Market Insight

Russian disc market decline accelerates as digital video takes off

September 19, 2014

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  • The Russian home video market declined by a quarter in 2013
  • Collapse in DVD spending, with rate of decline in spending at -44%
  • Rapid adoption of digital video will compensate decline in discs by 2014

IHS Video Intelligence has finalised its Russian DVD and Blu-ray Disc (BD) analysis for the full year of 2013, and updated existing forecasts to 2018, on the basis of feedback from industry sources.

In 2013, Russian consumer spending on DVD retail dropped by an unprecedented rate of annual decline of 44.9% compared to 2012— from r. 6.45 billion ($207.7 million) to r 3.55 billion ($111.8 million). This is the outcome of an almost halving of the total number of DVDs purchased by Russian consumers in just one year—down from 47.2 million in 2012 to just 27.4 million in 2013.

BD fared better in 2013, although the rate of growth has now fallen significantly. Spending on BD ended the year at r. 1.34 billion ($42.2 million), an increase of 3.2% over 2012. The number of BDs purchased by Russians increased to 2.91 million in 2013, up from 2.70 million in 2012, largely the result of further pressure on BD price—the average was down by 9.0% to r. 482.

Taken together, Russian disc market ended 2013 at r. 4.90 billion ($153.9 million), a drop of 36.8% against 2012, with a total number of discs purchased at 30.2 million (-39%).

However, 2013 was also a year of very rapid growth in Russian consumer spending on digital video. 2013 was the first full year after launch of iTunes and Google Play services in Russia, which kick-started the development of a legitimate digital video market. The combined digital video market—which includes movie and TV content consumed digitally via retail, rental and subscription platforms—increased more than fivefold in the year. Total spending on digital video in 2012 was r. 192.5 million; in 2013 it was r. 987.6 million.

The share of digital video out of the total Russian home entertainment pie is now 16%.8%, compared to just 2.4% in 2012. However, this impressive growth in digital video was not big enough to compensate the huge decline in physical video—the Russian home entertainment market as a whole dropped -25.9% to r. 5.89 billion in 2013, from r. 7.95 billion in 2012.

Our Analysis

The year 2013 not only represents the worst ever year for DVD sales in the country, but also the year when legitimate digital video consumption truly took off. While Russian video trends broadly follow those of mature Western markets, it is a market that tends to be characterised by extremes. The latest trends in Russian video consumption a reminiscent of trends previously identified by IHS Video Intelligence in the Nordics—where the introduction of Netflix caused acceleration in the decline of disc consumption. The Russian home entertainment market outlook indicates that the point at which consumer spending on legitimate digital consumption of video exceeds that spent on physical video, the digital cross-over, is rapidly approaching.

Our analysis indicates this milestone is will occur early 2015, when digital video will account for 52.6% of total home video spending. As in the Nordics, the most important factor behind this sea-change in Russian video is the decline in physical discs. In line with trends in mature international home video markets, Russian DVD market went into decline in 2009, however this decline has been much faster in Russia. The size of the Russian physical video market in 2014 is only a third of what it was in 2009. The outlook for physical video to 2018 is now further contraction. In five years’ time, IHS forecasts that the combined Russian DVD and BD markets to have dropped to about 40% of its size in 2014.

Despite this the Russian home entertainment market will return to growth in 2014, a result of digital video now able to compensating the continued decline in physical video. In 2014, Russians are expected to spend a total of r. 6.46 billion across all physical and digital video formats and platforms, at an annual increase of 9.8% compared to 2013 and the reversal of a negative trend for video overall that goes back to 2009. Additionally, growth is likely to characterise the Russian market throughout the forecast period to 2018, with total spending across home entertainment in that year reaching r. 8.17 billion.

The latest analysis and forecasts from IHS Video Intelligence covering the Russian DVD and Blu-ray Disc market are now updated on the service. Please click here for data.

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