The “Russian Netflix” receives $40mn from top Russian and foreign investors

The “Russian Netflix” receives $40mn from top Russian and foreign investors
The "Russian Netflix" takes in $40mn of investment from Russian and foreign investors
By Adrien Henni in Moscow for East West Digital News September 20, 2019

A group of top Russian and foreign investors have injected $40mn into, Russia’s largest online video platform in terms of revenue. The transaction, which was announced in June, has just been completed, RBC reported last week, citing exchanges with the company and one of the investors involved.

“This investment will give an impetus to ivi’s development and will allow us to improve our content offering for our audience, in particular, by expanding the production of our own unique content,” ivi founder and CEO Oleg Tumanov told the media in June.

The investor pool includes Russia’s sovereign fund RDIF, Mubadala Investment Company (UAE), Baring Vostok Private Equity Fund IV, Flashpoint VC, RTP Global, and Winter Capital, according to RDIF.

The terms of the deal have not been disclosed, but a source told the business daily that none of the existing shareholders exited the company.

The media also learned earlier this year that Russian telecom operator MTS considered acquiring ivi, estimating its value at 20bn rubles (nearly $310mn); however, the parties failed to reach an agreement.

Launched in 2010, ivi now occupies 42% of the legal Russian online video market. The company initially received $30mn from ru-Net (the previous name for RTP Global), Tiger Global Management and Frontier Ventures. In 2011, in a second round of funding, it received another $40mn from the same investors and Baring Vostok, the famous US-led private equity firm.

In 2015, secured $3.5mn from Buran Venture Capital. The same year, the service expanded its operations to 11 countries of the Soviet Union.

Market growth accelerates

In the first half of 2019, Russian online video platforms saw their revenues grow to 10.6bn rubles (around $163mn, up 44.3% in rubles from the same period in 2018), according to Telecom Daily’s estimates cited by Vedomosti.

By the end of 2019, these platforms – including foreign ones: YouTube, iTunes, Google Play – are expected to earn about 21.5bn rubles ($336mn at the current exchange rate). Seven years ago, this market did not exceed 1bn rubles (see EWDN’s industry report).

At the beginning, the business model of Russian online video platform relied primarily on advertising revenues. However, two years ago, user-generated revenues exceeded advertising revenue. Since then, the share of user-generated revenues has grown constantly, writes Vedomosti. In the first half of 2019, this share reached 70% of total revenues (7.3bn rubles, up 70% from H1 2018), while advertising revenue generated just 3.3bn rubles (up 11%).