After a decade of stagnation due to cable TV’s monopoly, Ukrainian pay TV platforms finally had their year.
During the quarantine lockdowns, a growing number of people switched to watching TV shows on their computers, bypassing cable and its tedious ads. This was good news for pay TV platforms, also known as over-the-top (OTT) services, which allow paid subscribers to watch the shows they want without ads.
Yet, Ukrainian pay TV platforms can’t compete with international players like Netflix. They had to adapt to the local market, where many consumers still prefer to watch pirated movies in Russian or Ukrainian for free.
From providing exclusive local TV content to dubbing Hollywood productions, platforms are catching up to attract a growing number of former cable TV users.
But piracy is a massive obstacle to the development of pay TV in Ukraine, Aleksandr Rezunov, director of Sweet.tv, told the Kyiv Post.
“Piracy seriously affects streaming services, especially when it comes to buying exclusive content,” he said.
Fighting piracy
Pay TV platforms offer a simple subscription model, which is the key to their success.
They get their revenues from subscribers. If the viewer doesn’t pay for a subscription to watch a film, there will be ads. If the viewer pays for a subscription, they receive the content without ads. The viewer can also pay for one movie at a time without buying a subscription.
Ukrainian pay TV platforms, including Divan.tv and Sweet.tv, expect their number of consumers to jump from less than a million households in 2020 to 2.3 million in 2021.
This represents half of the roughly 5 million TV viewers in the country, but OTT platforms need to ensure a certain level of quality content to tackle piracy.
Piracy challenges pay TV platforms to offer better content to their users at an affordable price, Rezunov said.
“It’s a good challenge to get people to pay for what they watch if they want to get quality content of course,” he said.
Andrey Kolodyuk, co-founder and owner of pay TV platform Divan.tv, echoed this statement to the Kyiv Post.
The average cost of a subscription is up to $3 per month in Ukraine, an affordable rate for hundreds of TV channels and thousands of ad-free movies, he said.
“Why hack bad quality content when you can afford to watch better quality?” he asked.
For example, Sweet.tv extended its catalog with the ‘Hollywood in Ukrainian’ project, which provides Hollywood films dubbed in Ukrainian to its subscribers, so they don’t go looking for a worse-quality version of the same content on pirate sites.
That’s how Sweet.tv became the first Ukrainian streaming service to sign direct contracts with big U.S. studios including Disney, Paramount, Universal and Sony to adapt their content for the Ukrainian market.
“It was complicated because Hollywood film studios prefer to work with larger markets,” Rezunov said.
Still, the price of exclusive content is high, Rezunov said, and this investment doesn’t pay off when people choose to pirate this content for free.
Local market
The fight against piracy didn’t happen overnight. In recent years, local media under the umbrella of Media Group Ukraine struck a crucial blow against piracy by upgrading TV networks’ cybersecurity to protect Ukrainian content from illegal broadcasting.
“Pirates can only target foreign content because you can’t reach local sports and local content on piracy sites,” Kolodyuk said.
And in Ukraine, the most viewed content is in Ukrainian.
Consumers tend to prefer locally produced TV shows inspired by international formats like “The Voice” or “X-Factor,” according to Kolodyuk.
OTT platforms have license agreements with TV networks to broadcast their content. For instance, Divan.tv offers access to hundreds of channels to its viewers and pays royalties to TV networks that produce this content.
It’s a win-win situation for both OTT platforms and traditional TV networks because their audience is the same. A recent survey conducted by Sweet.tv concluded that 63% of Ukrainians search for content that’s made in Ukraine or broadcast in the Ukrainian language, while 58% of them would like to watch videos on Ukrainian streaming platforms.
That’s where pay TV platforms come in. They attract investors by providing local content, Rezunov said. He also said that international services tend to forget local needs, which leaves room for Ukrainian platforms.
Kolodyuk echoed Rezunov’s statement on the importance of exclusive local content for Ukrainian pay TV platforms.
While Poland’s TV market is dominated by international players, it is the opposite in Ukraine, where local channels, providers and operators are in the majority, he said.
“It’s the only market in Europe which is not dominated by foreign players,” he said.
Encryption boost
Ukrainian pay TV may be a niche but it’s a huge one, according to Kolodyuk.
While the OTT market was worth $40 million in 2020, he believes that it will grow to $400 million in the near future.
Online TV accounted for only 15% of the market in Ukraine last year, but it could reach up to 50% in four years, he said. Ukraine’s recent switch to encrypted cable was the turning point.
Ukraine’s media groups encrypted cable TV in a bid to fight piracy in 2020, forcing viewers to buy special boxes to access their programs, which became the death knell of so-called free analog TV.
This move opened up the market because people had no choice but to subscribe to cable television or online streaming services. It’s a battle that cable companies will eventually lose, Kolodyuk believes.
“They will eventually go bankrupt, it’s inevitable,” he said.
The main challenge for pay TV in the years to come will be to attract older viewers who watch more TV but tend to stick to the more familiar cable or don’t know how to switch to new devices.
“Unfortunately, not everyone can afford to upgrade their TVs regularly, some do it every 10 or even 15 years,” Rezunov said.
But that’s not enough to dash Kolodyuk’s high hopes. “Ukraine is the last market in Europe with good potential for growth,” he said.
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