The report “The prohibition and the replacement of Russian content in Ukraine. Prognosis and decisions” at the conference Telco Trends – 2016, Latvia
The prohibition of Russian TV channels in Ukraine is a topic that usually is not considered without political context. And this is wrong. Political decisions have launched certain market mechanisms used for all sorts of speculation so often that is hard to get to the heart of the process.
The Russian content prohibition should be considered on two levels: prohibition of a number of Russian TV channels broadcasting on the territory of Ukraine for violation of advertising law and information security of the country; and the prohibition of Russian content broadcasting by Ukrainian TV channels because it does not comply with the requirements of Ukrainian legislation.
According to the decisions of regulatory authorities 58 Russian TV channels disappeared from the Ukrainian air. Instead, new ones appeared: 21 Ukrainian and 18 European channels.
This situation greatly affected the market. It would be a mistake to evaluate what is happening using the black and white category, there are the winners and losers. One of the popular “expert” opinions was that Ukrainian pay-TV market decreased because of the Russian TV channels shutdown, subscribers began to leave en masse to pirated services and open satellite broadcasts where the Russian TV channels are available. Let’s try to analyze basing on research data whether this is true.
This is a difficult job to assess the financial performance of the Ukrainian market. According to Expert & Consulting, total revenue in UAH on the territory of Ukraine (except for the Crimea and the ATO area) has grown for more than 11 % within two years. On the other hand, in USD it decreased to 19 %. Revenue per user (ARPU) for the last year increased by 8 % in UAH, while in USD it decreased by 15 % … There are many influencing factors – subscribers pay in UAH, part of the market is related to USD (foreign content acquiring, etc.) and other part is not related, etc., – we should recognize that it is almost impossible to give a complete and adequate assessment of the financial indicators dynamics. In general, it is reasonable to assume that the income of the majority of market participants in the economic and political crisis has considerably decreased.
A bit easier to analyze the number of households. The subscriber base shows a negative dynamics – an average of – 4.5 % per year. These 4.5 % includes the audience which changed paid operators for pirates or open broadcasting, as well as demographic changes. The subscribers switch to pirates for various reasons: desire to save money during crisis, opportunity to watch illegal channels, etc. By the way, let’s talk about audience preferences. According to the latest ITK data, the most popular programs are domestic production, but not purchased in Russia.
It is difficult to predict and explain the behavior of a particular user, it is very individual, depending on the region, age, financial status… But I would suggest that a major reason to give up a paid services is unwillingness to pay, the audience dedication to Russian TV channels does not play a primary role in this process and is often exaggerated. Most of subscribers are rather inactive and don’t like to change anything, people in the western and central regions of the country didn’t watch Russian television often. However, of course, a certain percentage of the paid TV market is lost, what is good for pirates.
Analysis of changes in technology shares on the pay-TV market in Ukraine demonstrates global tendencies: transition of analogue TV subscribers to digital TV, and IPTV/OTT growth. We are talking about legal sector which does not broadcast prohibited TV channels, despite this it shows a subscriber base growth. The moral of the fable – you can and should earn without Russian TV channels.
Of special note is paid satellite TV: Xtra TV and Viasat DTH-platforms have changed their owners (Viasat have not fully finished the process yet), they were restructurized and have lost some customers during the transition period, so, the negative dynamics may not be indicative of market processes. Earlier Mediasat conducted a detailed review of these processes. On the other hand, the number of subscribers of NTV Plus Ukraine which mainly broadcasts Russian TV channels has not changed significantly in recent years despite extremely low prices during the crisis – UAH 5-7 per month.
If we compare the figures of the Ukrainian market with global ones, we can see that Ukraine is developing within the framework of global processes – the transition from analog to digital broadcasting and IPTV/OTT jump.
Who lost because of the Russian TV channels proscription? First of all, the Russian TV channels and their distributors. Ukrainian studios and TV channels that filmed content by the order of Russian channels and in cooperation with them also suffered from significant losses. There is no chances to get the same financial injections as Russians in the nearest future.
Who did win? Ukrainian TV channels. The share of existing TV channels has increased, as well as import substitution is developing – Ukrainian TV channels broadcasting both their own and purchased content. Distributors of foreign channels also won – competition decreased, a place for the new European TV channels appeared. On the other hand, the European content is expensive for Ukrainian operators. This situation becomes a powerful stimulus for the development of Ukrainian productions, especially for small studios that were not previously related to co-production with Russian TV channels. Ukrainian actors and film directors are in demand. Among the winners are pirates getting benefits from Russian content proscription, many viewers started to watch pirate services without abandoning the paid services, these subscribers have not spoiled the official statistics.
The following scheme worked until recently. Ukrainian studios (Film.ua, StarMedia) filmed content for Russian TV channels, sometimes in cooperation with Ukrainian media holdings. Series were first shown on the Russian market, and then they were bought by Ukrainian TV channels and shown again. All the participants of that scheme received stable and guaranteed profit. I remember well how much they complained of a vicious circle which inhibited domestic production and obliged to buy Russian products that were made in Ukraine. It was expensive, but cheaper and more reliable than filming themselves.
Political events broke the habitual scheme. That turned to be painful. Within the general crisis and decreasing of the advertising market TV channels began to look for content, words arise from a joke: “Having money any fool can do, try without money.” It’s time for non-standard, out of box mind solutions and creative people.
What should Ukrainian TV channels do? To continue what they have started. Filming interesting content for little money, looking for investments: media groups cooperate for joint filming, an initiative “Kіnokraina” to protect and promote the interests of filmmakers appeared, the plan for subsidizing Ukrainian filmmaking by the state is ready. It is worth noting that local content has several advantages that are worth using: the audience is much more interested in watching on HD Fashion about the opening of a boutique in Kiev rather than in Moscow, or fishing close to home on Trophey TV channel. Ukrainian formats are promoted abroad. For example, “95 Quarter” took 2nd and 3rd places at the NASPI in Budapest this year.
Negotiations on purchasing content and co-production with Poland, Israel, Turkey and other countries were activated. It is too early to talk about the same level of profit which Russian TV channels got on the Ukrainian market. Moreover, it is too early to talk about any profits. However, you should start and do to get the result.
What should Russian TV channels do if they do not want to lose the Ukrainian market? To create a customized versions in accordance to the Ukrainian legislation, to take into account the difference in mentality, a different outlook and different assessment of a number of historical and political events and facts. This, of course, only if they are interested in Ukrainian viewer. The same relates to co-production.
There are certain political realities, they are the subject of an entirely different debate. It does not make sense to discuss them by market participants, but it is necessary to act in accordance with the new reality, but not counting the lost revenue.
