Russian online video major IVI (ivi.ru) announced today a $250 million funding round involving top state and private investors. This is one of the biggest deals of the past years on the Russian tech scene, and an all-time record in the online video segment.
The consortium of investors includes several big names, combining two major state-owned financial organizations — VTB Bank and sovereign fund RDIF — with two private firms linked to Russian billionaires: Millhouse Capital, which manages the assets of Roman Abramovich, and AG Invest, which is owned by industrial magnates Alexander Abramov and Alexander Frolov.
Three venture and private equity majors are also involved: Baring Vostok, Flashpoint Capital and RTP Global. The former, a leading private equity firm investing mainly in Russia and neighboring countries, has made the news since its founder Michael Calvey was arrested in a controversial case in 2019. Flashpoint (formerly known as Buran Capital) is an international venture firm operating essentially in Central and Eastern Europe, Finland and Israel. RTP Global is an international venture fund with Russian roots (previously known as Ru-Net), but rarely investing in Russia.
Baring Vostok, Flashpoint Capital, RTP Global and the RDIF took part in previous IVI equity funding rounds, including the latest one in 2019.
The company did not disclose any details of the $250 million round, but Forbes Russia reports a valuation “slightly under $1 billion,” citing an unnamed investment banker.
IVI said it will use the fresh funding “to further expand [its] content offering and production of own content, as well as further development of IVI’s advanced technological platform and marketing initiatives.”
Politically incorrect IPO
The company declined to comment on its IPO plans, which were leaked last year with a confidential NASDAQ listing procedure initiated in Nov. 2020. The operation was suspended just weeks later as Russian lawmakers discussed a draft legislation that would establish restrictions to foreign ownership of online video platforms — no more than 20% — which came as no surprise in the current Russian political context.
However, in April 2021, a revised version of the draft law was announced under pressure from industry lobbyists. Instead of direct restrictions in terms of foreign ownership, the lawmakers now consider mandating other ownership and governance mechanisms that would be compatible with international listings while still addressing government concerns that domestic online video platforms might be controlled one day by foreign shareholders. According to Russian industry media, this new scheme is inspired by the precedent of Yandex, the NASDAQ-listed Russian digital giant which underwent a deep restructure in 2019 due to similar government pressure.
The future will tell how IVI will adapt to the expected new legal environment, and how this may ultimately impact the company’s activity and attractiveness in the eyes of international investors.
Strong growth amid Covid lockdown
Citing TMT Consulting data, IVI touts itself as the number one online video streaming platform in Russia with a market share of mote than 30% in 2020. Its audience exceeds 50 million unique monthly users, who enjoy a catalogue of more than 100,000 content items. These are provided by some 400 Russian and international studios, including six Hollywood majors, according to the company.
IVI told East-West Digital News its revenue reached 8.8 billion rubles in 2020 ($121 million at the average exchange rate of the year), up 44% from 2019.
In total, according to TMT Consulting, Russian OTT online video services generated 27.8 billion rubles ($383 million) in 2020, up 66% from 2019. This strong growth is attributed to the impact of the Covid-19 lockdown last year.
Another estimate from Telecom Daily puts market size at 38.94 billion rubles in 2020 (nearly $540 million), up 52% from the previous year.
The market is dominated by domestic platforms IVI, Okko, Wink, Kinopoisk, Megogo and Amediateka alongside foreign players YouTube, iTunes and Google Play. Telecom Daily confirms IVI’s leadership in 2020, but attributes to the company a mere 22.5% market share in terms of revenue, down from 25% in 2019. Okko, YouTube, Wink and Megogo also saw their market share decrease to 13.6%, 9%, 7.3% and 6.6%, respectively, while Netflix jumped from 4.% in 2019 to 8.4% in 2020.
At the beginning, the business model of Russian online video platforms relied primarily on advertising revenues. However, user-generated revenues now exceed advertising revenues.
This story was updated on May, 27 to take into account the latest developments. An adapted version appeared in The Moscow Times, an editorial partner of East-West Digital News.
