A giant rises

Russia’s recent history has seen deep recession, depression and financial crisis. But it’s also witnessed unprecedented growth, extreme wealth and a developing middle class. This economic roller coaster has, for good and for bad, taken the AV industry with it. Anna Mitchell reports.

It’s July 1998 and Russia is under siege from spiralling inflation, a plummeting rouble and increasing poverty. A small AV integration firm of 15 people, led by Elena Novikova, is preparing to trade amid the appalling business conditions. Then, on the company’s first working day financial crisis is announced across the country.

That company was Polymedia and from its unlikely beginnings it would become a thriving business with 12 offices, 350 employees and an impressive installation record. After the troubled 1990s, when the USSR disintegrated and GDP declined roughly 50 per cent in five years, Russia made a steady economic recovery and Polymedia, along with a growing AV industry, was there to enjoy the favourable market conditions.

As opportunities have grown Novikova explains they are still largely led by government funding. Lev Orlov, publisher of InAVate Russia, supports the assertion: “Lucrative areas are mostly state projects and education. Education is a priority with a great deal of funding for the modernisation of universities. These projects are leading to demand for video walls and videoconferencing.”

Novikova says the AV sector is also supported by growing demand for corporate installations, control rooms in the energy sector, transport and emergency related installs and a strong pharmaceutical industry. Furthermore, both Orlov and Novikova pinpoint the Olympic Winter Games, to be held in Sochi in 2014, as a major area for the AV industry.

There’s no doubt business has boomed in Russia since 2000, and it has supported a burgeoning AV industry along the way. But, like much of the world Russia was rocked in 2008 when the global economy took a nosedive. “Sales in the IT industry, which includes AV, went down 50 to 60 per cent,” notes Novikova. However, she says that the worst affect was felt in the “box moving sector” and continues: “In the field of complex solutions the market dropped by about 30 per cent and the situation is slightly better. As the margins shrink in box moving we see greater potential in selling additional services such as consulting, project designing and construction as well as software and content development.”

“In late 2008 imports almost completely stopped,” says Orlov, explaining that all AV-equipment is imported in Russia. He also says Russian customs apply protective tariff rates, greatly increasing the cost of a whole system. “While all AV-equipment is imported the ‘sweet-places’ are occupied by commercial companies that have signed exclusive contracts with western manufacturers,” he says describing the market as an “oligopoly”.

Orlov and Novikova agree that events like Integrated Systems Russia play an important part in developing the emerging AV industry. Novikova comments: “We think the ISR exhibition is very important for the whole AV industry. However, our customers do not quite realise yet that this is a specific industry exhibition and we need to educate them.”

Orlov says the Russian AV industry would be better supported if there were Russian manufacturers serving the business because currently “there are no investors which will pay money to develop the market.” He continues: “In the last ten years the number of assembly plants, often assembling shopping and information kiosks on the base of Western-made touchscreens, has increased. Such plants are based in the major cities of Russia, for example Moscow, St Petersburg and Samara, but lack the capacity to serve the surrounding regions.”

The Russian AV industry faces numerous hurdles but the story has the makings of a happy ending. According to estimates, the country has the largest natural gas reserves, the second largest coal reserves and the eighth largest oil reserves in the world. It’s the fourth largest electricity generator and the fifth largest renewable energy generator. It boasts more higher education graduates than any other country in Europe. And, whether for good or for bad, in Orlov’s words, “the Russian AV-industry is inseparable from the common market.”

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