Legal Russian VOD Market Shows Rapid Growth

Moscow Russia Aerial View - H 2013
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Moscow Russia Aerial View - H 2013

Sales of legitimate movie downloads topped $44 million in first six months of this year

Russia's market for Video on Demand (VOD) services is set to grow fourfold this year if trends seen in the first half of 2014 continue, according to a report released today.

The new report, by the European Audiovisual Observatory, draws on the latest research from leading analysts Nevafilm Research, Universe Consulting and IKS-Consulting. It shows that Russians increasingly prefer to pay for VOD services rather than buy DVDs and other home video products.

Two years ago VOD sales totaled an estimated 1.13 billion rubles -- around $36 million at 2012 exchange rates. Today the market for the first six months of 2014 alone was worth 2.32 billion rubles, according to IKS Consulting. If buying trends continue, that could mean, in local currency terms, that the Russian VOD market will have grown fourfold by the end of the year. The ruble's steep depreciation against the U.S. dollar, however, means dollar growth will be lower. So far this year the ruble has lost 35 to 40 percent of its value against the greenback.

The development is a sign that Russia's crackdown on online piracy is beginning to bear fruit. Officials have moved aggressively to shut down piracy websites offering illicit downloads that were deemed to be "repeat offenders."

The report also details developments in Russia's transition to digital technologies in cinemas, a development that is now almost complete. By mid-year 2014, three-quarters of Russian cinemas had a digital projector for every screen, and only 7 percent of theaters lacked a digital screen. All films released this year in Russia have been distributed in either digital or hybrid form.

Xenia Leontyeva, senior analyst at Nevafilm, told The Hollywood Reporter that the key reasons for VOD growth in Russia include the impact of antipiracy legislation and growth in the number of smart TVs, Internet penetration and IPTV subscribers.

Dec. 2, 8:37 a.m. This story has been updated with information from Nevafilm analyst Xenia Leontyeva.