A local player is leading the Russian paid video-on-demand (VOD) market, having recorded dynamic growth throughout 2014. Okko (formerly Play) offers a smart TV digital service that has taken a commanding lead in the paid segment, recording revenue twice the size of direct competitor iTunes in H1 2014, according to the latest research by J’son & Partners Consulting, a leading Russian tech consulting agency.
Through its iTunes model, Apple is a world VOD leader in electronic sell-throughs, responsible for around two-thirds of global unit sales of feature-length movies in 2013.
However, much like other major international Internet players, such as Google and Facebook, the US giant has been unable to capture a leading position on the Russian digital video market.
Strong growth proves Russian consumers are ready to pay for content
Okko’s rising revenues have been all the more impressive considering the predominance of pirated video content on the Russian market. Portals offering free and partly pirated content such as leading social media site Vkontakte (although owner Mail.ru Group is looking to legalize content) and torrent site RuTracker are extremely popular.
This market landscape has forced a number of VOD operators such as ivi.ru, Tvigle and RuTube to turn to an ad-based model – showing free, though not necessarily brand new, movies with advertisements.
By contrast, Okko, like iTunes, has built its success on new, licensed releases, with users paying for the latest Hollywood films, including premium content released at the same time as in the cinemas. The company is working with six major Hollywood studios and more than 50 European studios.
Market share of Russian OTT VOD sector (1H 2014)
Source: J’son & Partners Consulting, company data
The growing penetration of smart TVs, a booming digital video market and the rise of homegrown players like Okko are strong signs that Russian consumers are becoming more comfortable with paying for content, despite still high levels of piracy engagement. The attraction of viewing movies in full HD/3D with Dolby Digital Plus sound is swaying more users towards premium models.
However, Okko is looking to gain a greater foothold in the non-paid VOD market by expanding its everyday TV offering.
Okko was launched in 2011 under the name of Yota Play but following a major rebranding process and split from Russian telecom firm Yota the company continued operations under its present name from July 2014 onwards. The company is being financed by an injection of more than $30 million from a group of private investors, and focuses on delivering both a personalized OTT TV service and a premium VOD service for movies.
