Subscription: best international practices

with Russian approach

Legitimate video audience in Internet. Challenges and perspecs of the developing market as users see them.

Russian Internet Growth Dynamics 2005-2011, % of population Источник: УИ TNS Web Index, Россия 100 000+, 12+ лет.

30%

35%

40%

45%

50%

55%

60%

65%

70%

75%

Dec '05 June '06 Dec '06 Jun '07 Dec '07 Jun '08 Dec '08 Jun '09 Dec '09 Jun '10 Dec '10 June '11

Russia 100 000+

Moscow

Saint Petersburg

Ekaterininburg

Novosibirsk

68% 65% 65%

60%

Annual growth

63%

+8%

+4%

Source: TNS User–centric, June 2011, Russia 100 000+, age: 12-54.

Each third Internet user visits video

services

39 274 thsnds.

26 955 thsnds.

7 459 thsnds.*

TV Internet Video Services*

Daily share of TV, Internet and video services

TV Index, УИ Web Index, TNS User–centric, June 2011, Average Daily Reach, thousands of people, Russia 100 000+, age:12+. *Video services audience includes the age group between 12 and 54according to user-centric panel

TV and Internet Audience

0%

10%

20%

30%

40%12-17

18-24

25-34

35-44

45-54

55+

Population of Russia TV audience Internet users Video services visitors

Source: TNS TV Index, Web Index, june 2011, Average Daily Reach, Average Daily Reach, thousands of people, Russia 100 000+, age:12+.

TV audience reflects the structure of the Russian population.

Half of the TV audience are people

of 45 and older, while video services visitors are generally

people under 34 (69% of the audience)

TV and Internet Audience

0%

5%

10%

15%

20%

25%

30%males 12-17

males 18-34

males 35-54

males 55+

females 12-17

females 18-34

females 35-54

female 55+

Population of Russia TV audience Internet Users Video services visitors

Females dominate in TV audience. While males

dominate among video

services visitors

TV Index, УИ Web Index, TNS User–centric, June 2011, Average Daily Reach, thousands of people, Russia 100 000+, age:12+. *Audience of video services is based on age group of 12-54 year olds according to user-centric panel

90 min. 100 min. 103 min.

n/a

225 min. 250 min.

306 min.

369 min.

9 048 thsnds. 8 183 thsnds. 8 292 thsnds.

1 432 thsnds.

5 932 thsnds.

7 178 thsnds.

13 769 thsnds. 12 395 thsnds.

12-24 25-34 35-54 55+

TV and Internet Audience Different age groups

Daily Internet browsing time

Daily TV watching time

Average daily Internet audience

Average daily TV audience

TV Index, УИ Web Index, TNS User–centric, June 2011, Average Daily Reach, thousands of people, Russia 100 000+, age:12+. *Audience of video services is based on age group of 12-54 year olds according to user-centric panel

81% of users cannot refuse from using pirate content in the future even if they face computer threats, criminal liability, and poor content quality*

58% of users watch pirate content only because it’s free

Some users are ready to pay for new content (71% for TV programs, 45%

for feature films)

83% of users do not mind advertisements in content as an alternative to payments

Challenges of VOD market in Russia

*According to the research by PWC «The speed of life»

Piracy on the Russian Internet and its International Impact

Russia is the biggest single source of camcords in the European region

By the variety of time zones, Russia is leading in speed and quantity of “pirated" content from TV broadcasters.

1 • More than 550 big «Pirate» portals in the Russian language

2

• Russian portals are often used as the master to create foreign versions to initiate the piracy supply within other markets (eg. CIS, Korea, Turkey, Japan, China)

3

• The Russian market of illegal content is paid great attention to and under scrutiny from the world’s leading film studios and is treated as a priority in the fight against piracy globally

NOW.RU – the First Portal in Russia operating with SVOD Model.

Audience, Key Figures

Gazprom-Media Holding and TNT TV Channel launch a paid, Internet video

service www.NOW.ru. Any Russian Internet user can watch an unlimited

number of feature films, documentaries, TV series, and

cartoons by taking a subscription for 499 roubles per month.

NOW.RU IS A BIG RUSSIAN PROJECT, CREATED IN THE BEST WESTERN TRADITIONS, BUT WITH RUSSIAN FEATURES, SUCH AS:

• Exclusive content is available on a Subscription basis before TV air

• Free of charge movies are placed in a special section to attract users

• Pay-Per-View Movies are Premiere Movies

• The largest collection of legitimate movies and TV series on the Russian Internet, which is growing every day

DATA

• From the launch of NOW.RU more than 17 mln. people have visited the site

• Our users have watched more than 52 mln. Pages

• Recently the PPV views on NOW.RU are 6 times higher than the FREE views.

• As for the territory, at the moment, our primary audience is residents of the Russian millionaire cities

• Moscow and St. Petersburg audiences make up 27.7% in total

More than 45% of the daily audience is permanent (returning audience) The number of repeated purchases in several content categories is up to 79%

Audience Interest

0%

1%

2%

3%

4%

5%

6%

7%

8%

Instant Buy In a month In 2 months(projection)

Conversion to purchases

* Registered users

Consumer activity Over the past month (from 27th August) the growth dynamics of subscribers in the category of "30 Days" was 76%. !

The VOD Market Development, New Formats and Time-Window in terms of NOW.RU

How soon will the video content start earning money?

11%

15%

18%

37%

8%

11%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1 day 1 week 2 weeks 1 month 3 months 6 months

70% of the Users are ready to wait no more than 1 month

Source: PWC «The speed of life»

76% of the Users are ready or partially ready to pay for the content appearing right after its TV or Theatre release.

!

!

Pre-Air content on NOW.RU. Traffic.

Opening day Normal day

What do you look at when you choose a film?

Maximum Monetization

0

2

4

6

8

10

12

1st release 2nd release 1 year

Income distribution depending on the model

30 days

TVOD/

DTO SVOD/

DTO AVOD

PRE-AIR Model

$

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