Change is in the air for a highly dynamic though still small segment of Russia’s TV industry.
Independent legal online video OTT services are seeing their revenues rise rapidly but are for the most part still unprofitable. What is more, they are facing the prospect of being regulated, with the Media Communications Union (MKS), representing leading telcos and media holdings, pushing for – amongst other things – the foreign ownership level of such services being capped at 20%.
While the latter would only bring the services into line with the recently imposed ownership limits on media companies, including TV stations, in Russia, the online video OTT sector fears any restrictions placed on it will restrict its growth, and quite possibly also independence.
As throughout the rest of Central and Eastern Europe, Netflix made its debut in Russia at the beginning of this year. Although its lack of local and indeed localised content means it is unlikely to have a major impact on the Russian market anytime soon, online video OTT services have argued it is competing unfairly by not paying any Russian VAT.
This prompted moves to introduce new regulations for the OTT sector, with the process overseen by the MKS. However, that in turn raised concerns such regulations will be used to put restrictions on the sector.
It should also be born in mind that despite the success of independent legal online video OTT services in Russia, with the market leaders Ivi, Okko and Megogo in particular making impressive progress, larger players also want their share of the OTT cake. By this autumn, we will probably know if First Channel, Gazprom-Media, VGRTK, National Media Group (NMG) and CTC Media have reached an agreement to launch a local equivalent of Hulu. Should they fail to do so, all are likely to press ahead with launching their own online platforms.
At this stage, only two things look likely. First, the smaller players will soon find themselves operating in a regulated environment. Second, there will be some consolidation in the market.
As for Netflix and its prospects in Russia, only time will tell.
