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

3

Источник: J’son & Partners Consulting

Total households – 52,2 mln (100%)

Households with TV – 50,6 mln (96,9%)

Cable TV 9,6 mln (18%)

IPTV

Satellite TV 6,3 mln (12%)

Pay TV – 16,3 mln (31%)

Source: J’son & Partners Consulting

0,44 mln (1%)

Every third family in Russia watches pay TV.

4

Classification of TV services and technologies

Marketing and technological classification of TV services

5

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

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”.

Pay TV is cable, satellite and IPTV!

Definition is twice incorrect. Firstly, there are terrestrial services of “pay TV”, for instance in

DVB-T networks. Secondly, cable and satellite TV provide such types of services that include

free channels only.

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

well.

Pay TV is TV with conditional access! Definition is close to the real situation in the Russian TV market, however there are also

examples of “conditional-free TV” with conditional access.

The example of linguistic confusion: What is pay TV?

☹

☹

☹

☹


6

Free, Conditional-free and Pay TV services

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.


Free TV Conditional-free TV Pay TV

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


Type of TV services

Free channels

Technical support

Paid channels

Marketing and technological classification of TV services Marketing and technological classification of TV services

Маркетинговая и технологическая классификация ТВ

7

Linear and non-linear TV

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


User terminals Linear TV Non-linear TV

Closed systems Open systems Closed systems Open systems

TV

PC, PAD

Smartphones

Web TV

TV to mobile

VOD for TV Cable TV

Satellite TV

Analogue terrestrial TV

Connected TV

Web-portals VOD for PC

VOD for smartphones

Digital TV

Video to mobile

IPTV

IPTV

OTT


8

Linear terrestrial TV

54%

29%

24%

49%

40%

16%

33%

62%

21%

28%

11%

29%

5%

14%

16%

14%

6%

5%

11%

12%

5%

3%

4%

5%

4%

Russia

Great Britain

Germany

Poland

Japan

TV Print Internet Outdoor Radio


9

Analogue broadcasting in Russia

Terrestrial broadcasting is financed by state budget and advertisers’ fees

Shares of advertising expenditures of countries, 2010


Average daily audience federal channels, October, 2011

Coverage of Russian population by terrestrial analogue broadcasting

16,4 15,5 15,3

8,1 7,9

3,8 3,4 2,3 2,1 2,1 1,9 1,8 1,6 1,6 1,3 0,9 0,8 0,8 0,7 0,2

0,0 2,0 4,0 6,0 8,0

10,0 12,0 14,0 16,0 18,0

98,8%

96,7%

73,2%

56,1%

33,0% 5 channels

4 channels

3 channels

2 channels

1 channel

Source: Rospechat’


10

Switching to digital terrestrial broadcasting

To overcome the above mentioned problems, it seems appropriate to examine and use the experience of countries that have successfully completed the transition to digital broadcasting.

Financial risk Lack of overall detailed action plan Delay of legislative regulation and absence of

digital standards Compressed transition period Substantial technical problems with

implementation of FTP Insufficient information campaign to support

the transfer to digital format

Risks of FTP implementation:

Federal Target Program (FTP) for the development of broadcasting for 2009-2015 was adopted in November 2009

Ministry of communication has expressed the need to transition to digital broadcasting standards

1997

1998-1999

R & D work "Development of a comprehensive project to establish a system for digital television broadcasting in Russia"

2000

The first in Russia zone of experienced digital terrestrial TV in Nizhny Novgorod

2001

Experimental Zone for digital terrestrial and cable TV in St. Petersburg

The first samples of the digital set-top box DVB T "Elf"

2004

Russian Federation Government Decree "About introduction of the Russian Federation in the European system of digital television DVB»

2005

The first edition of the project "Development Programme in the Russian Federation the European system of TV broadcasting DVB»


11

Partners and regional broadcasting

Federal HeadEnd

Local Broadcasting

Network

Local Broadcasting

Network

«Single upstream»

Federal HeadEnd

Regional HeadEnd

Local Broadcasting

Network

«Double upstream»

Source: NAT

TV channel Number of

partners

Subjects of

RF

Regional programs,

hours

СТС 191 83 2,6

ТNТ 522 79 3

RЕN-TV 1100 80 3

ТV-Center 241 33 1,6

Zvezda 335 77 3

Three groups of central channels: - Russian universal channels (“Channel One”, “Russia 1”, NTV, “Channel 5”), - Federal network channels (“TV-Center”, CTC, TNT, “REN TV”), one of which is universal - “REN TV”, - Specialized terrestrial channels (“Russia 2”, “Russia K”, “Domashniy”, “MUZ”, MTV, “TV3”, “Peretz”, “Russia 24”, “Euronews”, “2x2”, “Zvezda”, “Semerka”).

12

Linear non-terrestrial TV


Russian TV market structure by technologies, 2010

Dynamics of Pay TV market volume in Russia and Federal districts, 2009-2010


Current Pay TV subscribers base evolution in 2010 – H1 2011, million households

13

2010 H1 2011

Total 16,3 18,1 Satellite 6,3 7,5

Cable 9,6 9,9

IPTV 0,44 0,7

Source: J’son & Partners Consulting, companies data

329 411

111

137

224

249 31

39

106

116 95

107

47

56

80

89

1023

1203

0

200

400

600

800

1000

1200

1400

2009 2010

SOUTH

FAR EAST

SIBERIA

URAL

NORTH

CAUCASUS

VOLGA

NORD-WEST

CENTER

Pay TV market

volume in RF,

mln USD

mln

US

D

Satellite

34%Fix

66%

Analog

cable

85%

Digital

cable

11%

IPTV

4%

Source: J’son & Partners Consulting fieldwork data, companies data

14

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%).


0,5

1,9 1,7

1,5 1,6 1,6 0,2

0,2 0,2

0,2 0,3 0,3

0,1

0,1 0,1

0,5 0,6 0,6

2007A 2008A 2009A 2010A 2011E 2012F

Satellite Cable IPTV

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Subscribers’ equipment

Sales of subscribers’ equipment in physical terms by types, mln units

Digi Raum

Electronics

35%

General Satellite

28%

HUMAX

11%

Smartlabs

7%

Elecard

4%

ZTE

3%

AMINO

3%

ZYXEL

2%

COSHIP

2%

Realcube

2%

Другое

3%Другой

15%





Sales of subscribers’ STB equipment in money terms, mln USD

The share of leading players of the Russian market of STB equipment The structure of sales of subscribers’ equipment in 2010


90

246

171 185 151 152

2007A 2008A 2009A 2010A 2011E 2012F

Russian-language channels

Untranslated channels

Translated channels

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Digital non-terrestrial linear television

Operator Package Pay TV channels breakdown by provenance and localisation degree

Source: J’son & Partners Consulting, company data

The most popular translated TV channels: Animal Planet, Discovery Channel, National Geographic

The most popular untranslated TV channel: BBC World

The most popular Russian-language TV channel: RBC-TV

Operator Pay TV channel bundling by categories, 2010

Source: cableman.ru

This fact highlights a considerable difference between Russian viewers and their Western counterparts who prefer movies and sports channels


Entertainment; 25%

Sports; 11%

Ethnic; 0,4%

Childish; 8% Information; 9%

Movies; 13%

Music; 11%

Education; 20%

Adult; 1%

19%

26% 55%

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Forecasts of linear TV development in Russia by 2015

The definition of “digital dividend”

Source: ITU

Pay TV subscriber base dynamic in Russia, 2009-2015

Source: J'son & Partners Consulting

By 2016 four of ten households will use pay TV


Existing analogue channels

Existing program

channels

digital dividend

Spec

tru

m

Analog broadcasting Transition

Digital broadcasting

2020

Time

14,5 16,3 18,0 19,4 21,1 22,5 23,6

27% 30%

32% 35% 37%

40% 42%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

0,0

5,0

10,0

15,0

20,0

25,0

2009 2010 2011 2012 2013 2014 2015

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Forecasts of linear TV development in Russia by 2015

Forecast of Pay TV subscriber base structure in Russia by Federal Districts, 2009-2015


Central Federal District has the largest subscriber share and, according to estimated of J’son & Partners Consulting, the share of this district will be growing and by the end of 2015 will reach 37% of the total Pay TV subscriber base


CENTER

NORD-

WEST

VOLGA

URAL

SIBERIA

FAR EAST

SOUTH

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013 2014 2015

NORTH CAUCASUS

19

Mobile TV

Linear television in Russia

20

Mobile linear television

The subscriber base and penetration of mobile TV in Russia, thousand of people



367

CENTER 1648

141

NORD-WEST 635

131

VOLGA 578

91

NORTH CAUCASUS

388

235

URAL 1091

86

SIBERIA 409

137

FAR EAST 640

86

SOUTH 383

0 1000 2000 3000 4000 5000 6000

2011

2016

The dynamics of mobile TV subscriber base by FD, thousand of people 2010-2016

660

1274

2136

3152

4164

5038

5772

0,4%0,9%

1,5%2,2%

2,9%3,5%

4,0%

1,7%

2,9%

4,4%

6,2%

8,1%

9,5%

10,8%

0%

2%

4%

6%

8%

10%

12%

0

2000

4000

6000

2010E 2011F 2012F 2013F 2014F 2015F 2016F

Subscriber base, thsd subs Penetration from cellular subscribers, % Penetration from wireless BBA subscribers, %

660 1274

2136

3152

4164 5038

5772

0,4% 0,9% 1,5% 2,2% 2,9% 3,5% 4,0%

1,7% 2,9%

4,4%

6,2%

8,1%

9,5% 10,8%

0%

2%

4%

6%

8%

10%

12%

0

1000

2000

3000

4000

5000

6000

2010E 2011F 2012F 2013F 2014F 2015F 2016F

21

Non-linear TV

Non-linear TV in Russia

22

Closed systems

12 14

3 4 2 2

2010 2011

VOD for TV VOD for smartphones VOD for PC

Source: companies data

Providers Devices VOD type

Beeline TV sets PPV, NPVR

Smartphones PPV, SVOD

МТS TV sets PPV, NPVR

Smartphones PPV

Megafon Smartphones PPV, SVOD

AKADO TV sets PPV

Rostelecom TV sets PPV, NPVR, PVR, SVOD

Beeline TV sets PPV, NPVR

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


The main players of VOD market in closed systems

PPV per unit of content, RUB, 2011

1,5

5,3

0,7 1,3

2010 2011

Number of subscribers, mln of people Number of projects

89

8

100

The main business model used by

providers is PPV

23

Open systems

Shares of content segments at the Russian market, 2010

4,9 24%

2,5 12%

1,8 9% 1,4

7%

1,2 6%

0,9 5%

0,8 4%

0,2 1%

6,54 32%

Rutube.ru

Tvigle

ВГТРК

Mail Group

Smotri.com

Ivi.ru

Russia.ru

Zoomby

Другие Others Others


Market volume is 1 799 mln USD


According to forecasts of J’son & Partners Consulting, Internet video advertising market in Russia will increase from 2.4% of Internet advertising market in 2010 to 12% in 2016. It corresponds with the gap in share of video advertising in the structure of internet advertising market as a whole of USA indicators for three years.

Forecast of Web TV market, million USD, 2010-2016

Video advertising market structure in 2010, million USD; %


music 8%

RBT 41%

games 20%

pictures 6%

information 3%

TV broadcasting

6%

non-linear Mob TV

4% games and applications

in the vendors shops 12%

2010 2011 2012 2013 2014 2015 2016

0,1 0,2 0,72 1,7 4

9

17

24

Open systems

Source: companies’ data

NOW.RU Project start: March, 2011

In July, 2011 the portal has signed an agreement with the company "Russian World Studios“; due to that for the first time in Russia films will be legally available online earlier than in cinema theatres

VIDEO.RU Project start: July, 2007

Video.ru became the first portal to offer video content on the terms of the unlimited access.

GetMovies.RU Project start: 2006

The first full-fledged legal digital video store in RuNet. Daily audience is 50,000 users. The only project that offers HD Ready video.

Successful projects of paid open online-cinemas

OMLET.RU Project start: May, 2009

Omlet.ru became the only Runet web site, providing the possibility of online-broadcasting and purchase of the content on the VOD model without advertising.

TRAVA.RU Project start: June, 2010

Multimedia portal of licensed entertainment content "Trava.ru" is available on browsers and all popular mobile platforms. Project is based on "cloud technology".


0

50

100

150

200

2009 2010 2011 2012 2013 2014 2015

171,2 185,72

152,7 156 159 165 177

18,9

25,6

30,5 35,7

41,1

46,5

51,6

0

10

20

30

40

50

60

25

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-linear TV, 2009-2015


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.


171,2185,72

152,7 156 159165

177

18,9

25,630,5

35,7

41,1

46,551,6

0

10

20

30

40

50

60

70

0

20

40

60

80

100

120

140

160

180

200

2009 2010 2011 2012 2013 2014 2015

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

26

Questions are welcome!

DESIGNED BY J’SON & PARTNERS

Technology

Television and on-demand audiovisual services in the Russian Federation