Pirate rent: why the largest online cinema in Runet is not profitable

Founder of Ivi.ru Oleg Tumanov collected the largest legal video library in Runet, paying no attention to losses.
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What prevents the portal to become profitable and why the struggle of right holders against pirates is not to his advantage?

In winter 2010, Oleg Tumanov, the founder of the online cinema Ivi.ru, felt like a winner pirates. In exchange for the right to free access to a catalog of films during the week before the official launch, he proposed Internet users to hand over their files download manager torrent tracker. As a result, users abandoned the 50,000 accounts on pirate sites, and on the first day of work Ivi.ru visited by 180,000 people.

Videos Tumanova company has more than 70,000 movies, TV series, cartoons, TV shows and video clips recorded on contracts with more than 250 Russian and foreign owners. Ivi.ru revenue has almost doubled, to 470 million rubles in 2013. Nevertheless, the entrepreneur hopes to reach a zero operational in late 2014.

"We started the business in terms of piracy, and if we then put success depend on what will happen to the pirates, we would not have started it", - says Oleg Tumanov.

However, the dependence seen right holders. wrestlingkinopiratstvom with which they launched as a result has created a situation where legitimate online cinema unexpectedly receive new competitors.

Model for gathering

Owner Ivi.ru, we can say, bought into the online film market prospects. In 2009 Oleg Tumanov, a former deputy managing director of Alfa-Bank, who tried, and failed, to do business in the distribution of music content on the Internet, decided to create an online cinema. Trump card in competition with the pirates had to be free access to a catalog of high resolution movies. From the viewer displays only required to endure commercials, where fog and was going to earn.

The first contracts with the owners - "Soyuzmulfilmom", "Central Partnership", "Amedia" and "Lenfilm" - Ivi.ru concluded in early 2010. The right holder has received a guaranteed minimum payment - from a few hundred to several thousand dollars for the film - and 40% of the income from the sale of advertising.

On the question of the division of rights holders revenue so far include nervebut due to bad experiences in the market of DVD, which is extremely difficult to control the volume of sales (which allows distributors to underestimate the amount of royalty payments). Nevertheless Tumanov managed to break the prejudice. «Ivi.ru - one of the few areas with which we agree to work for royalty at the minimum guarantees", - said the head of the Internet department of the film company Star Media Julia Vinogradova.

If Russian companies are fairly easy to agree on an advertising model, foreign majors had to be persuaded. The same premier occurs on different channels at certain intervals - the so-called windows. First, the most profitable, "window" - rolling in the cinemas. Start screening of the paid legal online cinema are entitled not earlier than six months after the premiere of offline, and display on the advertising model - even later.

"We with Oleg went to California. They tried to convince majors to work with us on the advertising model - says general producer Ivi.ru Sergey Kornihin. - They said they sympathize with us, but we will get premier Liebon a paid model, or not received at all. We replied that we are willing to try. " In late 2011, Ivi.ru offered users watch Hollywood premiere on a fee basis (subscription or a one-time payment). "Movies we prefer to give a paid show, because today digital sales have become an essential part of the return and payback budget films," - explains CEO "The Walt Disney Company CIS" Marina Zhigalov-Ozkan. The first major label, which still sell on an advertising model was Disney, granted Ivi.ru content of your catalog. We agreed with the film company Fox. However, the majors ask for more margin calls - up to several hundred thousand dollars per movie.
Revenue Ivi.ru grew, but at the same time grew and expenses.

"The first three years to talk about the effectiveness of it made no sense, it was first necessary to show that the audience is ready to us", - explains Oleg Tumanov.

If in January 2011 Ivi.ru visited by 5 million unique visitors, and the number of views has reached 11 million by the end of 2013, the monthly audience has grown to 30 million users, the number of questionMotril - up to 200 million among legal kinoploschadok Runet is the highest performance.. But in parallel with the market of legal online impressions and expanding piracy area.

Pirate tricks

"Kopirastov reached LostFilm. Included in the registry and operators began to be blocked. Because of the series "Game of Thrones," "Breaking Bad," "Boardwalk Empire," etc. The culture is under lock and key, loot a barrel ", -.. Resented in mid-June this year in his" facebook "Artem Kozlyuk of Booty party of Russia. Now, however, search engines are the two working resource of the same name and two "VKontakte" group.

According to estimates by Olga Valigurskoy, director of the company Webkontrol (content protection on the Internet), in 2013, due in RuNet kinopiratstva rights holders have received less $ 1.3 billion in revenue. Who is to fight piracy? Guide Many online cinema declares that the case holders and law enforcement agencies. "Our task - to provide a more competitive compared to the pirated product", - says Oleg Tumanov.

Meanwhile Mr.ie less Ivi.ru managers tried to re pirates. In the first half year of life offered as an aggregator of content and illegal sites, ready to "embark on the road to reform," to put at Ivi.ru player on the terms of section in advertising revenue. With aggregators friends managed (eg, c Afisha.mail.ru). Conversion was too low, and by attempts Ivi.ru refused.

But the problem of torrents and pirate sites can not be compared with those created by rights holders legal social network "VKontakte". This is one of the largest online resource, storing illegal videos. Social network, as opposed to, for example, from the YouTube, has no filters, blocking the primary load of pirated videos. According to the company Webkontrol, «VKontakte" users fill in a few dozen films per second, the vast majority of which - the illegal copies.

"The day we remove tens of thousands of illegal copies of video. Only one major label for the first five months, we have removed 3 million files from the Internet, about 80% of them - with the "VKontakte" - says Wahligrskaya.

Dmitry Sergeev, CEO "VKontakte", says that social networks have a form to remove illegal content owners, but the system does not always work optimally. "We are improving recognition technology digital prints to be excluded including reloading, - he says. - That is, for example, if the series "Interns" was illegally downloaded and then deleted channel TNT, the second pour it illegally will be impossible. Or, if not removed, but TNT is verified, you can only look clean from the standpoint of the rights of the version. "

One day, "VKontakte" a problem with the server and the traffic at one of kinoploschadok working on an advertising model, increased by 30% (but, for example, to Play, which operates on a subscription, it is not affected). Ivi.ru trying to influence the situation with "VKontakte" for three years. In some cases it is possible to replace the illegal copy to your player.

Other legal pad with huge volumes of illegal video - social network "My World." On the day there may be downloaded several hundred thousand different viedeofaylov. If the owner will send a claim with proof of their rights, within two hours of pirated content will be replaced with the legal.

The exchange of players

The situation in RuNet turning point in August 2013, when the law came into force, allowing to block sites that contain unlicensed video productions, at the request of the copyright holder.

As the Valigurskaya of Webkontrol, after treatment of the Moscow City Court (on behalf of their clients) sites usually immediately remove the content, but Webkontrol judged until the end that the site is obliged to take measures to prevent the emergence of illegal content again. Sometimes rights owners only "dabble" locks - usually for 15 days, but it is not brought to court. Upon expiration of the film can again appear on the pirate site, and a second time to initiate the case anymore.

Sometimes rights owners coordinate their actions with legal online cinema. "In some cases, before to apply for an interim measure, we communicate with business partners and agree on concerted actions", - says VinogRadova of Star Media. The company removes a monthly basis about 200 thousand illegal links, 250 security measures have been taken since the beginning of the year, the court granted the application on 22 sites.

Another Russian rights holder, the film company "Amedia" since the autumn of last year sent the court a total of 28 claims. Eight of them won, the remaining consideration. Its catalog of online cinema "Amediateka" is formed from its own production and purchased exclusive rights to foreign serials. In the company admit that the pirates are helping to shape the demand for content. "This issue is close to the ... Increase the rhetorical counterfeit Swiss watches for sale the original? Consumers need to pass the path of evolution, "- says the chairman of the board of directors" Amedia TV "Alexander Shenkman.

Trying to re pirates, copyright holders, in fact, create a competition originally legal online movie theaters.

Star Media Company in November 2013, became the first official partner of "VKontakte" on the planned replacement of pirated copies on the licensed content (showing on withbstvennom player "VKontakte") under the terms of section in advertising revenue. The holding "STS Media", before you sue, send out e-mail alerts.

"First, we propose to put our pirate player with our advertising and share revenue from the views, - explains the head of department of distribution of digital content," CTC Media "Daria Ivanova. - Before the start of the new season of the serial send out preventive letters. Approximately half of the cases we are able to negotiate. " Some resources even created a special button to the right holder, making it possible to remove the illegal copies. However, it is rather an illusion of integrity. After the removal of illegal content hammered again and again. During the year the holding company delivers hundreds of lawsuits are pending at the same time an average of a couple of dozen cases.

the stumbling block

"While we were alone in the market, the situation was calm, - says Sergey Kornihin. - We even set the tone in the negotiations. And with the advent of competition it was beneficial holders of Artalkivat our heads together. "

In 2012, several Russian legal kinoploschadok (in particular, Zabava.ru, owned by "Rostelecom", and Play) decided to bet on a paid subscription model and develop the system. As a result, between the online competition for cinemas developed catalogs of large manufacturers. According Kornihina said part of the transaction, which Ivi.ru planned to conclude from the advertising model, had to be transferred to the toll. The price of the contract to a directory of several dozen films up to several hundred thousand dollars.

Company Tumanov, it seems, turned out to be a hostage of its own scale.

For comparison: Play, choose paid model and having in an active contract with the owners of 50, entered the operational zero in January 2014 (with sales in 2013 of 260 million rubles). Play CEO Leonid Belyayev believes that the mix of advertising and paid model is unreasonable. "This polar businesses. Take the site that show for advertising: they paid model is not very good is simply because they have created a good brand and people go there for free content, "- saystone.

Despite the successes of the competitors operating on the paid model in the prospects of its strategy Tumanov truly believe only in the autumn of last year. "This is not the adoption of a law or a change in consumer attitudes, and the development platform protection technologies - Smart TV and mobile devices. There the user has a good reason to pay for access to content, it's very convenient, "- explains the founder Ivi.ru. Now Smart TV and mobile platforms provide less than half Ivi.ru unique visitors, but 70% of the number of visitors. At the end of the year, suggests Tumanov, a paid model can give us up to a third of revenue.

However, the stumbling block in the market of online movies is not the choice of a particular model, and rules of social networks and search engines. If Google for SERPs removes links that contain pirated content, the largest search engine Runet "Yandex" prefer to stay away. "Yandex" has always said about the inadmissibility of moderation SERPs. Search engines index only publicly available information, and termination etc.stupa for it should be discussed with the owners or administrators of the site. We have never denied that the protection of copyright on the Internet is needed, and so we recommend copyright holders to contact the hosting providers ", - said the representative of" Yandex "Asya Melkumova.

If "Yandex" will restrict the issuance of links to pirated resources and "VKontakte" will remove illegal content kinopiratstvo in Russia by 80% will be eliminated, says Mists. Valigurskaya of Webkontrol agrees to a substantial reduction in piracy would be enough to install "VKontakte" filters, "Classmates" and "My World." Hope gives us the fact that "Yandex" has recently bought the service "Kinopoisk.ru" plans to create an "advisory service", built by the aggregation model. Similar plans stated and "VKontakte". When it comes to implementation, the fight against illegal content and will be the priority of these companies. And it means that there will be strong Ivi.ru legitimate competitors.