Russian DTH market consolidates

The long-awaiting consolidation in Central and Eastern Europe’s DTH industry may have finally got under way – at least in Russia.

Earlier this month there were two extremely important developments in the industry, one of which was expected and the other a complete surprise. In Poland, the platform the public broadcaster TVP had been talking about for the last few years finally became reality, while in Russia the two leading DTH operations all of a sudden found themselves with a common owner.

The Russian development was reported as Gazprom-Media Holding, the operator of NTV-Plus, acquiring a controlling stake in the joint stock National Satellite Company (NSC), the operator of Tricolor TV.

NTV-Plus is in many ways a unique operation. The oldest DTH platform in the CEE region, having made its debut as a four-channel analogue service in 1996, it was originally part of the Media-MOST empire, owned by the former Russian media baron Vladimir Gusinsky. It was taken over by Gazprom-Media at a time of general turmoil in the Russian TV industry at the start of this decade and has maintained its position as the country’s leading DTH operation – not in terms of subscriber numbers (it is believed to have only in the region of 650,000), but rather in innovation.

Indeed, it was the first broadcaster to introduce HD services into the Russian market, launching a package of channels in the format in April 2007.

What is more, it has a growing portfolio of mostly film and sports proprietary channels and provides its content to other pay-TV operators. It added Sport-Plus to this portfolio in August, and only last week announced the launch of a new hockey channel named CHL-TV, dedicated to the Euroasian hockey league, on October 1.

While NTV-Plus has from the onset been a premium service, Tricolor TV has targeted a mass audience. Launched by the NSC in November 2005, and distributed, like NTV-Plus, by Eutelsat’s W4 at 36 degrees East, Tricolor TV initially provided a package of 15 Russian and international channels on a subscription-free basis, with the only charge incurred by viewers being reception equipment supplied by the Russian company General Satellite. Then in Q1 2007 it added a 12-channel pay package to its offer.

Tricolor TV’s success over the last two years has been extraordinary, with the platform officially securing its 5 millionth subscriber in mid June. It is already by far and away the largest DTH operation in CEE in terms of subscribers – second placed Cyfrowy Polsat in Poland claims just under three million – and its success will undoubtedly continue under new ownership.

Indeed, it has already been made clear that Tricolor TV and NTV-Plus will retain their separate names and identities. The former will also continue to offer a free package of programming and no doubt expand its paid offer with NTV-Plus content. NTV-Plus, on the other hand, will through Tricolor TV have access to parts of the market it has currently little if any presence in.

Reports in the local press also say that Gazprom-Media Holding will create a new management structure to oversee the two operations and that there are plans to continue developing Tricolor TV, at least until early 2013.

Tricolor is also likely to retain its relationship with General Satellite Corporation, through which it introduced a PVR product earlier this year is set to launch a number of new services, including VOD and internet access, sometime in 2010.

Interestingly, Tricolor TV has also said that its free channel offer will in fact continue for the lifetime of W7, which the platform will start using following its launch later this year. This effectively guarantees the free element for its subscribers until 2015.

Gazprom-Media Holding’s acquisition of Tricolor TV effectively creates a company claiming just over 6 million DTH subscribers, with Tricolor TV having added a further 500,000 since its mid-June landmark. This will no doubt cast a few question marks over the future of Russia’s other DTH platforms Orion Express, Raduga and Platforma HD, though the latter is admittedly aimed at viewers outside rather than in the country.

The deal will no doubt also raise some competition concerns, given the already dominant positions NTV-Plus and Tricolor TV already hold in their respective high-end and mass market audience sectors.

However, it will undoubtedly also provide a boost to Russia’s rapidly expanding pay-TV market. Data produced by iKS-Consulting indicates that as of Q1 this year there were already some 20 million people in the country receiving some form of pay services, with the leading providers being STC, whose interests include the cable operations Mostelekom and St Petersburg Cable TV (23% share), NSC (16%) and Sistema (11%).

The market is also worth some R7 billion (€162.1 million) and looks likely to grow significantly over the next few years as Russia’s economic recovery, which is already under way, gathers momentum.