Russia's Set-top Box Market Set to Boom

According to IMS Research, Russia’s DTV market is switching into high gear. Over the next 5 years, an estimated 50 million set-top boxes (STBs) will be needed to supply this market, generating well over US$1 billion in STB revenues by 2014. The digital transition in the country as a whole is estimated to be a US$50 billion industry.

Several key developments will drive this market. The new Ministry of Communication and Mass Media (MCMM) has gained significant power to license and regulate, a dramatic shift from a formerly closed system under the auspices of the Russian Government. In February 2008, HD Media was formed to promote HDTV adoption, with hopes of 70 or more locally and nationally produced HDTV channels by 2014. In December 2008, The Digital Alliance of Russia was formed to provide technical solutions, economic need assessment, resolution of legal issues, as well as manage the DTV transition. Regulatory reforms will accelerate further growth, bringing the fragmented pay and free-to-air TV sectors together to work towards a shared objective. Increased openness to foreign investment has also played a major role in advancing the Russian DTV market.

Analyst Mark Meza states, “The pay-DTH market has exploded and become highly competitive with the successful launches of Platforma HD and Raduga TV, as well as the country’s numerous launches of linear IPTV services in major cities. Not to be overlooked, the country’s large analog terrestrial and cable sectors remain sleeping giants.” Meza adds, “The necessary provisions for an HDTV boom are falling into place and include the need for distribution of basic HD STBs, compatibility of an IP-based multiplatform approach, studios and broadcasters switching to HDTV content production, and increased broadcast signal quality.”

The oncoming growth has prompted the Ministry of Telecommunications (MIT) to devise a plan to encourage domestic production of STBs to replace foreign-made equipment that is prevalent in the Russian DTV market. In March 2009, the MIT announced that a Russian factory will be built in the Kaliningrad Region in summer 2009 to produce in upwards of 2 million digital satellite STBs per year. The equipment will be based on original Russian engineering designs, but will be built using foreign components. The MIT has stated that Western expertise will be needed to achieve the 50 million unit demand.