels, October, 2011
18,0 16,4
15,5 15,3
16,0
14,0
12,0
10,0 8,1 7,9
8,0
6,0
Terrestrial broadcasting is financed by state
3,8 3,4
4,0 2,3 2,1 2,1 1,9 1,8 1,6 1,6
1,3 0,9 0,8 0,8 0,7
budget and advertisers’ fees
2,0 0,2
0,0

Coverage of Russian population by Shares of advertising expenditures of countries, 2010
terrestrial analogue broadcasting
Japan 40% 28% 16% 12% 4%
5 channels 33,0%

4 channels 56,1% Poland 49% 21% 14% 11% 5%

3 channels 73,2% Germany 24% 62% 5% 5% 4%

2 channels 96,7%
Great Britain 29% 33% 29% 6% 3%

1 channel 98,8%
Russia 54% 16% 11% 14% 5%
Source: Rospechat’

TV Print Internet Outdoor Radio
9


Switching to digital terrestrial broadcasting
Ministry of communication has
expressed the need to transition to
digital broadcasting standards Risks of FTP implementation:
1997
 Financial risk
The first in Russia zone
of experienced digital
R & D work "Development of a
comprehensive project to establish a
 Lack of overall detailed action plan
terrestrial TV in Nizhny
1998-1999
system for digital television  Delay of legislative regulation and absence of
Novgorod broadcasting in Russia"
digital standards
2000 The first samples of the  Compressed transition period
digital set-top box DVB T
"Elf"  Substantial technical problems with
Experimental Zone
for digital 2001 implementation of FTP
terrestrial and
cable TV in St.  Insufficient information campaign to support
Petersburg
2004 the transfer to digital format
Russian Federation Government
Decree "About introduction of the 2005
Russian Federation in the European
system of digital television DVB»

The first edition of the project To overcome the above mentioned problems, it
"Development Programme in the
Russian Federation the European seems appropriate to examine and use the
system of TV broadcasting DVB»
experience of countries that have successfully
completed the transition to digital
Federal Target Program (FTP) for the development of broadcasting for 2009-
2015 was adopted in November 2009
broadcasting.

10


Partners and regional broadcasting

«Single upstream»
«Double upstream»

Federal
HeadEnd Federal
HeadEnd

Local
Broadcasting
Network
Local Regional
Local
Broadcasting HeadEnd
Broadcasting
Network
Network

Three groups of central channels:
Number of Subjects of Regional programs,
- Russian universal channels (“Channel One”, “Russia 1”, NTV, “Channel TV channel
partners RF hours
5”),
- Federal network channels (“TV-Center”, CTC, TNT, “REN TV”), one of СТС 191 83 2,6
which is universal - “REN TV”, ТNТ 522 79 3
- Specialized terrestrial channels (“Russia 2”, “Russia K”, “Domashniy”, RЕN-TV 1100 80 3
“MUZ”, MTV, “TV3”, “Peretz”, “Russia 24”, “Euronews”, “2x2”, “Zvezda”, ТV-Center 241 33 1,6
“Semerka”). Zvezda 335 77 3

Source: NAT

11

Linear non-terrestrial TV

12

Current Pay TV subscribers base evolution Dynamics of Pay TV market volume in Russia and
in 2010 – H1 2011, million households Federal districts, 2009-2010
2010 H1 2011 1400 SOUTH
Total 16,3 18,1
1203
Satellite 6,3 7,5 FAR EAST
1200
Cable 9,6 9,9 89

mln USD
IPTV 0,44 0,7 1023 56
SIBERIA
1000 80 107
Source: J’son & Partners Consulting, companies data
47
116
95 URAL
Russian TV market structure by technologies, 2010 800 39
106
31 249 NORTH
CAUCASUS
600
224
Analog VOLGA
cable
137
85%
Satellite
400 111
34%
Fix NORD-WEST
66%

IPTV Digital 200 411
4% cable 329 CENTER
11%

0
Pay TV market
2009 2010
Source: J’son & Partners Consulting fieldwork data, companies data volume in RF,
mln USD


13


Penetration and Pay TV operators in Russia, 2010

In Russia, the highest Pay TV penetration areas generally match the location of the economically developed centers. The only
exception is the Moscow (24%), Moscow Region (33%) and Kamchatka Territory (65%).

14


Subscribers’ equipment
Sales of subscribers’ equipment in physical terms by types, mln
Sales of subscribers’ STB equipment in money terms, mln USD
units
0,1
246 0,2
0,1
0,5
0,6 0,6
0,2 0,3
0,3
171 185 0,2
151 152
1,9
90 0,1 1,7
1,5 1,6 1,6
0,2
0,5
2007A 2008A 2009A 2010A 2011E 2012F
Source: J’son & Partners Consulting 2007A 2008A 2009A 2010A 2011E 2012F

Satellite Cable IPTV
The structure of sales of subscribers’ equipment in 2010 Source: J’son & Partners Consulting
The share of leading players of the Russian market of STB equipment
Smartlabs
7%
HUMAX
Elecard
11%
4%
COSHIP Realcube
2% 2%
General Satellite
28% ZYXEL
Другой Другое
2%
15% 3%

AMINO
ZTE
3%
Digi Raum 3%
Electronics
35%



15


Digital non-terrestrial linear television
Operator Package Pay TV channels breakdown by provenance and localisation degree
Russian-
language
channels
The most popular translated TV channels:
Animal Planet, Discovery Channel, National Geographic 19%

The most popular untranslated TV channel: 55%
Translated
BBC World channels 26%
Untranslated
The most popular Russian-language TV channel: channels
RBC-TV

Source: J’son & Partners Consulting, company data

Operator Pay TV channel bundling by categories, 2010
Adult; 1%
Entertainment;
Education; 20% 25%

This fact highlights a considerable difference
Music; 11%
Sports; 11%
between Russian viewers and their Western
counterparts who prefer movies and sports
Ethnic; 0,4%
Movies; 13% channels
Childish; 8%
Information; 9%

Source: cableman.ru

16


Forecasts of linear TV development in Russia by 2015
The definition of “digital dividend” Pay TV subscriber base dynamic in Russia, 2009-2015

digital dividend 40% 42%
25,0 45%
Spectrum

37%
Existing 32% 35% 40%
20,0 30% 35%
analogue Existing 27%
30%
channels program 15,0 25%
channels 21,1 22,5 23,6 20%
10,0 18,0 19,4
14,5 16,3 15%
5,0 10%
Analog Digital Time 5%
broadcasting Transition broadcasting 0,0 0%
2020 2009 2010 2011 2012 2013 2014 2015

Source: ITU

Source: J'son & Partners Consulting

By 2016 four of ten households will use pay TV

17


Forecasts of linear TV development in Russia by 2015
Forecast of Pay TV subscriber base structure in Russia by Federal Districts, 2009-2015
100%
SOUTH
90% FAR EAST

SIBERIA
80%
URAL
70%
NORTH CAUCASUS

60%
Central Federal District has the largest subscriber VOLGA
share and, according to estimated of J’son & 50%

Partners Consulting, the share of this district will NORD-
40%
be growing and by the end of 2015 will reach 37% WEST
of the total Pay TV subscriber base 30%

20%
CENTER
10%

0%
2009 2010 2011 2012 2013 2014 2015


18

Linear television in Russia

Mobile linear television
The subscriber base and penetration of mobile TV in Russia, thousand of people
6000 5772 10,8% 12%
5038 5772
6000 9,5% 12%
5038 10%
5000 4164
4164 8,1% 10%
4000 10,8% 8%
4000 3152
3152 6,2%
9,5% 8%
3000 2136 8,1% 6% 6%
1274 21364,4% 6,2% 3,5% 4,0% 4%
2000 2,9% 4,0%
2000 660 1274 2,9% 2,2% 3,5% 4%
4,4% 1,5% 2,9%
1000 0,9% 2,2% 2%
660 0,4%
1,7% 2,9%
1,7% 1,5% 2% 0%
0 0,9%
0,4%
2010E 2011F 2012F 2013F 2014F 2015F 2016F
0 0%
2010E 2011F 2012F 2013F 2014F 2015F 2016F
Subscriber base, thsd subs Penetration from cellular subscribers, % Penetration from wireless BBA subscribers, %

The dynamics of mobile TV subscriber base by FD, thousand of people 2010-2016
NORTH
CENTER NORD-WEST VOLGA URAL SIBERIA FAR EAST SOUTH
2016 CAUCASUS
1648 635 578 388 1091 409 640 383
367 131 235 137
2011
141 91 86 86

0 1000 2000 3000 4000 5000 6000

20

Non-linear TV in Russia

Closed systems
The main players of VOD market in closed systems
Providers Devices VOD type
TV sets PPV, NPVR
Beeline
Smartphones PPV, SVOD The main business model used by
TV sets PPV, NPVR
МТS

Megafon
Smartphones
Smartphones
PPV
PPV, SVOD
providers is PPV
AKADO TV sets PPV
Rostelecom TV sets PPV, NPVR, PVR, SVOD
Beeline TV sets PPV, NPVR
Source: companies data

Indicators of VOD in closed systems by devices in Russia, 2010-2011

PPV per unit of content, RUB, 2011 Number of subscribers, mln of people Number of projects
14
100 12
5,3
8 3 4
1,5 0,7 1,3 2 2
89
2010 2011 2010 2011
VOD for TV VOD for smartphones VOD for PC

22


Open systems
Shares of content segments at the Russian Forecast of Web TV market, million USD, 2010-2016
market, 2010 music
non-linear 8%
Mob TV
4% games and
17
TV applications
broadcasting in the 9
Market volume is 6% vendors
shops 4
1 799 mln USD information
12% 0,1 0,2 0,72 1,7
3% RBT
pictures 41%
6% 2010 2011 2012 2013 2014 2015 2016
games
20%


Video advertising market structure in 2010, million USD; %
Rutube.ru

6,54 4,9 Tvigle
According to forecasts of J’son & Partners Consulting, 24% ВГТРК
Internet video advertising market in Russia will increase from 32% Mail Group

2.4% of Internet advertising market in 2010 to 12% in 2016. It 2,5
Smotri.com
Ivi.ru
corresponds with the gap in share of video advertising in the 0,2 12% Russia.ru
structure of internet advertising market as a whole of USA 1%
0,8 Zoomby
indicators for three years. 0,9 1,2 1,8 Другие
4% 1,4
Others
Others
5% 6% 9%
7%
23


Open systems
Successful projects of paid open online-cinemas

GetMovies.RU
NOW.RU Project start: 2006
VIDEO.RU
Project start: March, 2011 The first full-fledged legal digital video store in RuNet.
Project start: July, 2007
In July, 2011 the portal has signed an agreement with the Daily audience is 50,000 users.
Video.ru became the first portal to offer video content on
company "Russian World Studios“; due to that for the first The only project that offers HD Ready video.
the terms of the unlimited access.
time in Russia films will be legally available online earlier
than in cinema theatres

OMLET.RU TRAVA.RU
Project start: May, 2009 Project start: June, 2010
Omlet.ru became the only Runet web site, providing the Multimedia portal of licensed entertainment content "Trava.ru"
possibility of online-broadcasting and purchase of the is available on browsers and all popular mobile platforms.
content on the VOD model without advertising. Project is based on "cloud technology".
Source: companies’ data

24


Forecasts of Non-linear TV development in Russia by 2015
Forecast of subscriber base and revenue from the sale of services and terminal equipment for Non-
linear60 2009-2015
TV, 200 185,72 70
171,2 17751,6
180
159 165
152,7 156 46,5 51,6
60
50 160
41,1 46,5
35,7 50
140 30,5 41,1
40
200
120 35,7 40
171,2 185,72 30,5
30
150 100
25,6 30
80
18,9 159 165 177
100
20 25,6 152,7 156
60 20
50
10 18,9
40
10
20
00 0 0
2009 2010 2011 2012 2013 2014 2015
2009 2010 2011 2012 2013 2014 2015

Sales of services and terminals, mn USD Non-line TV subscriber base, mn people


Revenue from the sale of non-linear TV services in 2010 amounted to only 0.4% - 0.8 million dollars.
This is primarily due to the newness of the format, poor consumer culture of paid digital content and
the absence of its broad relevant base.

25

Questions are welcome!

DESIGNED BY J’SON & PARTNERS 26

Television and on-demand audiovisual services in the Russian Federation

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