Russian market opportunities 2011

CAPITALIZING ON NEW GROWING DIGITAL MARKETS:

PARTNERSHIP AND MARKET OPORTUNITIES IN RUSSIA

Moscow – July, 2011

HI-TECH

TELECOM

DIGITAL

MEDIA

TV

IT

17 mln km²

142.9 mln people

Content

2

RUSSIAN ECONOMIC INDICATORS

CELLULAR COMMUNICATIONS

DIGITAL DEVICES

RUSSIAN INTERNET ACCESS

ONLINE GAMES

SOCIAL NETWORKS

FILM DISTRIBUTION MARKET

INTERNET MEDIA MARKET

RUSSIAN PTV & TV MARKET

PARTNERSHIP & MARKET OPPORTUNITIES IN RUSSIA

DVD MARKET

ANNEX

4

9

10

12

14

15

17

18

21

22

24

28

DESIGNED BY J’SON & PARTNERS

Content

3

Top Ten Russian cities by Population 4

Socio-economic indicators of Russia 5

Russian Telecom Operators Revenue, bn USD 6

Digital Devices in Russian Households 7

Cellular Business 9

Digital Devices Sales, 2010 10

Russian Internet Access vs. World 12

Russian Online Games Market 14

Russian Social Networks 15

Russian Social Networks, Income (%), 2010 16

Advertising volume in Russia vs. World 17

Russian TV & video Markets Development Forecast 18

Russian PTV market potential and forecast 19

Russian TV market 20

Movie Theatre Market in Russia 21

DVD market in Russia 22

Content distribution opportunities in Russia 24

Potential strategy 25

Partnership structure 26

Key Russian market players: Telecom Operators 28

Key Russian market players: Pay TV market, 2010 29

Key Russian TV Channels and niches 30

Key Russian market players: TV holdings and owners 31

Key Russian market players: Web TV 32

Key Russian market players: Russian TV channels 33

Key Russian market players: Internet Portals 34

Key Russian market players: Russian TOP 4 social networks 35

Our Clients 37

Our Clients About Us 38

1. General information:

2. Market overview:

3. Partnership & Market Opportunities In Russia

4. Annex:

5. About us:


4

GENERAL INFORMATION


© Franz Steiner

1. Moscow - 11,514,300 2. St.Petersburg - 4,848,700 3. Novosibirsk - 1,473,700 4. Yekaterinburg - 1,350,100

5. Nizhny Novgorod - 1,250,600 6. Samara - 1,164,900

7. Omsk - 1,154,000 8. Kazan - 1,143,600 9. Chelyabinsk- 1,130,300 10. Rostov-On-Don - 1,089,900

1. General information: Top Ten Russian cities by Population

5

Moscow Nizhny Novgorod

Kazan

Yekaterinburg Chelyabinsk

Omsk Novosibirsk

Rostov-On-Don

St.Petersburg

Samara

17 mln km²

142.9 mln people


1. General information: Socio-economic indicators of Russia

RUSSIAN ECONOMIC INDICATORS 2004 2005 2006 2007 2008 2009 2010 2011E 2012E

POPULATION OF RUSSIA (WITHOUT MIGRATION), MLN PEOPLE 144.2 143.5 142.8 142.2 142 141.9 142.9* 141.5 141.1

NOMINAL GDP, BN USD 591.1 763.6 990.5 1298.7 1660.4 1218.6 1478.3 1850 2050

REAL GDP GROWTH, % 7.2 6.4 8.2 8.5 5.2 -7.8 (-7) 4 (5) 4.8 4

GDP PER CAPITA, THOUSAND USD 4.10 5.32 6.94 9.13 11.69 8.59 10.34 13.07 14.53

THE GROWTH OF REAL OUTPUT, % 7.3 4 7.1 6.8 0.6 -9.3 8.2 5 4.5

PROFICIT Δ / Δ BUDGET DEFICIT, % 4.2 7.7 7.3 5.4 4.1 -5.9 -4 -0.8 -2.1

STABILIZATION FUND, BN USD 18.8 43.7 89.1 156.8 225.1 152.1 113.8 98.8 68.8

UNEMPLOYMENT,% 8.2 7.6 7.2 6.5 6.2 8.4 7.5 6.8 6.8

EXTERNAL PUBLIC DEBT AT END OF PERIOD, BN USD 105.6 82.3 49 46.4 32.7 44.3 46.6 46.8 50

EXTERNAL PRIVATE DEBT AT END OF PERIOD, BN USD 108.9 176.1 260.7 419 452 425.4 442.1 470 490

TOTAL EXTERNAL DEBT / GDP, % 33.7 30.6 29.2 32.2 30.5 39.2 32.4 27.2 25.8

AVERAGE EXCHANGE RATE USD / RUB 28.8 28.3 27.2 25.6 24.9 31.8 30.4 28 27.8

Sources: Federal State Statistics, Central Bank, Troika Dialog * According to the National Population Census '2010

The Russian economy is steadily growing. Despite the crisis of 2009, strong macroeconomic indicators (such as GDP and industrial production growth, an impressive amount of the stabilization fund, low debt, including national one, and relatively low unemployment rate) show stability and great development potential of the economy of the country.

AGE GROUP (YEARS)

POPULATION % OF POPULATION

0-14 22 661 721 15.68

15-34 42 346 200 29.30

35-64 59 718 259 41.32

65+ 19 800 100 13.70

TOTAL 144 526 280 100.00

Market Size: > 102 Millions

16%

29% 41%

14%

0-14 15-34 35-64 65+

Age Group (years)

6 DESIGNED BY J’SON & PARTNERS

24,5

7,3 5,5

2,2 0,9

20

4,5 4,5

2,3 1

22,8

4,8 4,9

3,0 1,2

Cellular Handsets Fixed telephony Internet PTV

2 008 2 009 2 010

1. General information: Russian Telecom Operators Revenue, bn USD

Cellular communication in Russia remains the international "showcase" of the telecommunications market. Revenues from wireless communication in Russia (along with the strong sales growth of cellular phones and

digital devices) is 5 times higher than the revenues from the fixed one.


1. General information: Digital Media Market in Russia

8

Russia follows general international trends increasing rapidly high-speed Internet Technologies; Smartphones, laptops, tablets and other digital devices sales; consumption of new video, audio, gaming and social services.

Russia at nowadays be considered as a newly-formed digital platform with a high market potential for all types of digital content production and distribution locally and in partnership with strong world`s market leaders.

3592

1249

250 53

1658

743

18 1

859 775

8331

1848

305 567

3006

2310

280 41

1646 1167

7054

1940

320

1300

3169 3527

544 589

1916

618

FTA Advertising PTV Subscribtion PTV Channels Subscribtion

PTV Advertising Broadband Subscribtion

Internet Advertising Internet Video Advertising

Paid Internet Video Services

Theaters Licensed DVD Sales

2010 2016 (1) 2016 (2)

Promising segments

* - BTV (free-air TV) - 20 current air channels, RPTV (advanced pay-TV) - non-air local and pay TV channels, including social TV networks; 2016 (1) - conservative scenario, 2016 (2) - optimistic scenario

Video Services Market volume in Russia, 2010-2016*, mln USD


10 households or 27 people in Russia have:

3.4 computers with broadband Internet access

42.5 SIM cards

6.6 apartment phones

3.1 TV sets, connected to pay TV

7.2 active users of social networking

18.5 cell phones, purchased over the last three years

0.8 iPads

2.3 smartphones

1. General information: Digital Devices in Russian Households


10

MARKET OVERVIEW


© Franz Steiner

2. Market overview: Cellular Business

Cellular penetration & Subscriptions by Counties, 2009

21

73,6

125,3

185,6

26,5 31,2 26,6 20

India China Japan USA France Spain Germany Russia

Mobile content market growth by Countries, 2010

Russia is the №1 in growth rates among major countries in terms of mobile content market in 2010.

Cellular operators revenue by countries, 2009 (bn USD) Mobile content market volume by countries, 2010

Sources: J’son & Partners Consulting

525

747

116

286

60 51 105

210

1170

1330

127

307

62 47 82 142

45%

57%

92% 93% 95%

112%

127%

147%

0%

20%

40%

60%

80%

100%

120%

140%

160%

0

200

400

600

800

1000

1200

1400

India China Japan USA France Spain Germany Russia

Subscribers, mln City population, mln people Cellular penetration, %

26%

23%

19%

16%

14%

13%

12%

11%

9%

9%

9%

Russia

India

Germany

Canada

USA

World

France

Japan

China

South Korea

Brazil

180 253 143,2

642 1167 906

231 123 88 85,9

116

188 347

560 372 403 1031 701,5

668

869 1722

2965

252 265 90 286,3

295

944

878

292

928 1010 1217

1432 1720

3168

3852 4048

0

500

1000

1500

2000

2500

3000

3500

4000

4500

0

500

1000

1500

2000

2500

3000

3500

4000

4500

France Germany India Russia South Korea Japan USA China

Video and TV

Graphic content

Audio, RBT, and audiobooks

Games


0,9 3,2 7 11,3 12,7 12,9 12,6 12,4

0,12 0,15

0,23

0,33 0,36 0,36 0,35 0,34

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

0

2

4

6

8

10

12

14

2008A 2009A 2010E 2011F 2012F 2013F 2014F 2015F

USB-modems, mln units USB-modems, bn USD

2 4 10 12 15

0,8

1,5

2,9

3,6

4,3

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

0

2

4

6

8

10

12

14

16

2009 2010 2011 2012 2013

mln units bn USD

2. Market overview: Digital Devices Sales, 2010

Smartphones sales in Russia 3G-USB Modems Sales in Russia

Value of mobile handsets market, bn USD Volume of mobile handsets market, mln units

0,8 1,5

2,9 3,6

4,3 3,6

3,4

2,8 2,7

2,5 4,5

4,9

5,8 6,3

6,8

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

2009 2010 2011 2012 2013

Smartphones Other handsets All handsets

1,9 3,9 9,6 12,4 14,8

27,1

31,6

28,9 27,6 26,2

28,9

35,5 38,5 40 41

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

2009 2010 2011 2012 2013

Smartphones Other handsets All handsets


956

732

712 632

401

1076

Sales, mln USD

1197

1092

1046

660

545

1358

Sales, thousand units

ASUS

ACER

SAMSUNG

HEWLETT PACKARD

LENOVO

Other

2. Market overview: Digital Devices Sales, 2010

NetBooks & Notebooks sales in Russia, 2010

Tablet PC sales in Russia, 2010

Total Total

Total Total

Sales volume and structure of the smartphone market in Russia, 2010

40,2%

31,2%

8,2%

7,7%

3,8%

6,9%

2%

Nokia

Samsung

LG

SonyEricsson

Apple

Other

НТС

The structure of the mobile phone market by producers, 2010

Units USD

267,1

7,8 4,2


386,1

6,8 8,4


Apple

Samsung

Other

35,8%

35,1%

12,0%

4,1%

0,5%

12,5%

66,7%

26,3%

0,8%

6%

0,2%

Symbian

Windows Mobile

Android

Apple

Other

1,48 bn USD

71,6%

8,3%

11,4%

4,5% 4,2%

3.93 mln units


12,8 15,6 19,3 22,9 26,2 29,2 31,9 34,3 24%

29% 36%

43% 50%

55% 61%

65%

0%

10%

20%

30%

40%

50%

60%

70%

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

2008 2009 2010 2011 2012 2013 2014 2015

Total number of households Penetration*, %

24 24,6 31,3

41,1

57,6

75,4

88,9 93,7

42% 28% 26% 32%

55%

74% 87% 93%

17% 17% 22%

29%

41%

53%

63% 66%

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

1,8

0

10

20

30

40

50

60

70

80

90

100

2008 2009 2010 2011 2012 2013 2014 2015

Number of users, million

Share of Fixed Internet access subs using Mobile Internet

Mobile penetration, %

233,0

31,3 21,3

97,7

22,5

165,4

22,6 6,3 3,6

17% 22% 26%

77%

36% 54%

37% 38% 47%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

0,0

50,0

100,0

150,0

200,0

250,0

Subscriptions, mln Penetration (per 100 inhabitants), %

Russian Fixed Broadband Internet Penetration Forecast

Mobile Broadband Internet Penetration in Russia and selected countries, 2010 Fixed Broadband Internet Penetration in Russia and selected countries, 2010

2. Market overview: Russian Internet Access vs. World

Russian Mobile Internet access Forecast

434,6

52,9 40,8 45,5 29,7

118,9

25,8 7,6 3,4

30%

36%

64% 68% 71% 72% 75% 86% 88%

-

50,0

100,0

150,0

200,0

250,0

300,0

350,0

400,0

450,0

500,0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Total number of households Penetration, %

*Penetration of fixed broadband, fixed WiMAX and fixed Wi-Fi access in Russia in households


2. Market overview: Russian Internet Access vs. World

Fixed Broadband Internet Penetration in the World Biggest Cities, 2010

Moscow and St. Petersburg occupy 30% of the internet market in Russia. The level of internet penetration in large cities of Russia is comparable to the world capitals level.

Internet Active Users Audience in Russia, 2008-2015

44,3 53,3 63,7 75,6 83,2 91,1 97,3 98,6

30,9% 37,2%

44,6%

53,0% 58,4%

64,1% 68,6% 69,7%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

0,0

20,0

40,0

60,0

80,0

100,0

120,0

2008 2009 2010E 2011F 2012F 2013F 2014F 2015F

Number of users, million Internet users penetration, %

0,99 0,99 0,97 0,96 0,96 0,92 0,89 0,87 0,76 0,62

Moscow St. Petersburg

15

Internet penetration in Russia is increasing rapidly Russian Government has ambitious plans to increase internet penetration up to 100% within 5 years


Online Games Market Volume in Russia and Selected Countries, 2010

Russian online games market Forecast, 2008-2015

The number of online games users in Russia and selected countries, 2010

23%

23%

17%

16%

14%

6%

5%

5% 5% 4% Legenda: Nasledie Drakonov

Geroi voini I deneg

Lineage 2

Perfect World

Boitsovskii Club

World of Warcraft

Troetsarstvie

Wizards World

Territoria

TimeZero

17,9 27,3 73,64 111,9 118,8

$0,49

$1,26 $1,31

$4,61 $5,02

$-

$1,00

$2,00

$3,00

$4,00

$5,00

$6,00

-

20,0

40,0

60,0

80,0

100,0

120,0

140,0

Russia South Korea Japan China USA

The number of users million people. Market volume, billion USD

3

47

81

17

57

1

22 27 30

66

14

87

124

9 16

Russia USA China South Korea Japan

MMO games Casual Social network games

2,0 12,1

17,9

25,1

31,6

38,1 43,5

48,1

$0,15 $0,29

$0,49

$0,67

$0,84

$1,00

$1,16

$1,32

0,0

10,0

20,0

30,0

40,0

50,0

60,0

$-

$0,20

$0,40

$0,60

$0,80

$1,00

$1,20

$1,40

2008 2009 2010 2011 2012 2013 2014 2015

The number of users, million people. Market volume, billion USD

Popular Russian online games, 2010

2. Market overview: Russian Online Games Market


0,11

0,31

0,53

0,74

0,97

1,23

1,51

2009 2010E 2011F 2012F 2013F 2014F 2015F

Social networks market volume, bn USD

Social networks penetration in Russia and selected countries, 2010

Number of social network users in Russia, 2009-2015 Russian social networks market volume, 2009-2015

Social networks market volume in Russia and Selected Countries, 2010

353,4

37,5

175,9

39,7 17,6

38,6% 58,2%

136,7% 153,3%

185,3%

0,0%

20,0%

40,0%

60,0%

80,0%

100,0%

120,0%

140,0%

160,0%

180,0%

200,0%

0,0

50,0

100,0

150,0

200,0

250,0

300,0

350,0

400,0

China Russia USA Japan South Korea

Number of Internet users, million Penetration, %

0,32 0,31

1,07

1,96 2,22

South Korea Russia Japan China USA

bln USD

31,0 37,5 49,7 58,3 65,3 72 76

55% 58%

62% 67% 69% 73%

77%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

2009 2010E 2011F 2012F 2013F 2014F 2015F

Number of social network users, million Share of Internet users who uses social networks from the total number of Internet users,%

2. Market overview: Russian Social Networks


25% 10%

20%

89% 97% 49%

30%

69%

11%

3%

26%

60%

11%

vkontakte.ru my.mail.ru odnoklassniki.ru livejournal.com liveinternet.ru

Games and applications Payment services Advertisement

24%

47%

10% 17%

30% 23%

17%

4%

7%

20%

38% 53%

59% 49%

83%

63%

32% 24%

World USA China Southern Korea Japan Russia

Games and applications Payment services Advertisement

Age categories, % Gender structure, %

12-17 18-24 25-34 35-44 >45 Women Men

5.0% 32.8% 40.5% 14.1% 7.6% 52.0% 48.0%

Socio-demographic categories of Russian social networks users

2. Market overview: Russian Social Networks, Income (%), 2010


0,34 0,24 0,31 0,41 0,52 0,65 0,78 0,91 0,37 0,35 0,52 0,72

1,00 1,34

1,75 2,18

0,22

0,15

0,18

0,21

0,76 0,65 0,92

1,26 1,70

2,24

2,85

3,53

2008 2009 2010 2011 2012 2013 2014 2015

Unusual placement and campaigns Video advertising

Сontextual advertising Media (banner advertisement)

Sources: market players information, AKAR, ZenithOptimedia, J'son & Partners Consulting Russia is № 1 in terms of growth rates of internet advertising

2. Market overview: Advertising volume in Russia vs. World

2012 100% 40% 14% 28% 17%

2007 100% 37% 8% 39% 16% World

2012 21%

2007 22%

Germany

2012 100% 54% 16% 13% 17%

2007 100% 48% 5% 22% 25%

Russia

TV Internet Print media Others

100% 21% 19% 52% 8%

100% 22% 11% 58% 9%

Sources: ZenithOptimedia, J’son & Partners Consulting

Advertising market volume in Russia, 1Q 2011, mln USD

Источник: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates

Internet advertising market volume in Russia and selected countries, bn USD

95%

5%

94%

6%

92%

8%

Advertising market

Internet advertising market

950

73,3

281,7

243,3

236,7

23,3

TV Radio Print Media Outdoor advertising Internet Others

The growth rates of Internet advertising market, 2007-2012

26,6 31,1 35,8 40,4 44,5

22,1 27,6

33,6 39,9

46,2 12,2

15,4 18,5

21,6 24,8

1,5

1,8 2,1

2,4

2,8

0,7

1,3 1,5

1,9

2,1

0,8

0,6

0,9

1,3

1,7

2008 2009 2010 2011 2012

USA Europe, Middle East and Africa Asia-Pacific Latin America Canada Russia

63,1 77,2

91,5

106 120

The growth rates of Internet advertising market, 2007-2012

19

Last year, Russia became the fastest-growing online advertising market in the BRICS, overtaking China, India and Brazil. The Russian Internet advertising market grew by 42% in 2010 in comparison to 2009, while China grew by 35% and in India and Brazil by 30% each.

Online context advertising increased its share from 53.7% in 2009 to 56.1% in 2010.


98% 98% 98% 98% 98% 98% 98%

41% 45% 48% 52% 55% 58% 60% 37% 44% 51% 57% 62% 67% 70% 18%

24% 31% 39% 46% 53% 60%

54%

56% 57% 59%

60% 61% 63%

72% 74% 76%

79% 80%

82% 83%

2010 2011 2012 2013 2014 2015 2016

FTA PTV Broadband Web TV DVD Cinema

Changes in Russian TV/Video Watching Time*, %

2. Market overview: Russian TV & video Markets Development Forecast

TV, Video, Internet Services Penetration Forecast in Russia, %

Web TV Penetration in Russia (% of population)

25 34

44 55

66 76

85

18% 24%

31% 39%

46% 53%

60%

0%

10%

20%

30%

40%

50%

60%

70%

0

10

20

30

40

50

60

70

80

90

2010 2011 2012 2013 2014 2015 2016

The audience Web TV, mln people Penetration of Web TV, %

88% 86% 82% 78% 73% 68% 62%

9% 11% 15% 17% 19% 21% 24%

1% 3% 6% 9% 12%

2010 2011 2012 2013 2014 2015 2016

Web TV

DVD

PTV

FTA

Market Forecast of paid online video

0,72 1,7 4

9

17

29

41

2,1% 4%

4,9% 6%

8,7%

11,1%

13,2% 14,6%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

0

5

10

15

20

25

30

35

40

45

2009 2010 2011 2012 2013 2014 2015 2016

Internet video advertising Market share on Internet video advertising


2. Market overview: Russian PTV market potential and forecast

Russian PTV market volume, mln USD

Russian PTV market Forecast, in households, 2010-2016

Russian PTV market technology Structure, 2010

Russian Paid TV Channels market volume, bn USD (VAT excluded), 2009-2015

ComScore’s video METRIX report shows that in may 2011, 4 billion online videos were viewed by over 41 million unique viewers in Russia. Since march 2011, the first month under measurement in Russia, the online video audience has grown by 5 percent and 27

percent more videos haven been consumed since march 2011.

282 318 350 368 382 396 407 411

850 936 986 1004 1089 1143 1182 1207

29 46

64 82 93

111 129 146

2009 2010 2011 2012 2013 2014 2015 2016

Satellite TV Cable TV IPTV

39%

12%

49% Satellite

Digital Cable

Analog Cable

5,1 6,3 7,2 7,9 8,4 8,9 9,3 9,6

9 9,5

10,1 10,6 11,7 12,4 12,9 13,3 0,37

0,5 0,7

0,9 1

1,2 1,4 1,6 27%

30% 32%

35% 37%

40% 42% 43%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

5

10

15

20

25

30

2009А 2010E 2011F 2012F 2013F 2014F 2015F 2016F

Satellite TV Cable TV IPTV Penetration, %

0,04 0,05 0,06 0,07 0,09 0,09 0,1

0,21 0,23 0,24 0,25

0,26 0,27 0,28

0,25 0,28

0,3 0,32

0,35 0,36 0,38

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

0,40

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

0,40

2009А 2010E 2011F 2012F 2013F 2014F 2015F

Advertising Subscribtion Total


2. Market overview: Russian TV market

The number of TV channels in Russia

Genre structure of pay TV channels in Russia in the measurements of TNS, units

Free TV in Russia is a 100% penetration

Genre structure of TV watching by time of watching, %

The structures of channels supply and demand for thematic content are quite different from each other. Children's channels are not so strongly represented in the supply, but they are most popular among the audience. Demand for the music channels is a little higher than the category’s place in a supply. At the same time the demand for educational, sport channels and channels about cars is, conversely, somewhat lower than their relative representation in the market.

143 180

225 271

312

2007 2008 2009 2010 2011

3

4

4

5

9

7

9

11

16

27

6

9

9

15

15

16

19

23

32

39

L

O

E

I

C

M

E

C

C

C

Number of channels in a personal interview

Number of channels in the measurement using People Meter

0,6

1

1,4

5,1

5,8

6,7

9,9

20,1

23

26,6

Lifestyle & Fashion Channels

Other specialized Channels

Ethnic Channels

InformationChannels

Cars & Sports Channels

Entertainment Channels

Music Channels

Cognitive Channels

Cinema and Series Channels

Children's Channels


The number of cinemas and cinema halls in Russia, units Box office and attendance at cinemas, including VAT

Russian film market experienced a slight drop in 2009. and continues to grow

2. Market overview: Movie Theatre Market in Russia

The number of releases of new movies, units

286 315 293

350 355 324

363

2004 2005 2006 2007 2008 2009 2010

477 563 624 682 751 766 832 804

1064

1317

1561

1878 1976

2246

2004 2005 2006 2007 2008 2009 2010

Cinema Cinema Theater

69 84 90 105 118 132 156 224

310

412

548

801

706

1014

3,25 3,7

4,59

5,24

6,76

5,34

6,5

0

1

2

3

4

5

6

7

0

200

400

600

800

1000

1200

2004 2005 2006 2007 2008 2009 2010

Cinema Attendance, mln visits

Cash charges, mln USD

Average ticket price, USD


2. Market overview: DVD market in Russia

1893

1600

1920

2008 2009 2010

The number of releases of license DVD in Russia, units

The level of cinema and DVD consumption in Russia

The structure of Russian license DVD market by video production countries in 2008

The sales of license DVD in Russia, millions of units

5,18 20,97

41,74

67,35

83,77 77,20

92,64

2004 2005 2006 2007 2008 2009 2010

The structure of Russian license DVD market by types of content in 2008

Due to the struggle with piracy DVD market has experienced a rapid growth in 2005 to 2007. After the crisis of 2009 it again came to life, but in the long term perspective it is threatened by the active development of Web TV, which is actively growing in Russia.

North America; 48%

Europe; 28%

Russia; 20%

Others; 4%

Movies; 73%

Documentaries and TV series;

11%

Animation; 9%

Gaming TV Shows; 7%

0,63 0,73

0,83 0,93

1,09

0,29

0,47 0,59 0,54

0,65

2006 2007 2008 2009 2010

Cinema attendance per capita

Purchase of licensed DVD per capita


25

PARTNERSHIP & MARKET OPPORTUNITIES IN RUSSIA


© Franz Steiner

3. Partnership & Market Opportunities In Russia

26

J`son & Partners offers

360° support

Marketing support

Management support

Legal support

Distribution support

Strong contacts with leading Russian media companies

TV Operators and TV channels

Web TV\AVOD\TVOD\SVOD projects

Mobile carriers Social Networks

Cinema Networks

Digital marketing agencies (mobile apps, social buzz, direct marketing etc.)

Localization\dubbing studios

DVD distributors

Merchandising agencies

J'son & Partners Consulting is a leading consulting company in Telecommunications, Media, High-Tech market segments across Russia and CIS with strong relationships with key market players and decision makers of all types of MEDIA/TELCO companies, with extensive in-depth market intelligence and core competences in investment deals support and strategy advisory services.

J’son & Partners Consulting can help your company to build a strong media presence in Russia taking advantage of its worldwide content and distribution excellence and creating new revenue sources on the growing digital media market in Russia


Gradual consecutive steps towards cooperation will bring the both companies high rewards and substantial advancement in the development of their businesses

27

3. Partnership & Market Opportunities In Russia: Partnership Strategy

Content excellence and Know How, Worldwide network of media, financial and technological partners

Strong expertise of J’son & Partners in Digital Media and direct relations with key players of all types in Russia and CIS

Capitalize on the growth of Russia's TMT sectors

Utilize Russia's expertise in Technology and Arts

Partnership: With leading TV / Web TV operator, leading social networking companies, leading cellular operator, leading social networking companies

Distribution in Russia and CIS: Distribution of content to digital (online & mobile), free-to-air and pay TV channels platforms

Content creation: Development of TV, movies and digital content in Russia and CIS (thematic TV channel creation, local movies production, digital content

development)

Marketing: Promoting content in TV, Web & mobile channels

Brainstorming of projects ideas

Selection of priority projects to realize

Business and legal operations support (local office, business representation, joint venture, negotiation support)

Management support: local team hiring, overall day-to-day activity management, launch of the projects

OPPORTUNITIES

COMPETITIVE ADVANTAGES

CONTENT PRODUCTION AND DISTRIBUTION PROJECTS

NEXT STEP: 360° SUPPORT AND BUSINESS LAUNCH IN RUSSIA


Annex


© Franz Steiner

4. Annex: Key Russian market players: Telecom Operators

COMPANY MTS MEGAFON VIMPELCOM ROSTELECOM SCARTEL (YOTA)

Brief info Leader in cellular, broadband and cable TV businesses in Russia, CIS

and Eastern Europe. The company along with its

shareholders started and actively develops cellular business in India

(Shiym Telecom).

Second largest cellular operator in Russia.

The major player in cellular, broadband and IPTV businesses in Russia and CIS. The company is in the process of global expansion in

the countries of Middle East (Orascom Telecom), Western

Europe (Wind Communications) and other countries.

Incumbent telecom operator, which in the process of

consolidation of Russia’s regional fixed line operators, broadband and IPTV providers, as well as

major cable TV and DTH operators.

The largest operator of WiMAX in Russia.

Plans to provide LTE services in partnership with MTS, Vimpelcom, Megafon,

Rostelecom.

Market Cap (July 12, 2011)

17.3 B -*

15.7 B 20.10 B -*

Revenue (TTM) 11.7 B 11.02 B 2.45 B*

EBITDA (TTM) 5.2 B 5.3 B 362.30 M*

Positions in Russia • Leader in Cellular • Top 3 Cable TV • Top 3 IPTV • Top 3 Broadband

• The second largest Cellular operator

• Leader Mobile TV

* - private company

• Top 3 Cellular • Top 3 IPTV • Top 3 Broadband

• Leader in IPTV • Leader in Cable TV • Leader in Fixed line telephony • Leader in Broadband

* - before consolidation

• Leader in WiMax • Owner of Licenses and

frequencies for LTE

* - private company

The shares of operators in the total subscriber base, %

69,3 69,1 69,4 69,7 71,4 71,5

50,9 51,3 50,9 51,6 52,0 53,0

50,2 51,6 53,5 55,9 56,6 56,5

37,9 38,4 39,7 40,6 40,9 41,4

2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011

MTS

VimpelCom

MegaFon

Другие

Russian key market players “TOP-3 Cellular Operators”, mln subscribtions

29

32%

24%

25%

19% MTS

VimpelCom

MegaFon

Other


Cable TV Satellite TV IPTV

Subscriber base 6,3 mln HH Penetration – 12%

Market size – 9 bn RUR. ARPU – 118 RUR.


Market size – 26,5 bn RUR. ARPU – 230 RUR.

The satellite TV market structure by subscriber base

The cable TV market structure by subscriber base

The IPTV market structure by subscriber base

Source: J’son & Partners Consulting Source: J’son & Partners Consulting Source: J’son & Partners Consulting


Market size – 1,3 bn RUR. ARPU – 220 RUR.

4. Annex: Key Russian market players: Pay TV market, 2010

30

MTS; 28%

ER-Telecom; 12%

Akado; 5%

NKS; 2%

Ufanet; 2%

Rostelecom; 3%

Other; 48%

NTV+; 10%

Orion-Express; 5%

Raduga TV; 2%

Platforma HD; 1%

Trikolor; 82%

MTS; 25%

Beeline TV; 20%

Rostelecom; 44%

Other; 11%


4. Annex: Key Russian TV Channels and niches

CHANNELS IN TOTAL 275

Educational/science-fiction 70 Discovery Channel, Animal Planet, Moya Planeta

Entertainment 36 TDK, Humor box, Park razvlecheniy

Cars 5 Avto Plus TV, Drive

Music 31 RU.TV, A-ONE, Bridge TV

Fiction (movies+series) 35 TV 1000, TV 1000 Russkoe kino, Dom kino

Children 18 Karusel, Disney Channel, Detskiy mir

Information 14 RBK-TV, Mir, BBC World

Religion 4 Spas, Soyuz, CNL, TBN

Sport 23 Eurosport, Eurosport 2, NTV+ Sport+

Fashion 3 Fashion TV, World Fashion Channel, Fashion HD

Erotic 13 No statistic data in TNS Gallup

Tele shop 6 Top Shop TV, TV club, TV sale

Ethnic 17 Tatarstan, Belarus’ TV, BST

The majority of TV channels is represented in educational, entertainment and movies-and-series niches, the minority is in the niches of fashion and religion.

Number of TVC in 2010г. TOP-3 TVC IN THE NICHE1

1 By audience

NICHE


4. Annex: Key Russian market players: TV holdings and owners

Three major players (NMG, GAZPROM MEDIA, VGTRK) control 76% of TV watching in the market only due to broadcasting TV channels, while they are also active in the markets of non-broadcasting channels and Web TV. Other players significantly lag behind the leaders in the market of broadcasting TV channels, while some of them (SFC “SISTEMA” and ONEKSIM GROUP) are active in the market of non-broadcasting and Web TV.

STOCKHOLDERS / MANAGEMENT

COMPANIES BROADCASTING TV CHANNELS

THE SHARE OF BROADCASTING CHANNELS AUDIENCE IN TV

WATCHING ON THE RESULTS OF 5 MONTHS OF 2011,%

ASSETS OF NON-BROADCASTING TV CHANNELS

WEB TV ASSETS

NMG Ren TV, 5 channel, Perviy kanal (25%), STS Media (25% - STS, Domashniy, DTV)

34,7 (including 11,4 STS Media) Digital telefamily of the “Perviy kanal” (4 channels)

videomore.ru (via STS Media)

MTG 38,2% STS Media (STS, Domashniy, DTV)

11,4 The group of channels Viasat and TV 1000 (7 channels)

videomore.ru (via STS Media)

Gazprom Media NTV, TNT 21,0 Thematic channels NTV+ (20 channels) rutube.ru, now.ru, tnt-online.ru

VGTRK Rossiya 1, Rossiya 2, Rossiya 24, Rossiya K

20,0 Karusel’, Moya Planeta, Nauka 2.0, Strana, Sarafan, Sport 1, Sport 2

zoomby.ru

Prof Media TV3, MTV, 2х2 3,3 - ivi.ru

UTV 7TV, MuzTV 2,7 - -

SFC «Sistema» - - TV channel Strim оmlet.ru

Oneksim - - RBK TV, Zhivi smotri.com

Rostelekom - - TV-groups: ArtMediaGrupp, Noviy Vibor, Klub 100 (14 channels)

-

Trikolor TV - - The group of TV channels 1TVCh (14 channels) -

Discovery Communications - - The group of channels Discovery, TLC, Animal Planet (6 channels)

-

TF1 Group - - The group of channels Eurosport (3 channels) -

Others TVC, Zvezda, Euronews 4,6 - -


TVIGLE.RU IVI.RU ZOOMBY NOW.RU

Pro

file

:

• Started in 2007 • Professional video content • Advertising business model • Own production and licensing

(internet-series, music videos, flash cartoons; programs about movies, fashion, music, sport etc.)

• Socialization of content • Significant partnership network of

showing the content at the third-party resource

• Leader in the market

• Started in 2010 • Professional video content • Advertising business model • Own advertising agency and content

seller B2B (Digital Access) • Free movies, series, TV programs and

cartoons (watching online).

• Started in 2010 • Professional video content • Advertising business model • State TV holding VGTRK is one of the

stockholders of the company • Gives the user a possibility to watch

favorite movies, series, shows and other TV programs free and online

• Started in 2011 • Professional video content • Pay business model • Affiliated with a large Russian TV

group (Gazprom-Media)

Co

nte

nt

Various: Russian: from TV channels (Perviy Kanal, STS etc.) and independent producers Foreign: Disney etc. Own: mini-series

Focused on movie content: Russian: from independent producers Foreign: from various producers

Focused on TV content: Russian: from VGTRK and other TV channels Foreign: from various producers

Focused on movie content: Russian: from TNT and independent producers Foreign: from various producers

There are other players in the market (including Video.ru, Omlet.ru, Tnt-online.ru, Tvzavr.ru, Etc.), But now they don’t show significant results of development.

The market is new and perspectives of its development are not finally clear: big perspectives are expected with the output of service to the TV screen (now the big part of audience watch the content via computer), with the development of pay model and the entry of new players to the market.

4. Annex: Key Russian market players: Web TV


4. Annex: Key Russian market players: Russian TV channels

The market of pay thematic channels as a whole has a great growth perspectives, but its high fragmentation shows high competition and potential consolidation of a market between major players.

The share of channels audience over the last 5 months of 2011, %

The greater part of TV watching in Russia is occupied by broadcasting channels

The significant share of market is occupied by non-broadcasting channels and other types of TV watching as a whole, and its share is constantly growing

The market of non-broadcasting TV wacthing is fragmented between many players

13 13,1 13,3

14,1

2008 2009 2010 2011

The share of non-broadcasting TV wacthing, %

* - others: non-broadcasting channels (local and pay thematic channels) and other

The share of separate segments of non-broadcasting TV watching over the last 5 months of 2011, %

* - others: immeasurable TV, DVD player and other

16,4 15,5

14,0

7,7 7,0

4,3 2,9 2,5 2,1 1,9 1,9 1,7 1,7 1,6 1,6 1,1 0,9 0,7 0,6 0,2

13,7

4,1

7,3

2,3

Measured local TV Measuring case-TV Other*


4. Annex: Key Russian market players: Internet Portals

Searchers and universal portals

Niche thematic portals Social networks and

communication services WEB TV

Players: Yandex, Google, Mail.ru, Rambler

Market characteristics: • Several large Russian players

work in the market • Yandex is the leader, Google

actively works in the market, but significantly lags behind Yandex

Players: Kleo.ru, Eva.ru, rbc.ru, afisha.ru etc.

Market characteristics: - Many players in the market - Leaders are Russian players

Players: Vkontakte.ru, Facebook, mamba, odnoklassniki, moymir etc.

Market characteristics: - Several Russian and one foreign

players (Facebook) work in the market

- Leaders are Russian players

Players: UGC (Youtube, Rutube, Smotri.com) and prof. content (Tvigle, ivi.ru, Zoomby, Now.ru etc.)

Market characteristics: - Many players in various

segments of the market - Youtube is a leader in the

market of UGC, but Rutube.ru and Smotri.com show a successful competition

- Tvigle is a leader in the market of prof. content , there are other strong Russian players in the market.

E-commerce and specialized services (games etc.)

Players: ozon.ru, molotok.ru, bolero.ru

Market characteristics: - Many players of e-commerce - Market leaders are Russian

players

The largest segments of Russian Internet market and key players


4. Annex: Key Russian market players: Russian TOP 4 social networks

DATE OF COMMERCIAL LAUNCH

OCTOBER 10, 2006 MARCH 4, 2006 MAY 17, 2007 FEBRUARY 4, 2004

Indicators of attendance

On July 13, 2011 there were 141 million users registered on Vkontakte In July 2011 daily attendance was 34 million people

In February 2011 more than 45 million users are registered, site attendance – 17,4 mln per month.

In 2011 more than 40 mln profiles are registered, attendance is 19,5 mln per month.

On June 27, 2011 the amount of active users was 750 mln. In July 2011 attendance was 160,9 mln per month.

Business model Mixed Mixed Advertising Mixed

Methods of monetization

Advertisements on Vkontakte

The voting to raise the rating of other users

Virtual gifts

The fee for additional services: a place for additional photos, ratings removal and high ratings of the photos, switching off reports that the user is online, providing a wide choice of "emoticons.« Removal of the guests from the list view, the page closing from all but friends. The service "Game" it is offered to improve gaming opportunities for electronic money and paid SMS-message. Internet advertising that allows precise targeting by geographic region, sex, age and frequency of displaying of advertising messages to the user. Virtual gifts

Targeted advertisements are in application.

Banner and video advertising

Virtual gifts

Creation of group or brand page and its promotion.

Paid services:

Inner system of payment for virtual goods of the social network

Group video-calls

Group text chats

Revenue In 2010 revenue from advertising was 1,36 bn RUR (44,7 mln USD) In 2011 revenue should increase three-fold.

2009 - 1 541 mln RUR

48.5 mln USD

N/A Revenue 2010 - 1,8 bn USD

It is expected that by 2011 it will be doubled primarily due to advertising (3,5 bn USD).

The Russian market size in 2010 - 403.2 mln USD (Including Russian-speaking audience in CIS countries) Data in table is data around the world that complicated construction of income shares.

72,8%

38,2%

32,9%

9,0%

8,2% 4,1%

3,5% 3,4% 2,3%

vkontakte.ru

Odnoklassniki.ru

Mail.ru - Мой Мир

facebook.com

twitter.com

fotostrana.ru

privet.ru

vkrugugruzei.ru

moikrug.ru

Segmentation of social network market participants in Russia, march 2011


37

ABOUT US: J’SON & PARTNERS CONSULTING


5. About us: Our Clients

38

J'son & Partners Consulting Clients are Industry Leaders, Start-ups, Investors And Government Institutions


5. About us: Our Clients About Us

Peter Gerwe

Investor and Founder

“CTC Media” (NASDAQ listed TV

company) and other media projects

This is probably the best consultancy I worked with in Russia and Europe. Financial models and Business plans were

amazingly accurate, comprehensive and convenient in usage. We`ve done a great job together.

Erbol Keldibaev

Chairman of BoD

“FONEX Invest” (large Central

Asian Telecom Holding)

J`son & Partners Consulting has made an inestimable contribution to our Strategy development. We were happy to

take a fresh and clear look on existing investment opportunities, to evaluate them precisely, and to choose the best

scenario for our multinational strategy.

Dmitry Grishin

CEO

“Mail.ru Group” (TOP Internet

Portal in Russia and EurAsia)

It has always been a great pleasure to work with J’son & Partners Consultingson & Partners Consulting. Rigorous

research, clear analysis, proactive solutions, personified approach… and a lot of satisfaction of astonishing results!

Lee Sparkman

President “ENFORTA” (largest

Russian WiMAX network)

J`son & Partners Consulting is known for discovering new prospective segments and pioneering unconventional

business solutions. A thorough comprehensive research on WiMAX had made long time before this has become a “hot

topic”.

Alexey Shelestenko

Associate Product Marketing

Manager

“Google”

“A big thank you for your help in making sense of the Russian Internet services market. A series of successful joint

projects completed against tight deadlines illustrate the level of the J`son & Partners Consulting team’s

professionalism”

Sergey Nazarov

Vice-president, Marketing, “Comstar”

At the moment is CEO, “MGTS”

“We have been cooperating with J`son & Partners Consulting for a number of years. Our team is thankful for the

high-quality research and client-driven service”

Artur Alekperov

Strategic Marketing Director

“Akado-Stolica”

“For several years now our company has been relying on J`son & Partners Consulting for data on the Moscow

broadband market. Regular research, rigorous methodology with profound detail help our company to understand the

market situation as it develops and succeed in the market”


5. About us: Contacts

40

THANKS J'SON & PARTNERS CONSULTING

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