THE FILM DISTRIBUTION MARKET IN RUSSIA Research group: Xenia Leontieva, Senior Analyst at Nevafilm Research. Analysts at Nevafilm Research: Eleonora Kolyenen-Ivanova Valeria Boyko Svetlana Mudrova Anton Makarov Translation: Eclectic Translations http://eclectictranslations.co.uk Nevafilm Nevafilm Group was founded in 1992 and boasts a wide range of expertise in the film industry. Nevafilm Studios has sophisticated sound and dubbing studios in Moscow and St. Petersburg. Nevafilm Cinemas has become a leader on the Russian market in cinema design, film and digital cinema equipment supply and installation. Nevafilm Digital was Russia’s first digital cinema laboratory for digital mastering and comprehensive DCP creation. Nevafilm Emotion distributes alternative content for digital screens. Nevafilm Research has undertaken independent monitoring of the Russian cinema market in the cinema exhibition domain since 2003, and is a regular partner of international research organizations providing data on the development of the Russian cinema market. 33-2B Korablestroiteley Street, St. Petersburg, 199397, Russia Tel.: +7 812 449 70 70, Fax: +7 812 352 69 69 E-mail: [email protected] http://www.nevafilm.ru http://www.digitalcinema.ru This report was prepared by Nevafilm Research strictly for informational purposes. The information contained in this report was obtained from sources that Nevafilm Research considers reliable. However, Nevafilm Research does not guarantee the accuracy nor the completeness of the information presented here for any purposes. The information contained in this report should not be presented to clients as information directly or indirectly recommending investment. All opinions and appraisals contained in this survey represent the opinions of the authors at the time of publication and can change without warning. Nevafilm Research does not bear responsibility for losses or damages that may come from third parties’ use of the information presented in this report, nor from the incomplete presentation of said information. Additional data may be available on request. Neither this document, nor any part of it, may be distributed without the written permission of Nevafilm Research, and may not be reproduced in any way. © 2011, NEVAFILM RESEARCH CONTENTS INTRODUCTION .......................................................................................................................... 8 Political aspects ..................................................................................................... 8 Russia’s power hierarchy and political structure ...................................................... 8 Administrative division and languages of the RF ...................................................... 8 Geographical aspects .............................................................................................. 9 Geographic location and distribution ...................................................................... 9 Time zones ...................................................................................................... 10 Social and demographic characteristics ................................................................... 11 Cultural and religious makeup ............................................................................ 11 Russia’s Population ........................................................................................... 11 Age composition of Russia’s population ................................................................ 11 Level of education ............................................................................................. 12 Economic factors .................................................................................................. 13 Stages of economic development of the RF (crises) ............................................... 13 Ranking by region in the RF ............................................................................... 15 Legal framework for copyright in the RF .................................................................. 16 Official holidays .................................................................................................... 17 1. THEATRICAL FILM DISTRIBUTION .......................................................................... 21 1.1 The overall structure of the Russian film distribution market ................................ 21 1.2 Legal aspects of theatrical film distribution in Russia ........................................... 21 1.2.1 Regulatory agencies governing the industry ................................................. 21 1.2.2 Key legislation .......................................................................................... 22 1.2.3 Basic legal framework, rights and restrictions ............................................... 22 1.2.4 Mandatory fees and tax incentives .............................................................. 24 1.3 Development history of the film distribution market ............................................ 25 1.4 Current market status ..................................................................................... 27 1.4.1 Film distribution infrastructure – exhibition ...................................................... 27 1.4.2 Films in Russian distribution ....................................................................... 37 1.4.3 Peculiarities of Russian distribution ............................................................. 48 1.5 Film distribution and exhibition market volume ................................................... 51 1.6. Film ticket prices ........................................................................................... 54 1.7 Principal market players .................................................................................. 56 1.7.1 Exhibition ................................................................................................ 56 1.7.2 Film distribution ....................................................................................... 66 1.8 Trends and predictions for future development ................................................... 71 2. VIDEO DISTRIBUTION .......................................................................................... 73 2.1 Overall structure of the Russian video distribution market .................................... 73 2.2 Legal aspects of video distribution in Russia ....................................................... 73 2.2.1 Regulatory bodies in the video distribution sector ......................................... 73 2.2.2 Key legal decisions ................................................................................... 74 2.2.3 Basic legal framework, rights, and restrictions .............................................. 74 2.2.4 Duty and tax incentives ............................................................................. 75 2.3 History of the market’s development ................................................................. 75 2.4 Current status of the market ............................................................................ 77 2.4.1 Infrastructure of the video market .............................................................. 77 2.4.2 Video releases .......................................................................................... 79 2.4.3 Video distribution ..................................................................................... 87 2.4.4 Sales volumes on the licensed market ......................................................... 91 2.4.5 An assessment of the market for pirated media ............................................ 94 2.5 Pricing ........................................................................................................... 94 2.6 Principal market players .................................................................................. 97 2.6.1 Video distributors ..................................................................................... 97 2.6.2 Factory production of video discs ............................................................... 110 2.6.3 Sales networks for video media ................................................................. 111 2.6.3.1 Wholesale brokers ............................................................................. 111 2.6.3.2 Chain stores ..................................................................................... 112 2.6.3.3 Brand-name outlets for video distributors and rights holders ................... 118 2.6.3.4 The Internet ..................................................................................... 119 © 2011, NEVAFILM RESEARCH 3 2.7 Trends and predictions for the development of the Russian video market .............. 119 3. DIGITAL STREAMING DISTRIBUTION .................................................................... 121 3.1 Market structure for streaming digital distribution .............................................. 121 3.2 Legal aspects of streaming distribution in Russia ............................................... 122 3.2.1 Regulatory agencies in the video distribution sector ..................................... 122 3.2.2 Key legal statutes .................................................................................... 122 3.2.3 Basic legal framework, rights, and restrictions ............................................. 123 3.2.4 Duty and tax incentives ............................................................................ 127 3.3 The