Russian audiovisual right holders made online cinemas to use third party system of reporting

Online distribution of audio-visual content in Russia plays prominent and leading role in Russian internal market. The right holders take online distribution very seriously because it makes money even when the movie is not shown in cinemas. Anyway, the right holders are not happy with statistics provided by the online cinemas. On the basis of this statistics the cinemas calculate royalties and pay them to right holders. Right holders want statistics from the third party.

Actually there is rationale in the right holders’ requirement. If the online cinema provides right holders with statistics and compose this statistics, the right holders have no guarantee that the statistics is objective and correct in relation to figures. The revenues of online cinemas raise 40% in year, but their payouts to right holders raise only not more than 10% in year. Such financial “gap” makes right holders suspect the online cinemas don’t pay them all royalties. Taking into account that online distribution prevails other types of distributions, the right holders have a problem.

The online cinemas monetise the audio-visual content in three main ways: 1) the user pays for certain movie or serial, i.e. pay per view, or 2) the user buys subscription and 3) the user watch movies or serials for free but with advertising. The right holder usually receive advance or it receive royalties calculating in terms of certain conditions – views, the quantity of subscribers, how many time the advertising has been shown and so on. The last financial model makes right holder very dependent on online cinema. If the cinema reports incorrectly the right holders suffers damages.

So the audiovisual right holders made everything to change the situation in their benefit. So they almost did it. Online cinemas should use services Nielsen company in order to provide right holders with correct statistics. The audiovisual right holders have even asked the Russian ministry of communication to assist in this complicated issue. The deputy of minister has organised the meeting with right holders and online cinemas. At the meeting the right holders stated publicly they don’t believe the statistics provided by the online cinemas are reliable. Some of right holders believe online cinemas don’t pay all royalties.

Two online cinemas have opposed all accusations; no one from right holders has publicly accused them of royalties stealing. Online cinemas don’t want to provide all information right holders require, because the part of such information is trade secret and can be used by the competitors. More over the right holders don’t clearly understand how information is proceeded and where it is received from.