Online Entertainment Service

Performance indicators

2020: Revenue - 462.96 million rubles, profit - 24.38 million rubles

The Entertainment Online Service company, which manages Netflix's activities in Russia, generated 462.96 million rubles at the end of 2020 and received a net profit of 24.38 million rubles. Business indicators of an online cinema on the Russian market were disclosed for the first time.

Financial results are cited by Kommersant, referring to the SPARK-Interfax system. It reports that Netflix payments to suppliers and contractors in 2020 amounted to 220.4 million rubles, 2.9 million rubles were spent on labor in the country.

Since October 2020, all transactions of new Netflix users in Russia have been going through Entertainment Online Service LLC (fully owned by the National Media Group).

The revenue of Entertainment Online Service reached 462.96 million rubles in 2020

According to Mobile Research Group analyst Eldar Murtazin, for the incomplete fourth quarter of 2020, the number of subscribers to the service could exceed 500,000, taking into account the total revenue and dividing it by the average revenue from the subscriber in the amount of 830 rubles. According to his forecast, the paid audience of the platform for the year can grow to 1 million people.

By the beginning of April 2021, the minimum price for a Netflix subscription is 599 rubles per month, users have access to a standard plan for 799 rubles and a premium plan for 999 rubles. According to the calculations of the director of the Internet Video Association Alexei Byrdin, if you take the maximum cost of the tariff, the service has at least 180 thousand subscribers.

Based on the fact that the Netflix base in Russia exceeded 100 thousand users, Roskomnadzor should include the platform in the register of audiovisual services, Byrdin notes. Then, as the expert explains, she will have to comply with regulatory requirements, including, for example, labeling content, storing data of Russian users in the country, and registering a separate legal entity. All these requirements, according to him, will entail additional costs.^[1]

History

2022

Loss of 25% of capitalization due to withdrawal from Russia

On April 19, 2022, shares of the Netflix video service fell 25% in price on the post-market after the company reported a loss of 200,000 paid subscribers in the first quarter of the year and the risk of a reduction of another 2 million subscribers.

Netflix, which has 221.6 million subscribers at the time, last reported a loss of customers in October 2011.

The company noted that the decision to suspend work in Russia, made in early March, deprived the streaming service of 700,000 users.

Class action lawsuit against Netflix

On April 13, 2022, the Chernyshov, Lukoyanov and Partners Law Office, representing the interests of Netflix users, filed a class action lawsuit against the American Netflix service in the Khamovnichesky District Court of Moscow. The basis for the claim was a violation of the rights of Russian users in connection with Netflix's unilateral refusal to provide services in Russia. The amount of claims at the stage of filing a claim is 60 million rubles.

In early March, the streaming platform Netflix announced the suspension of the provision of services to Russian users at the end of the paid period without the possibility of renewing the subscription. At the same time, the contract of Netflix with subscribers of the service is public and does not provide for the possibility of unilateral refusal to fulfill obligations. In accordance with the Civil Code of the Russian Federation and the Law "On the Protection of Consumer Rights," such actions are a direct violation of user rights.

One way to protect consumer rights from company fraud is through class action. In conditions when a large number of people have the same type of requirements for the same defendant, this is the most effective means of judicial protection. Violation of consumer rights is obvious, we will seek from Netflix to comply with the requirements of Russian legislation, - said Konstantin Lukoyanov, senior partner of the Chernyshov, Lukoyanov and Partners Law Office.

More than 100 users of the service announced their desire to join the group lawsuit. The filed statement of claim against Netflix unites an initiative group of 20 people in accordance with the requirements of the Code of Civil Procedure of the Russian Federation. The amount of claims at the stage of filing a claim is 60 million rubles and includes compensation for moral damage caused to citizens, as well as a fine of 50% of the amount of compensation for moral damage awarded by the court. In addition, in case of failure by Netfix to comply with the court decision, the defendant will be charged a judicial fine (astrent) for each day of non-execution of the judicial act.

Those who consider their rights violated, and Netflix is subject to prosecution for unfair actions in the Russian market, can join the already filed lawsuit. To do this, you need to contact the Law Office.

Suspension of registration of new users against the background of Russia's special operation in Ukraine

On March 7, 2022, Netflix, against the backdrop of a special operation by Russia in Ukraine, announced that it would cease its activities in Russia, being one of the largest media companies to leave the market.

New customers will not be able to sign up, and it is not yet clear what will happen to existing accounts, the company said. In Russia, the service has more than 1 million customers.

2020

Launch in Russia

Streaming service Netflix has launched a Russian-language version. Localization includes not only the translation of the interface into Russian, but also a tariff grid adapted for the Russian market and presented in rubles, and not in euros. This became known on October 15, 2020.

In addition to this, Netflix is going to significantly replenish the collection of content available in Russian. According to the service, several thousand TV series and films will receive the dubbed translation. Their list for October 15, 2020 was not known.

We not only offer our service in Russian, but also inform you that content dubbed into Russian from the Netflix Originals line will appear on the platform. More Russian content will also be presented, including the "Epidemic" series, which is already available on Netflix around the world, Netflix said in a statement.

As in European countries, in Russia Netflix offers three tariff plans - basic, standard and premium, differing primarily in video quality. The cheaper the tariff, the worse the quality. The launch of Russified Netflix, among other things, ensures the appearance of official Russian-language accounts of the service in popular social networks. Profiles are registered on Instagram, Facebook and Twitter, plus a Youtube account has been launched.

Also, adapted technical support has been launched for Russian-speaking users. She receives calls and messages daily from 10 to 22 hours in Moscow.

The Russian partner of the service was the National Media Group (NMG), one of the media holdings in Russia.

The terms of the signed agreement included the translation of the service interface into Russian, the development of a tariff grid in rubles and the increase in the volume of content with dubbed translation and subtitles^[2].

Partnership with NMG to localize the service in Russia

In September 2020, it became known that Netflix plans to localize in Russia, where its partner will be the National Media Group (NMG), the video service said.

"Netflix is available in more than 30 languages worldwide. Almost five years after the launch of our English version in Russia, we are pleased to offer users our service entirely in Russian in partnership with the National Media Group. "

2016

The Minister of Culture of the Russian Federation sees Netflix as a threat to American propaganda

Russian Culture Minister Vladimir Medinsky, expressing concern about the lack of normal funding for domestic cinema, said that Netflix is supporting the American government with might and main.

In an interview with RNS^[3] the official expressed the opinion that successful startups, like the American OTT service, cannot arise just like that.

think - all these giant start-ups come up on their own? Sat one boy student, invented - and billions of dollars fell on top?!, " the minister emphasized

According to Medinsky, the American government understands that cinema is one of the most important stories, which, moreover, can be used as a tool to influence citizens, which is why the US authorities support it, including through Netflix.

"In our conditions, our ideological friends are well aware that there is the most important of the arts - how to enter every house with Netflix, get into every TV, and through this TV - into the head of every resident of the Earth," the head of the Ministry of Culture of the Russian Federation specified.

Earlier, the Ministry of Culture proposed to introduce a new fee from online cinemas and TV channels in the amount of 0.5% of revenues and another 3% from cinemas and film distributors to support the domestic film industry. Neither the industry nor government agencies supported the support of the ministry. "Unfortunately, the position of both film networks and TV channels is understandable, explainable, logical and selfish. Perhaps in their place we would behave in the same way, "Medinsky commented. Meanwhile, the Ministry of Culture, obviously, is not going to retreat from this idea and will look for alternative ways to raise funds from business in favor of domestic cinema

STS proposes to limit Netflix in Russia

Deputy General Director of STS Media, President of the Media Communication Union Sergei Petrov proposed taking legislative measures in Russia against foreign streaming services such as American Netflix. He stated this in Kazan at a meeting of the Agency for Press and Mass Communications of Tatarstan^[4].

"I think it is quite possible that companies should have registered representative offices in Russia, become tax residents, so that the turnover of payments received from consumers passes through the Russian taxable base, and the country received an opportunity from this to strengthen domestic content," Petrov said.

In his speech, Petrov called Netflix a threat to the prospects for import substitution in Russia. According to him, Netflix infringes on the interests of Russian manufacturers, without ordering them films and TV shows.

In a commentary to Novaya Gazeta^[5] Petrov stressed that he acted precisely as president of the Media Communication Union. Among the founders of this organization are the National Media Group, STS Media and the Gazprom Media holding.

Coming to Russia, but not to Crimea

Netflix began operating Russia on January 6, 2016. Subscription to the service costs from 649 to 949 rubles per month. The company's services are not provided in Crimea due to government sanctions on the USA activities of American companies^[6]

Notes