Disney's Successes in Russia and the Venture Capital Boom

Businessweek has published an array of materials focusing on the booming Russian consumer economy. In the "Mouse Ears Over Moscow" article, BW talks about the rapidly growing Russian entertainment industry and the entry of big Hollywood studios onto the Russian movie scene. Disney, in particular has made big "bucks" in Russia most recently with the release of the new "Pirates of the Caribbean" (its star actress Keira Knightley pictured) a few weeks ago. After a barrage of publicity for the movie including billboards four-stories high, the movie generated $14 million in ticket sales and 2.3 million viewers in its first weekend, a new record for Russia, where 1999 movie sales only managed to scrape in a modest $18 million. This is why the creators of Mickey Mouse are planning a massive expansion in Russia:

The entertainment giant opened its Moscow office just over a year ago and now employs more than 50 people. A new Russian-language Disney TV channel is due to be launched this autumn. In January the company teamed up with Sony Pictures Entertainment (SNE ) to create a joint venture for distributing Disney films in Russia. And Disney on Ice, a skating show featuring the likes of Snow White and Sleeping Beauty, came to Russia for the first time in May, selling out shows in Moscow and St. Petersburg. "Russia is a priority country," says Andy Bird, president of Walt Disney International. "We see the potential for growth for several years down the line."

With total box office sales estimated to approach $600 million in 2007, most of the big Hollywood studios have already begun local movie production in Russia and are in for a very competitive market, with Russian TV channels already churning out multi-billion dollar movies and mini-series.

Another article "Russia's Venture Capital Boom", as the name suggests, explores Russia's growing venture capital industry which has gathered much attention from foreign investors who have switched their radar screens from China and India to Central and Eastern Europe, and, most importantly, to the large opportunities available in Russia.

Though the population of Russia is far smaller than China's, it offers investors some of the same advantages. For one thing, connectivity is exploding. Russia is now home to more than 140 million mobile-phone users, and Internet usage and broadband penetration is reaching critical mass. Also like China, local players have had the chance to gain traction in the domestic market, meaning that giants such as Amazon, Yahoo! (YHOO), and Google (GOOG) don't dominate.

Google's competitor in Russia Yandex, has been seen to pursue the same aggressive tactics of internet expansion, and has thus become a prime target for the venture capitalists, along with Russia's Ozon.ru, a version of the popular Amazon.com. While being a full portal with its own mail service, news clustering and aggregation service, blog search, free Web hosting, research, shopping, and many other services, including its own payment system, it also runs one of the largest networks of free Wi-Fi hotspots in Russia. And like Google, it's branching out into mobile search. Its search engine was one of two recently incorporated into the Russian version of one of Nokia's (NOK) new smartphones.

The Russian government has been quick to respond, by setting up a trust to match investments from private venture capitalists. Already, it has agreed to dispense nearly $100 million to three groups of investors. Yet Russian government officials have still been fairly disappointed with the amount of venture capitalist investors entering Russia and applying for funding from the government. Despite the overall stability in the economy relative to a few years ago, the general risky nature of the venture capitalist industry is magnified by the inherent risks of an emerging market economy like Russia, and without very generous government attention it will take longer than necessary for it to grow.