(For other news from Reuters Russia and East Europe Investment
Summit click here)
* Russia's internet audience largest in Europe
* Online advertising revenue seen rising 65 pct to $3 bln in
* Piracy accounts for 75 pct of online viewing
By Alessandra Prentice
MOSCOW, Sept 26 Luring Russia's 72 million web
users away from online pirates is a top priority for leading
Russian internet TV portal Tvigle, the firm's head told Reuters,
forecasting revenues will double in the next two years.
Tvigle, an online streaming service similar to U.S. firms
Hulu and Netflix, already has 10 million unique monthly
views. It aims to wean consumers off illegal content, which
accounts for around three-quarters of online viewing in Russia.
Tvigle (www.tvigle.ru) offers a suite of channels including
drama "webisodes" and children's cartoons. It also carries
programming targeted at male and female audiences, with another
channel aimed at moviegoers.
"Our biggest competitor is piracy. Ninety percent of the
market is open and it's our biggest opportunity ... We are going
to convert this media space to the legal side," Tvigle founder
and CEO Egor Yakovlev told the Reuters Russia Investment Summit.
Russia's commodities-based economy is slowing down with
traditional industries such as steelmaking suffering steep
slumps. By contrast, business is booming at internet-focused
firms like Tvigle, whose revenue tripled in 2012.
"No one expected such growth in one year. People for the
first time have a freedom to choose and are never going back to
linear TV," Yakovlev said.
Tvigle is capitalising on an accelerating consumer shift
away from traditional television toward more flexible on-demand
viewing on computers, tablets and internet-connected
However, endemic piracy - only 5 percent of downloads in
Russia are legal - challenges Tvigle and other providers.
Yakovlev, a former computer programmer for nuclear power
plants, said Tvigle's free higher-quality content would entice
more and more Russians away from pirated videos.
What's more, Tvigle generates most of its revenue from
advertising rather than subscriptions, which Yakovlev reckons
will encourage Russian viewers, accustomed to free content, to
shift away from illegal content.
The company forecasts the market for online digital
advertising rising over 65 percent to $3 billion in three years.
Russia's business environment is often criticised for
lacking transparency and its intrusive regulation, but these
issues are not apparent to the new wave of online firms,
according to core shareholder representative Maxim Melnikov.
"With the metal and gas companies there is a risk of the
government getting involved, but when it comes to the internet -
this is real capitalism," Melnikov, whose investment firm Media3
is the largest shareholder in Tvigle, told the Summit.
One issue which Tvigle does struggle with is Russia's
sometimes labyrinthine bureaucracy.
"We are 100 percent legal and pay 100 percent of our taxes
and that's kind of challenging in Russia. There's still the
situation that you have to spend lots of resources on paperwork
and not on your actual business," Yakovlev said.
The tougher operating environment, language barrier and
licensing issues have so far deterred global providers such as
Hulu, Netflix or Amazon.com Inc's Prime Instant Video
service from launching a Russian service.
But foreign companies are unlikely to want to steer clear of
Europe's largest internet audience for long, Melnikov said.
"(Amazon's) representative has been here a few times looking
for M&A opportunities and I don't believe that there won't be an
Amazon or Netflix in Russia in 3-5 years. The point is how big
we are at that time," he said.
Tvigle raised initial funding in 2007 from Allianz-Rosno
Asset Management, part of German insurance group Allianz
, and a further round in 2011 from PromSvyazCapital,
the investment arm of bankers Dmitry and Alexey Ananiev.
Around a quarter of the company is now owned by Allianz and
a third by Media3 - a holding structure of PromSvyazCapital.
Founder Yakovlev owns a quarter with the rest distributed among
management and staff.
(Additional reporting by Megan Davies; Editing by Douglas