Disney Strikes Movie Treasure in Russia

The global movie industry is in a state of flux.

North America is the world's largest film market, but is also the most mature market. Box office revenues for 2010 were basically flat from the prior year at $10.6 billion, about a third of the global total, according to a report earlier this year from the Motion Picture Association of America.

The global picture, however, is more encouraging according to the Motion Picture Association. Growth in emerging markets lifted total box office revenues to $31.8 billion in 2010, a 13 percent increase from 2009.

One of the emerging markets showing tremendous growth is Russia.

Box office revenues in the country have soared over the past decade to more than $1 billion. Revenues have been rising at a compound annual rate of 27 percent since 2006, according to Russian investment bank Renaissance Capital.

Five years ago, 90 million people went to the cinema in Russia. By 2010, the number leaped to 165.5 million and the number of screens across the country rose from 1,300 to 2,400.

One of the companies benefiting from this boom in Russia is Disney (NYSE: DIS). That market has become a top-five tier market for the company.

Disney's executive vice-president for theatrical exhibition sales and distribution, Dave Hollis, said “Russia's growth has outpaced established markets and emerging markets like China.”

Mr. Hollis added “there's a cultural revolution under way there in terms of people embracing cinema.”

Disney is attempting to take advantage of this cultural change by adapting its approach to the country.

The company has a vast consumer products business in Russia, selling all sorts of products from movie-related items to Mickey Mouse lunch boxes.

But it is now shifting from an import-led model to a local one by trying to strike licensing deals with Russian manufacturers. Andy Bird, chairman of Walt Disney International, said “We want to develop an internal market...retail in Russia is growing at a fantastic rate.”

Disney “gets it” as far as the industry rapidly turning into a global one, led by incredible growth in the emerging markets.

Look for other companies to soon follow in Disney's footsteps in Russia.