Press Release Strasbourg, 1 December 2009 Russian film industry feels the chill as recession cools the production sector		The Film Industry in the Federation of Russia ENGLISH RUSSIAN
		Nevafilm
		RFilms
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One of Europe’s fastest growing film industries, the Russian Federation, has been generating increasing interest from investors, both national and foreign. But as the chill winds of recession bite, will the industry struggle to maintain growth?

The Film Industry in the Federation of Russia, a ground-breaking new report commissioned by the European Audiovisual Observatory from independent consultants Nevafilm and RFilms, provides an in-depth analysis of all aspects of the industry in Russia and takes a timely look at the impact of a modified economic climate.

Exhibition revenues resist recession…

Russian cinema admissions have surged ahead over the last five years, with ticket sales growing at an average of 14% annually over the period 2004 to 2008. An expanding modern screen base and the revival of cinema-going generally lie behind this growth, with average admissions per head almost doubling. Rising ticket prices have multiplied the effect on box office, with 32% average annual growth in revenues between 2004 and 2008. For 2009, the report predicts continuing growth, though successive devaluations of the rouble in late 2008 / early 2009 may give negative results in hard currency terms.

Perspectives for future growth may however be limited by a slow-down in the rate of creation of modern cinemas. Though the overall number of screens in Russia has been almost halved since 2005, the number of modern screens has grown at an annual average rate of 24% since 2004. By July 2009, Russia had 1,949 modern screens in 756 sites, with 51% of these screens located in shopping and entertainment complexes. Growth shows signs of slowing, though, as the economic recession curbs commercial construction and as major urban centres reach screen saturation.

Digital cinema arrived in Russia in October 2006, with the opening of the first DCI compliant-screen in Saint Petersburg. By July 2009, 161 digital screens were available, representing 8% of the total screen base, with a quarter of these concentrated in Moscow. As elsewhere, digital 3D has been a significant impetus for growth, with almost all of Russia’s digital screens equipped with 3D technology.

…but the production sector starts to cool

Since the success of Nochnoy Dozor (Night Watch) in 2004, films produced by Russian companies have made a significant contribution to the revival of the market. Overall investment in production between 2004 and mid-2009 was over RUB 62 billion, of which just over half went to the production of TV films and series, with feature production representing a RUB 25 billion share. In parallel, investment started flowing into the production services sector, with extensive restructuring, upgrading and construction taking place.

Since late 2008, however, tensions have become evident. The Ministry of Culture of the Russian Federation, a major investor in local production, has redirected all 2009 funding to the completion of existing films, so no new projects will receive financing during the year. National television channels have revised downwards investments and acquisitions and prices for rights have shrunk. Changing conditions have sparked consolidation among production companies and concerted efforts have been made by the newly-created Association of Film and TV Producers to contain spiraling production costs. In the services sector, plans for the construction of new studio space have been postponed or cancelled, and existing facilities are operating below capacity.

DVD sales show signs of weakness

Concerted anti-piracy measures between 2004 and 2006 have paved the way for growth in the market for licensed DVDs, though the segment still remains underdeveloped. Total market volume reached 83.8 million units sold in 2008, up 24% on 2007. Locally-produced content accounted for around 20% of all releases in 2008, with five Russian feature titles appearing in the top ten titles by unit sales in the same year. Overall, feature films are the predominent genre, accounting for almost three-quarters of all titles released.

According to local trade publication, Videomagazine, quoted in the report, the number of new releases was down and sales slowed during the first six months of 2009. If this trend is maintained the full year results could slip back by as much as 8% year-on-year.

Journalists, please contact:
Alison Hindhaugh, Information and Press Officer, tel.: (+ 33) (0) 3 90 21 60 10 - alison.hindhaugh@coe.int

For further information on the content of this report, please contact our Department for Information on Markets and Financing:
andre.lange@coe.int - susan.newman@coe.int - martin.kanzler@coe.int

The European Audiovisual Observatory Set up in December 1992, the European Audiovisual Observatory's mission is to gather and distribute information on the audiovisual industry in Europe. The Observatory is a European public service body comprised of 37 member states and the European Union, represented by the European Commission. It operates within the legal framework of the Council of Europe and works alongside a number of partner and professional organisations from within the industry and with a network of correspondents. In addition to contributions to conferences, other major activities are the publication of a Yearbook, newsletters and reports, the compilation and management of databases and the provision of information through the Observatory’s Internet site (http://www.obs.coe.int).