Russian Pay TV Market Realities and Trends Discussed at the CSTB.Telecom&Media’2016 Forum
Russian Pay TV Market Realities and Trends Discussed at the CSTB.Telecom&Media’2016 Forum
The 18th international exhibition and forum CSTB.Telecom&Media, 2016 brought together leading representatives of the TV and telecommunications industry at the Crocus Expo centre to discuss the results of 2015 and the challenges facing the industry in 2016. Gathering at a time of dramatic changes in the economic environment that has sent shockwaves through the industry, delegates actively participated in the business programme of the conference, panel and lobby discussions, whilst manufacturers displayed their latest technological achievements on the exhibition floor, where traditionally they demonstrate their powerful innovative potential; it is a hallmark event showing the best and latest in TV and telecommunications technologies. During the 3 day event, leading market players shared their ideas on how to build a TV and telecom business in a declining margin environment. The exhibition was visited by 24,273 people, and 400+ brands from more than 29 countries were represented.
The expectations of leading Russian media companies and pay TV providers at the start of the year was the focus of the round table discussion, New Business Model in TV and Telecom Operations in a Declining Income Environment, which opened the business program of the CSTB. Telecom & Media’2016 international exhibition and conference. The discussion was moderated by president of the Association of Cable TV of Russia (AKTR), Yuri Pripachkin, and head of MTV Russia, Yana Churikova, (VIACOM). The list of panelists included Leonid Levin, chairman of the State Duma committee for information policy, information technology, and communications; Mikhail Kovalchuk, CEO of Signal Media; Kirill Lysko, CEO of Digital TV; Sergei Nazarov, president of AKADO; Andrei Semerikov, CEO of ER-Telecom Holding; Alexei Kholodov, CEO of Tricolor TV; Natalya Bratchikova, director of marketing department for fixed line and TV business of MTS; Kseniya Drozdova, deputy CEO for business development of the Russian Satellite Communications Company; Nikolai Orlov, regional vice president of Eutelsat S.A.; Mikhail Demin, CEO of NTV-PLUS and Alexei Byrdin, CEO of Internet-Video Association. The Russian pay TV market grew by 11% in 2015 (with sales of RUR 68 billion), and the client base increased by 6% (to more than 39.6 million people). The expectations for 2016 included slower growth rates due to the economic crisis but with continued technological advances and changes in economic models. In an overview of the government perspective, officials pointed out that the growing pay TV market was a great responsibility, and should be regulated.
The delegates shared their principal concerns in 2016: an on-going battle against piracy, where the Russian Institute of Internet Development is expected to play a major role; price wars between operators (cable or satellite TV channels should not be priced lower than broadcast TV); and dependence on exchange rate fluctuations (where imports of foreign equipment and content are involved). A lack of clearly defined concepts and regulations was quoted as the main obstacle hampering the development of OTT services. Intellectual property rights should be adequately protected, and official statistics on the consumption of digital content should be maintained.
The delegates spoke in favour of aligned efforts to increase ARPU as an important factor for the development of the industry. The government anti-monopoly regulations should set an equal playing field for Russian and international platforms. A draft law has been filed in the State Duma to have VAT apply to foreign as well as domestic services, including goods and content sold through the internet.
One of the key outcomes of the CSTB round table was direct dialogue between lawmakers and the business community. The proposals voiced by businesses have been captured by AKTR and will be communicated to the State Duma committee for information policy, information technology and communications.
Another panel discussion focused on the Russian satellite broadband and multimedia markets, and new service offerings of the satellite TV market operators. The panel was moderated by Oleg Kolesnikov, deputy director of NTV-PLUS, and the speakers came from the largest Russian and international satellite companies. The CEO of Gazprom Space Systems, Dmitry Sevastyanov, described their Yamal TV and broadband communications system. The system includes a telecommunications centre, a satellite digital TV centre, regional communications and TV networks and a constellation of 4 satellites (YAMAL-202, YAMAL-402, YAMAL-401, and YAMAL-300K), which provide satellite broadband service to telemetry systems and internet access via user terminals. The company plans to expand its constellation by launching YAMAL 601 in 2018 and YAMAL 501 in 2020. Sergei Plotnikov, director of ICT and multimedia services of the Russian Satellite Communications Company, spoke about the experience of his company working in the new economic environment. The company managed to maintain high service quality, create a unique offering for each of the target audiences, expand the client base by entering new geographical areas, and help customers expand their business. Nikolai Orlov, regional vice president of Eutelsat S.A., presented his company’s development plans, which include creating and launching six new satellites by 2019. Eutelsat 9В had been launched already, and two would be sent into orbit in the first quarter of this year. In 2018, Eutelsat will launch a unique Quantum satellite – the first new generation satellite capable of operating at any orbital position with any coverage areas. Tatyana Scherbakova from the Satellite Company presented their CADENA UMK-587 unit, a unique device, which combines TV viewing functions, a security module, elements of a smart home and Android-based media-centre. The head of telecom services at Orion Express, Andrei Trufanov, spoke about the problems facing the pay TV market, including declining advertisement income, too many players, low ARPU and 20 must carry channels, which covers most of the thematic categories. To overcome the problems, he offered an integrated and effective solution covering a complete operational cycle, from content preparation to distribution. In her presentation, Yulia Shakhmanova, CEO of Satellite Television Company, said that the Russian media market had come to a point where all stakeholders should align their efforts. The market needs to be cleared of any grey business. Many channels must also improve the quality of their TV product and the additional expenses that are required may be compensated through outsourcing arrangements.
For the first time this year, CSTB held a Forum of Regional Operators and Broadcasters, which brought together Vitaliy Korneyev from Vidicon; Mikhail Fominykh from Sevencom; Alena Aksenovskikh from Intersvyaz; Tatyana Abramovskaya and Andrei Urlin from the ROSTELESET Association; and Mikhail Pashkov and Leonid Buslaev from NADIKS Association. The meeting was moderated by Oleg Grishchenko, ROSTELESET president. The key discussion topic was the role played by regional operators in the development of the Russian TV market, but some practical issues were also discussed. The regional operators currently account for 30% of the Russian TV market. They know their geographical market better; they are closer to their clients and can customize a better offering to their audiences and, unlike large national operators, have fewer issues with contractors. The speakers covered such topics as contractual relationships with owners of content, regulator relations, managerial accounting, social events, handling personal data and security issues.
The panel, Telecom & Media, on the second day of the CSTB 2016 exhibition and conference discussed trends in the telecom industry. Moderated by Vitaliy Shub, advisor to the TransTeleCom president, the panel featured the following speakers: Dmitriy Kolesov, J’son & Partners Consulting; Denis Kuskov, TelecomDaily; Dmitriy Kulakovskiy, MGTS; Dmitriy Filippov, SPB TV; Alexei Churin, SAP; Yevgeniy Mikheichev, the National Satellite Company (Tricolor TV); Denis Rychka, Acado Telecom; Mikhail Golubev, Huawei; Pavel Tolyupov, TVEVT; Yekaterina Yakusheva, VKontakte; Oleg Dronov, OneAPI and Mikhail Popov, CTI. The panelists agreed that content was the driver of growth for the media and telecommunications markets. The participants spoke about the following trends: movement towards IoT, the new role of the smart phone, increased video consumption from portable devices, and convergence of wired and wireless broadband networks.
The analysts presented the results of 2015. The broadband access market was 29.45 million households, with sluggish growth of 700,000 against the previous year. The penetration rate in Russia was 54%, with 68% of those connected using the services of one of the top five operators. The competition is expected to grow, the bit rate to increase, and the prices to fall. There are two areas of organic growth: smaller cities with less than 500 thousand residents, and newly-built housing. The market of pay TV expanded to reach 39.62 million households (+2.02 million during the year). Penetration in Russia was 72%, with 90% of the users connected by one of the top five operators. The greatest demand continues to be for satellite TV and IPTV. Internet access remains the most expensive in the Far East. The least expensive and the fastest access is in Moscow and Saint Petersburg. Recommendations to the operators: manage client loyalty, offer personal approach and support, make packaged offerings and have a well-balanced tariff structure. Additional sources of revenue for regional operators may lie in cooperation with VOD services and online cinemas. Another suggestion was to “digitalize” the whole range of interactions with the client, from classical media advertisement to the point of sale, to understand the value of each client and improve efficiency at all points of contact. AKADO Telecom spoke about 3 problems: increased cost of equipment that they need to buy to implement an interactive platform (which AKADO Telecom plans to launch by the end of the year), higher price tag associated with foreign-made content and piracy.
Among successful cases, MGTS increased their broadband access client base by 2.6 times in 2 years and is growing ARPU by 20 to 25% every year. Its GPON penetration is now 33%. The company has completed a restructuring of its business processes to improve the quality of its product and convenience for the users, it has also created a user-friendly 3D interface MTS TV. In satellite TV, the trend is Ultra HD broadcasting with the National Satellite Company (Tricolor TV) announcing the launch of test broadcasts of two Ultra HD channels.
The panel also spent quite some time discussing the internet TV and the presence of TV channels in the digital space. There are still issues with legal broadcasting of must carry channels in OTT. The OTT TV market today is more than 3,000,000 people in Russia watching broadcast channels. The trend is the growing role of video content, which is now the main driver for the operators and there is a fast shift of focus to mobile devices. The participants also spoke about the consumption of content through social media which often have bigger audiences than the main channels and how to use social media platforms to attract target traffic to an operators channel or site. Speaking about the longer term, a combination of modern technologies and internet platforms will set the stage for the production of new forms of media content and the future internet TV will bring together operators, content providers and users into a single powerful TV network.
The same day, video service market prospects were discussed by the panel Interactive Video Services in CTV, IPTV and ОТТ. The speakers were Dmitriy Kolesov, J’son & Partners Consulting; Sergei Belokopytov, Vi Analytical Center; Alexander Kiselevich, Smotreshka; Anton Petukhov, Vi; Kirill Filippov, SPB TV; Konstantin Kolovskiy, Huawei; Vadim Makmatov, SmartLabs; Alexander Atsik, E-Contenta; Victor Chekanov, MEGOGO; Anastasia Kiseleva, Net By Net Holding; Tatyana Moskaleva, Microimpulse; Alexander Shirokikh, Imagine Communication; with Alexei Byrdin, the CEO of Internet Video Association, acting as the moderator. The focus was again on the ОТТ market, although this market currently remains behind linear broadcasting in terms of coverage, cost and content. The market shows a steady growth of the audience consuming TV content and video services through the internet (the process is, of course, facilitated by increased availability of Smart TVs and the growing number of portable digital devices). Advertisement budgets are showing a tendency of moving towards online and market players are keen to increasingly monetize their audiences via the internet. However, pirate sites and the easy access to free content, all combined with the lower purchasing power of Russian consumers, continue to create problems. There is also a range of regulatory and licensing barriers for the broadcasters and channels: the status of OTT TV services has not been clearly defined, there are broadcasting rights issues, licensing problems with TV content for Catch-up and VoD, difficulties in organizing broadcasts of regional versions of channels and no TV content statistics for the internet for monetization purposes.
Online services were discussed in another panel of the conference, Online Cinemas and Operator VoD Services, which involved Anna Vorontsova, Vi Analytical Center; Alexei Sechkin, Megafon; Alexander Osipov, NGENIX; Andrei Gromkovskiy, Twentieth Century Fox Home Entertainment; Olga Filipuk, IVI; Denis Gorshkov, AMEDIA TV; Marina Sourygina, Tvzavr Online Cinema; Sergei Storozhev, Channel One, with Alexei Byrdin again moderating. The session acknowledged considerable growth in the consumption of movies, series and TV shows through the internet, supported by Smart TV technology. There are currently 4.3 million households with Smart TV connections, and the potential user base is 11 million people. This expansion comes at the expense of linear TV, which is waning in popularity, DVD format which is becoming obsolete and Blu-Ray players and disks which are expensive. With their growing popularity, online cinemas and VoD services should focus more on personalization to offer better and more relevant content. In terms of delivery, CDN technology is gaining in popularity, which preserves the quality of delivered content (SD, HD and Ultra HD) without detriment to throughput.
The session called Monetization of Cable Operator Services was moderated by chief editor of Kabelshik internet portal Yana Belskaya. The subject, monetization crisis in cable TV, sparked a lively discussion among the panelists Stanislav Pribylov, industry expert and delegates representing Smotreshka, IPTVPORTAL, iKS-Consulting, EPG Service, Ufanet and Vidicon. The range of discussed issues included how to make TV business profitable, lean production and how communications operators can organize it, what are the pay TV development trends, operators’ extra services and how to monetize them, services of the future (paid and free), hotel TV as a separate sales focus, pricing options, how to use innovative EPG to improve client loyalty and how to sell additional packages to the client through EPG.
On the final day of the forum, industry players were invited to visit the session Legal Advice. Telecom and Media Regulations, where the panelists discussed legislative changes in the industry in 2015, the legal aspects of the operation of telecoms and broadcasters, and the protection of intellectual property rights in the internet. The list of speakers included Olesya Kuznetsova, Orion Express; Valentina Lagaeva, Rostelecom; Mariya Novitskaya, Telecompas; and Pavel Katkov, KATKOV AND PARTNERS. The session was moderated by Yelena Gultyaeva, AKTR legal counsel. The panelists agreed that the legal and regulatory environment had become more complex in the industry in 2015, and the process would continue this year. One of the main changes in legislation was represented by amendments to article 19.1 in the law On Mass Media which deals with foreign participation in the capital of Russian mass media companies. In a positive move, amendments to article 429.4 introduced a definition of a subscription contract, article 426 of the Civil Code of the Russian Federation now defines the operation of a public contract and article 310 of the Civil Code of the Russian Federation now makes it impossible to unilaterally refuse to perform one’s obligations under a subscription contract. Among other things, one document under consideration right now is a draft law On Making Changes to the Civil Code of the Russian Federation to Improve the Mechanism to Collectively Manage Copyright and Related Rights. The panelists also exchanged information on court practice of cases under anti-piracy federal law №187-FZ, which had also been amended to include the provision on perpetual blocking of violating sites.
The session Multiscreen and Second Screen Services brought together Smotreshka, Orion Express, Huawei, SmartLabs, Touch Instinct and EPG Service, who shared opinion on the present and future of the technology. Marketing analyst Darya Feoktistova from iKS-Consulting presented information on trends in content consumption and market statistics. The number of home users of internet increased by 3.9%, and mobile internet, by 5.3% in 2015, with the audience of Runet now totaling 83.1 million people. Smart phones continue to lead sales, with 26 million devices sold, and followed by tablets (8.2 million) and Smart TVs (4.6 million.). There was a considerable increase in the usage of online cinema Apps on mobile devices and Smart TVs. An increasing number of smart phone Apps, higher penetration of connected devices and higher bit rates of internet access, all contributed to the development. Darya Feoktistova estimated the size of the Russian online cinema market in 2015 at 3.82 billion rubles. The discussion topics on the agenda included improving user loyalty and ARPU of a federal satellite operator through the introduction of a multiscreen service; international best practice of delivering TV content to mobile devices; development trends in Russian TV applications and advantages, implementation challenges and operation of multiscreen projects. These and other subjects were discussed by the panelists, and were moderated by Nikolai Orlov, member of the editorial board of TELE-Sputnik magazine, and Alexander Chernyaev, leading manager at Huawei.
The session TV Channel as a Commodity. Creating a Product Offering discussed marketing promotion tools for channels. As in previous years, this was moderated by Yana Belskaya, editor-in-chief of Kabelshik internet portal. The panel was made up of Regina Yurkina, MediaBrand; Sergei Koshlyakov, Digital Television (digitalrussia); Yaroslav Gorodetskiy, СNDvideo; Yelena Potanina, Solution Master; Polina Zimina, SHANDESIGN studio; Lili Sherozia, Channel 3; and Yaroslav Polyakov, Lifenews. Although statistics show a global decline in traditional television viewing of 13%, cable, satellite, and OTT operators have to spend a lot more in promotional activity than the traditional channels, because they have to sell services in addition to content. Unlike Europe, Russian traditional television audience was exceptionally high in 2015, says TNS. Digital TV also reached record heights. Digital Television (digitalrussia) company shared its success story on how it promoted content in the digital space. First, it employs all channels to deliver content to the user (5 screens), including cartoons and games for mobile devices, which creates trusted relations with the user in 5 environments. But it also communicated in a broader environment, and went beyond the media space to promote the brand and image of the company on goods for children, apparel, souvenirs, etc. The company also produces shows and movies and delivers them to a minimum of two channels in one segment (rather than one exclusive channel), to enhance brand awareness and encourage the audience switch from channel to channel, and generally grow the audience.
Another possibility in building good relations between a TV channel and the audience is creating the right architecture of space between the shows. Air time will become more efficient with the use of various promo tools, including dynamic tags, menus, promo signs, etc. These tools help structure the interaction with the audience and make for two-way communication. The main objective is to know the needs and interests of one’s audience. This helps increase viewing time, and promote the product and the brand.
Content as the driver for the industry has been emphasized throughout the three days of the CSTB. Telecom&Media exhibition and forum. In addition to the quality of its material, content should also look nice. SHANDESIGN studio spoke about its projects for leading channels and TV companies, including a rebranding project for Bridge Media, the Dance project at TNT channel, the launch of Match TV sports channel and other significant and challenging projects. The panel also discussed how to make a good commodity out of a regional channel, how to monetize TV channel’s internet traffic and how the new media works (using Lifenews TV channel as an example).
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The Bolshaya Tsifra national multi-channel digital TV award ceremony is held annually during the CSTB.Telecom&Media international exhibition and forum. The project brings together the key market players and promotes multi-channel digital TV in Russia and the CIS countries. The winners of the awards are determined by a vote by a professional jury and online voting by the viewers.
Organizer of the CSTB. Telecom & Media exhibition and conference: MIDEXPO exhibition company
The event was supported by the RF Ministry of Telecom and Mass Communications, The Federal Communications Agency, the Department of Information Technology of Moscow, the RF Chamber of Commerce and Industry
General Partner: The Association of Cable TV of Russia
Strategic partner of the exhibition and award: Tricolor TV
Platinum sponsor of the forum: Huawei
Forum partners: Beeline and Viacom
The 19th international exhibition and conference CSTB. Telecom & Media’2017 will take place from February 7 to 9, 2017 at the Crocus Expo center. To participate in the exhibition and conference, please contact the Organizer. For more information, please visit: www.cstb.ru.