The Russian Front
GFI's Inna Bukatina on the progress being made in Russia on piracy and broadband penetration
Last year more and mroe people started to talk about Russia as one of the key market hotspots in Europe, most notable EA's head of European publishing Dr Jens Uwe Intat.
Towards the end of the year we spoke to Anatoly Norenko, event director for the Game Industry Summit Russia 2008, who gave us his thoughts on how the market was developing, but to get the publisher's view we spent some time with Inna Bukatina, head of international licensing and acquisition at GFI. Here she offers her thoughts on receding piracy, better broadband, and why Nintendo might never succeed in Russia.
Q: Digital distribution is a big subject for the games industry right now - how is it developing in Russia?
Inna Bukatina: Digital distribution is becoming more and more popular in Russia, although it's still a very small percentage - less than one per cent of the games sold - because of the very bad internet connections outside Moscow.
People prefer to go to the shops to buy games, but as far as we have rights we can host games and protect them from online piracy. We get titles removed from sites like BitTorrent - we send them a legal note and the remove them the same day. It's a real advantage for publishers.
Q: EA's Jens Uwe Intat told us last year that Russia was one of the most exciting territories in Europe right now. Would you agree with that evaluation?
Inna Bukatina: Yes, I'd agree - the market has a great deal of potential, and for PC games it's huge, one of the biggest in the world I think, because there's less and less piracy. We've also expanded our distribution to places like Kazakhstan and Uzbekistan and put together localised versions that add further sales.
Until now nobody localised for those places, we were the first. There aren't any numbers so far, it's only been a couple of titles, so we'll see what they bring - but there's still the potential to expand.
Overall the territory in and around Russia is huge, and once the internet penetration improves more people will be able to buy titles, and piracy will come down further - so sales will be even bigger.
Right now you might look at the revenues coming out of Russia, but you should remember that our retail price is very low - normal USD 8 for most titles, maybe USD 15 for big games, but never more than that... never USD 39.99, unless it's for gift boxes or special editions.
For console titles it's not that weak a market now - recently a representative from Microsoft agreed that the market is growing, and they're satisfied. In 2007 a top game would probably only sell around 3000 units, whereas in 2008 it's 6000 units or more - so that's double, and they expect more and more.
Also there's a good market for Sony consoles, but not really for Nintendo - I don't know if it's not the right market, or not the right distribution chains, but it's not right for them.
Q: What are your estimates of the size of the potential PC games market in Russia and the surrounding area?
Inna Bukatina: It's a lot, at least 5 million gamers. In Russia we have all the games that hit Europe, plus we license games from India, China, Brazil - and of course all the games made in Russia for the domestic market.
Q: Looking specifically at piracy - you said it's changing, but how far along is Russia on the progress journey?
Inna Bukatina: Probably around four years ago there were 99 per cent piracy rates. Now we have some organisations for PC and console games with which publishers are working. The piracy rate in the big cities, of at least a million residents, is probably now down to 60 per cent or less - which is enough, it means we can manage with it.
Most licensed games are sold in retail outlets in the cities, while the worst place for piracy is outside the cities - it's probably more like 80 per cent there, because it's impossible to cover everything. Publishers would struggle to find an organisation which had enough penetration to fight piracy on that scale outside the cities.
So the anti-piracy organisations focus on the big cities.
Q: Will digital distribution be the long term solution?
Inna Bukatina: Well, we're working with internet providers for cities outside of Moscow and St Petersburg to improve the connections and increase download speeds for games - so that will help the penetration of digital distribution and help reduce piracy further.
Another solution that publishers are working on is registering trade marks for the games in Russia - now a lot of PlayStation, Xbox 360 and PC games have gone through registration, and it all helps the legal forces to fight piracy.
Q: How much do you expect your digital distribution business to grow in the next 12 months?
Inna Bukatina: We're looking at about 3-5 per cent of our total business to be online distribution in the next two years.
Q: That's pretty good growth.
Inna Bukatina: Yes, it's significant growth - and of course we're not alone in the market either.
Q: Why do you think Nintendo won't make a mark in Russia? Are there specific reasons why social gaming products wouldn't be popular?
Inna Bukatina: Well, firstly people in Russia prefer products that are more universal, that can be used for a number of different purposes. For example, a PlayStation 3 or PlayStation Portable can be used for games, or films, and so on.
But the Wii is only for games, and for very specific kinds of games. The gaming society in Russia is pretty young, and I remember when Nintendo attempted to attract more people from older demographics - they put on their last slide a babushka, an old woman, in a headscarf sitting in the countryside and playing on a DS... but actually it's very hard to see that really happening in Russia.
I know that in other parts of Europe, older age ranges are playing these games, but in Russia they don't know what to do with it - they never owned a computer, and probably never worked with a device that's more technical than a telephone, for example.
It might be given as a gift, to parents, for example - but that's why it's a difficult market. The DS has a following, but there's a lot of piracy there too, and it's of course much more expensive than the GameBoy.
Inna Bukatina is head of international licensing and acquisition at GFI. Interview by Phil Elliott.