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Creative Economy: How Ukrainians Make Money on Ideas

Creative Economy: How Ukrainians Make Money on Ideas

In developed countries, creative economy brings a significant profit to the budget, exponentially exceeding the profits of traditional industry. For example, UK’s creative industries generate  £100 billion a year and grow by 9% annually. The creative economy of the United States is approaching   one trillion dollars.

And what progress does Ukraine make?

In 2016, Ukraine ranked  138th among 189 economies in terms of GDP per capita, which was just over $ 2,000. This is five times less than the world average.

Ukraine has 16.9 million economically active citizens. About 470,000 of them work in the creative economy (2.8% of the working population). They bring the country about UAH 105 billion (or 4.4% of GDP).

The development of IT and creative services have recently become two of the seven priority areas in Ukraine’s export strategy 2017-2021, presented by the Ministry of Economic Development and Trade in March 2017.

UCMC publishes an abridged version of the Liga.net article, which analyzed the capacities of creative markets in Ukraine.

IT sector

IT services are the largest market in the overall structure of the creative economy. Ukrainian IT companies and specialists mainly work for foreign customers. According to IT market representatives, its efficiency amounted to $3 billion in 2016, or 3.3% of Ukraine’s GDP. According to the European Business Association, the export of IT products brought UAH 5.8 billion of taxes to the budget in 2016, 30% more than in 2015. There are regions where IT is already much more important for the local economy. For example, Lviv. “Seven years ago, the Lviv City Administration adopted the development strategy, and now more than 200 IT companies are already working there, generating 14.4% of the city’s GDP,” emphasizes Oleh Denys, Vice President of SoftServe, one of the country’s largest IT companies.

The number of IT specialists in Ukraine. Over the past 12-15 years, the market of IT specialists in Ukraine has experienced explosive growth. About 100,000 specialists currently work in this area in Ukraine. According to the PwC study, the number of IT specialists can exceed 140,000 people by 2020.

New horizons. The big potential of the Ukrainian IT market is technological and product start-ups. Our entrepreneurs have already become famous for major transactions  with the world’s giants. For example, the Odessa startup Looksery and Snapchat are known  to have entered into a record $150 million transaction in 2015.

The media army

The Ukrainian media market, unlike the IT market, is aimed at the domestic audience. According to various estimates, about 200,000 people are involved in this sphere. All-Ukrainian Advertising Coalition (VRK) claims that the volume of the media advertising market was UAH 11.6 billion last year. And this year, according to its forecasts, it will grow by 27% to UAH 14.8 billion.

The main problem of this market is employee attrition to other more promising spheres of creative economy – IT and start-ups.

Production

An upcoming trend of this market is content production. Artem Vakaliuk, Analyst at Media Resources Management, estimates that the Ukrainian production market is several billion hryvnias. Tens of thousands of people work in the production sphere. The country has 6 large production studios with a staff of about 1.500 people each. In addition, there are smaller players. As for now full-length films are claimed to be shown only at film festivals. The reason for this, according to the analyst, is saving on the budget, which also affects the technical, graphic and visual implementation of ideas.

The opportunities for exporting serials are also under a cloud. An average budget of an episode of the serial that is currently being shot in Ukraine is about $50,000, whereas in Europe the minimum budget of an episode for the serial claiming to be distributed abroad starts from 500,000 EUR.

According to Vakaliuk, such a specific content as cartoons looks more promising for Ukraine now. Last year, the 3D cartoon Mykyta Kozhumjakа  (budget – EUR 4 million) was released. It was purchased by about 10 countries. There are also preliminary agreements on the distribution rights for Mavka and Stolen Princess (2018).

There are also some very strong Ukrainian companies that produce commercials and music videos: LimeLite, VGNC, Radioaktive Film. Besides, some companies produce special effects for Hollywood blockbusters and show business stars’ music videos. For example, Gloria FX from Dnipro worked on producing special effects for Coldplay.

Crafts

The popularity of handmade is growing very fast. In Ukraine, this market can be estimated only approximately. It is estimated that 120,000 people who have already been earning money selling the products are involved in this market. The market volume is only a few tens of million hryvnias. There are several websites in Ukraine, where masters sell their products (Crafta.ua, Skrynya, zrk.in.ua). From 50,000 to 200,000 ads are posted there. The goods worth up to UAH 7 million (about EUR 230 thousand) a month are sold on Crafta.ua alone. Many transactions are not effected on electronic platforms. Therefore, evaluating its “gray part” is problematic.

Fashion

A much more popular market is design services in the fashion design. More and more local fashion shows (fashion weeks, fashion days) are held in Ukraine. They are held not only in the capital, but also in the regions (Odesa, Lviv).

Until recently, 90% of Ukrainian factories, according to experts,  have produced clothing for imports. Now this ratio is gradually changed in favor of the domestic market.

According to Zarina Semeniuk, founder of the Ukrainian Academy of Fashion Industry, the popularity of Ukrainian young designers starts booming.

4,5 thousand enterprises are part of the Ukrainian light industry and provide 150,000 jobs. According to official data, the volume of the Ukrainian light industry market amounted to UAH 16.9 billion in 2016. Design products of the fashion industry comprise 12-17% (about UAH 3 billion) of the Ukrainian light industry market.

Book publishing

The traditional segment of the creative economy is publishing of books. According to Oleksandr Krasovitskyi, general director of the Kharkiv publishing house Folio, now this market can be estimated at $160 million (UAH 4.3 billion). The sale of Russian books (despite the ban on importing commercial batches) accounts for more than half of the market. Up to 10,000 people are involved in the book industry, according to very rough estimates. Unfortunately, few modern Ukrainian authors are published abroad.

Music

The sphere of shows, concerts and festivals belongs to one of the most active creative markets in Ukraine. According to Karabas.ua, the number of such events in Ukraine has been growing for the second consecutive year (in 2015 – by 42%, in 2016 – by 56%).

According to the Ukrainian Direct Marketing Association data, it was $17.5 million at year-end 2013. The market volume approached $25 million at year-end 2016.

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