Ivi.ru is Hollywood’s route to Russian VOD

Confirmation that Russian video service ivi.ru is taking a $40 million investment shows the Hulu-like company is building cash for content acquisition.

The investment advisory shop GP Bullhound’s recent 2012 Russia market report said ivi.ru was raising $30 million from Tiger Global and ru-net, in February. That this round has become larger, and joined by Baring Vostok in the lead, suggests investor confidence in ivi.ru’s prospects.

And why not? Russia is Europe’s largest internet audience, with 53 million users (comScore Media Metrix, 2012) – 37 percent on broadband, but up to 91 percent in Moscow. Only 26 percent of users have so far paid for online video (J’son & Partners Consulting).

“We will use this investment to broaden our content offering to our audience including new premier movies, series, TV shows and latest cartoons,” ivi.ru founder and CEO Oleg Tumanov says (via release).

GP Bullhound:

“Recent studies suggest that 13 million Russian internet users are willing to pay for content online, but do not always understand whether content is legal or not.”

“Content rights owners view Russia as a lost market due to piracy and are likely to provide content at lower cost to content distributors who offer at least some monetisation.”

Baring Vostok senior partner Elena Ivashentseva (via release):

“Russian viewers are already used to watching video online, although until recently it has been mainly unlicensed movies and shows. Decreasing levels of piracy should help the growth of legal sites such as ivi.ru.”

Since ivi.ru, unlike Chinese counterparts Youku and Tudou, is not public, we have little site of its operating costs. As well as content licenses from the likes of Hollywood movie studios, Chinese video operators are also spending heavily on intelligent delivery to overcome poor consumer broadband infrastructure. Russian services are likely to need to spend here, too.