Fox's decision to move its New Zealand distribution from Village Roadshow to Universal appears to be nothing more than a standard shift of local licensee (only three of the six US majors currently operate subsidiary home entertainment divisions in the territory). However, the developments in Russia are arguably part of a larger trend.

Universal was the first studio to set up a local operating company in Russia in January 2005, followed by Fox in mid-2006, when the latter acquired its long-term local distribution partner Gemini Film. Over the next two years all but one of the majors would establish local opcos in the country. (The exception was Warner, which established a reciprocal distribution deal with Universal in 2005, under which Universal distributed Warner product in Russia and Warner handled Universal's Chinese business.)

The high level of interest in the Russian market reflected the territory's booming video business at the time. However, Russia was hit particularly hard by the global economic crisis of 2008, which immediately brought the market to a standstill, ending the double-digit annual growth that had characterised it since the launch of the legitimate video business in the late 1990s. With both volume sales and spending declining for the first time in 2009, we do not now believe that physical video in Russia will ever again experience anything like the pre-recessionary levels of growth. As a result, we no longer believe that the territory has the potential to generate the level of consumer spending (around $835m by 2013) we were forecasting at that time.

Universal's decision to close its local home video arm and instead license its product to Fox suggests that the studio has also reconsidered the market's potential. It reflects the increasingly pragmatic approach to distribution strategies being taken by the US majors. Other examples of this trend include Warner's downscaling of its physical video operations in the Chinese market and - perhaps most significantly - Universal and Paramount's recently-established distribution partnerships in Italy and Spain. Reflecting the steep declines in video spending in these two territories, Paramount exited Italy in 2010, leaving distribution of its products with Universal, while Universal closed its Spanish opco, handing its distribution activity to Paramount.