Without a dedicated free children’s channel in the market, kids programming in Russia has limped along for years on marginalized blocks heavily favoring classic soviet toons. But the country’s burgeoning middle class, bolstered in part by 7% annual GDP growth, is driving pay-TV consumption up these days with its demand for more air time and greater choice in content. As a result, the Russian broadcast scene, previously closed off to outside content, is shaping up to be the next hotbed of opportunity for kids entertainment distributors.

A report released last month by London-based media research firm Screen Digest says the pay-TV market across Eastern Europe grew by 18% last year, its biggest annual bump to date. And Russian pay-TV in its own right is pegged to experience 20% growth over the next five years to eventually penetrating 63 million homes. The study predicts that satellite access in Russia will hit five million subscribers by 2012, up from less than 1.5 million in 2007.

But for now, 80% of the Eastern European pay-TV market is cable. So for the most part, foreign content in Russia consists largely of dubbed cable versions of Cartoon Network, Nickelodeon and Jetix channels. In contrast to Western Europe and North America, whose pay-TV dials are chock-a-block with kids options, the unsaturated Russian market has kids content providers of every shape and size mapping out plans to join the party before the vodka runs out.

With cable on the rise and more foreign content flowing into Russian family life through pay-TV operators, the country’s public broadcast heavyweights are also increasingly looking outside the country’s borders for programming.

Earlier this year when its three-year content contract with free-TV broadcaster CTC Media was up for renewal, Disney was able to negotiate a multi-year deal that will see its animated series, live-action series, features and TV movies play into a much wider time slot. And the house of mouse forged another partnership with Russia’s largest public broadcaster, Channel One, offering up first-run features such as Pirates of the Caribbean, The Chronicles of Narnia, Cars and Finding Nemo, plus the regional debuts of High School Musical and High School Musical 2.

The fact that Disney-infused kids blocks are running on such well-entrenched outlets (CTC and Channel One serve 100 million and 140 million viewers, respectively) indicates that Russian parents and government gatekeepers that have traditionally been conservative about welcoming foreign content are coming around to the benefits of a greater variety of Western fare.

Though a behemoth like Disney may have had an easier time getting its foot in the door, smaller companies such as Toronto, Canada’s Decode Entertainment are also making in-roads with Russia’s public broadcasters. Sales executive Lara Ilie has spent the last year and a half establishing relationships in the Russian market, and at press time, she was leaving for Moscow to meet with terrestrial buyers and move another step closer to inking sales. Decode content is available in Russia through pan-regional deals with Jetix, Nick, EM.Entertainment and Cartoon Network, but the company is keen to start dealing at the local level so it doesn’t have to dilute revenues to pay a go-between. ‘Up until now, [the terrestrial broadcasters] were reluctant to deal directly with foreign distributors,’ says Ilie. ‘As a foreigner, you used to have to go to a local distributor.’

Ilie says Russian buyers seem to be interested in American-style sitcoms and comedies, so Decode’s live-action series The Latest Buzz and Radio Free Roscoe tend to be well-received. As for animation, the appetite for preschool fare is a bit light, but gentle toons for core kids tend to do well. And predictably, the former Russian agent mother character in Turner’s live-action comedy My Spy Family makes that series go over like gangbusters.

Getting its programming onto Russian airwaves has been an uphill battle for Bristol, England’s Aardman Animations as well. So far, comedy channel Komediya and adult-skewing net 2×2 have picked up a good chunk of Aardman’s catalogue, including Shaun the Sheep, Creature Comforts and its Wallace and Gromit half-hour specials. But the region’s kids buyers have been slow to respond. So while it continues efforts to forge broadcaster relationships, the company has struck a deal with Russian home entertainment company Soyuz, which will release Aardman’s Wallace and Gromit specials on DVD at Russian retail. Strong sell-through over the course of several releases is just the kind of proof of market demand that could sway the channel buyers into a broadcast pick-up.

As distributors struggle to make terrestrial inroads, development of the pay-TV dial is moving along nicely. MTV Networks will be jumping into the region with both feet next year, when it launches a localized Nickelodeon Russia outlet. Though Nick already has a presence there via a European feed and content service block on terrestrial channel TNT-Teleset, Bhavneet Singh, MD of emerging markets at MTVNI, says the goal now is to build a soup-to-nuts service made in Russia for Russian kids by the end of 2009. The channel project is just heading into development, but it will start out with brands and characters that Russian families already know, adding original programming and localized broadcast events like the Nick Kids’ Choice Awards down the road. In the meantime, MTVNI’s emerging markets team is in the thick of researching the Russian consumer market, exploring how best to reach local kids not only on-air, but also online and through mobile platforms.

Singh cautions that although Russia’s pay-TV landscape is heating up, the ad market for kids content isn’t robust, and it’s disproportionately smaller in the pay-TV arena. As well, he says the base tier of cable subscribers stick to inexpensive bare-bones packages, making it impossible for cable operators and content owners to jump out of the gate with a boatload of services. ‘I’d love to add Nicktoons, Nick Jr. and Noggin at the same time,’ he admits, ‘but the ad market for that kind of pay-TV universe is much smaller.’

Channel operators that don’t depend on advertising revenues are reveling in the scope for development. As Wayne Dunsford, GM at pan-regional preschool channel JimJam, notes, ‘For once it’s nice to be coming into a market at the start, when it’s in its infancy. We can only grow in terms of take-up.’

He’s in the midst of prepping JimJam’s Russian launch, which will see dubbed content from joint-venture partner HIT Entertainment’s library airing on a 24/7 subscription-based satellite feed. Although JimJam’s key brands are well-known in most international territories, Russian consumers are new to Bob the Builder, Thomas & Friends and Postman Pat. Though it means working a bit harder on the publicity front to breed awareness for the properties, Dunsford feels there’s also merit in bringing something totally new and fresh to market.

Building brand awareness for properties at a grassroots level is a major goal in Cartoon Network’s Russian strategy. A spokesperson for Turner Broadcasting System Europe says the company is not yet selling air time in Russia; but the channel is trying to build credibility and awareness through partnerships with popular Russian print publications, and these include several magazine-run events.

For Darran Garnham, SVP of sales and marketing for Eastern Europe at licensing agency Kidz Entertainment, grassroots marketing efforts have to take a backseat to broadcast media strategies to achieve blanket coverage without intensive legwork. Ad revenues in Russia associated with kids products are minimal at best, he explains, with telecoms, cars and beer dominating media buys. He adds that a 30% to 50% annual inflation rate on ad space pricing effectively shuts most kids product marketers out of the game.

But with the Russian economy still in early growth mode, licensing is taking a back seat right now to a general consumerism thrust in which manufacturers don’t need the benefits of a license to drive sales. Garnham does point out, though, that there’s a constant hunger in Russia for new properties right now, creating more opportunity for short-window programs for CGI movies than TV shows, which tend to be scheduled somewhat irregularly.