A community solution to a flawed media market

Editor’s Note: Media in Ukraine struggle under the weight of political pressure, a crisis-prone economy and oligarchic manipulation. Media expert Gaygysyz Geldiyev argues that despite these structural problems, building honest, impactful and profitable media is possible if you embrace novel solutions and community support – laying out what this innovative model can look like.

“Can news media be profitable, honest and produce quality content,” Andriy Ianitskiy, head of the Centre for Excellence in Economic Journalism at the Kyiv School of Economics, asked me during an interview at the beginning of 2020. 

This is a loaded question and one that is being hotly debated around the world and particularly in Ukraine. While many media globally still make money, the pessimists worry about continuously deteriorating business models. The future, they argue, is grim and dominated by public or donor-funded media – in the best case.

In Ukraine the situation is even trickier. The market is overwhelmingly dominated by oligarchic or politically affiliated media (around three-quarters to be precise, mostly TV channels and popular digital media), that are subsidized by their wealthy patrons. In turn, a handful of largely donor supported media are battling it out to provide audiences with quality and unbiased content.

That does not mean there are no honest, independent and profitable media. Admittedly it was not easy, but I was able to name 5 such organizations (spoiler: Ukrayinska Pravda, or UP as it is commonly known, was among them only one with national coverage). 

The absurdity of the situation is that we are talking about a country with over 40 million people and 5000+ different media (85 TV channels, 294 radio stations and thousands of print and online media).

The bigger question though, is can they find ways to convince both audiences and businesses of the value they deliver, and develop mutually beneficial ways to grow together? 

What does Ukraine’s media market look like?

To start it is important to understand what the Ukrainian media market actually looks like. Exact numbers are hard to come, as there are no comprehensive studies of the market, but one can pull the different pieces together to get an overall picture.

The biggest chunk is advertising, which amounted to just over 24 billion hryvnias (around 730 million euros) in 2019, according to the All-Ukrainian Advertising Coalition. While this figure does not include so-called “jinsa”, hidden ads paid off the books (above 2 million euros, by some estimates), it has shown an encouraging growth trajectory in past years – it was up 25% in 2019 compared to 2018 (see detailed table below).

Furthermore, it was set to grow another 18% in 2020, at least those were the forecasts before the arrival of COVID-19, which threw a wrench into the industry’s gears. 

	2019, million UAH	Change 2019 vs. 2018, %	2020 forecast, million UAH	Change 2020 vs. 2019, %
TV advertising (total)	11 526	24%	13325	16%
Direct ads	10 089	25%	11600	15%
Sponsorships	1 438	20%	1 725	20%
Press advertising (total)	1 850	14,8%	2099	13.5%
National press	1 106	14.6%	1 255	13.5%
Including sponsorships	284	15.1%	321	12.8%
Regional press	320	15.3%	363	13.5%
Specialized press	425	14.7%	481	13.4%
Radio advertising (total)	717	24%	839	17%
National radio	518	24%	606	17%
Regional radio	65	20%	74	14%
Sponsorships	134	25%	157	17%
Out of home advertising (total)	4 240	22%	4 990	18%
External advertising	3 283	13%	3 779	15%
Transit advertising	600	36%	660	10%
Digital out of home	205	n/a	383	86%
Indoor ads	152	20%	168	11%
Cinema advertising	58	20%	70	20%
Digital (Internet) media advertising	5 740 (6 379 update)	34%	7 120	24%
Total media advertising market	24 131	25%	28 443	18%

The following piece of the media market puzzle is state funding, which is allocated to the Public Broadcaster, foreign broadcasting and other media owned by the state. Their total size is about 3 billion hryvnia, or slightly more than 100 million euros (2019 rate).

Next comes arguably the biggest chunk – money allocated by international donors to support the media and related spheres. This is about 30 million euros. Although a portion goes to various civil society organizations, which are important but do not strictly constitute media, it is nonetheless a major source of resources.

Finally, we have audiences themselves. In advanced markets these are a major and growing part of the media revenue mix. In Ukraine, however, this segment is just in its infancy. Our team did a scan of the market and found that some 45,000 euros had been gathered in 2019 on ad hoc crowdfunding campaigns. 

The situation drastically changed in 2020, however, when both a number of top publications launched membership models and readers stuck in COVID-19 lockdown donated more generously. Our market analysis identified total revenues of around 80,000 euros/month, or about 1 million per year.

This brings us back to the question: “is there room for honest, quality and profitable media?”. As previously mentioned, oligarchs and politicians take up some 75% of the market, while the share of state and public broadcasters is about 11.5%. 

This suggests that, at best, the remaining almost 5,000 media organizations have to survive on some 190 million euros! 

Yet even in this hyper-challenging market, there are media outlets that have not only won their editorial independence but also built a sustainable financial model that can serve as an example for the rest of the market. I will now look at one of them in particular – Ukrayinska Pravda.

UP’s position on the market

Ukrayinska Pravda, or UP, was founded in 2000 by Ukrainian journalists Georgy Gongadze and Olena Prytula as a response to the censorship under the presidency of Leonid Kuchma. 

At first, it was a marginal media that was read by tens or hundreds of people a day. Back then, many in Ukraine were still discovering the potential of the internet as a medium for news distribution. 

Until 2005, the publication was funded mainly by donors, even the audience which had grown substantially by that time did not give UP the opportunity to earn money, since advertisers were afraid they would be targeted by the authorities for placing ads on the fiercely independent outlet.

Everything changed after the Orange Revolution, following which companies became ready to work with UP and its ever-expanding audience, which is 14 mln unique users per/month by now. Advertising became the main source of funding and remains so to this day. 

A deeper look, however, reveals a more nuanced picture. Much of the advertising revenue, which accounts for 80% of revenue overall, comes from banner advertising as well as the production and publication of native ad projects. With a prestigious brand and large, influential readership, UP can sell these at a significantly higher CPM vs. that offered by Google.

But while advertising is very much the story of UP’s present, reader revenues only recently became part of the conversation. A multi-tiered membership model was rolled out over the summer 2020 and is expected to contribute around 10% of revenues by the end of the year. 

As this market segment grows, it is set to also play a growing role in the media’s future. 

Building a reader revenue-driven future

The launch of UP’s membership project had that touch of serendipity that characterizes important undertakings. 

Together with the team of Jnomics Media, a consultancy, we had been working on membership ideas that would incorporate elements of bundling, frequently used by travel and leisure industries but rarely seen in media. 

When I came to discuss our findings with Sevgil Musayeva, UP’s editor-in-chief, it turned out she had been working on a related, exciting club membership project, which she had started developing during her studies at Oxford. 

We merged the ideas, came up with new ones and deliberated, and ended up producing a multi-tiered membership concept. This was ideally suited for UP, whose management was categorically against limiting access to information as a fundamental right of every person.

Good ideas are a great thing, but nothing beats testing the real user and market reaction. We were eager to pilot the concept, but wanted first to get input from audiences and rolled out a large questionnaire in which over 3,000 people took part.

There were dozens of questions, including whether readers would be ready to support UP financially (17% were), if they would do so regularly (5% were), and how much they could contribute on average (about $2), as well as what they would like to receive in return.

Perhaps even more important, the survey allowed us to segment the audience into distinct and differentiated groups – and aligned them to three tiers of membership. These three tiers were based on the amount of the contribution people were ready to make, but more importantly in how they related to UP and what they wanted in return.

The first tier focused on people interested in providing some basic support for UP and greater involvement in the editorial process. Using a combination of surveys and focus groups, we picked the name – a simple “UP Club” – and defined the value proposition. The latter included an exclusive newsletter, access to closed UP events, opportunities for direct discussion with the editorial team and the ability to vote for specific content (or even contribute themselves).

We launched this model in mid-June and saw the most loyal readers from across the world enrol. The average ticket was 76 UAH, or $2.7 (some 40% than the minimum contribution set at 55 UAH). 

The second level focused on people who wanted to support UP but were also excited about some tangible benefits. This was the most innovative segment, and involved creating a bundle of special offers for members. 

Known as “UP Toloka”, which means communal, this tier was built in partnership with over 30 companies operating in various B2C markets, who all provided special gifts and discounts to members, such as theatre tickets, exclusive deals on travel, or meals at restaurants. 

By creating a bundle of perks we ensured that everyone would find something in it for themselves. It was inspired by programs offered by Star Alliance or Amex, which offer everything from unique deals to cashbacks. Readers responded enthusiastically, bringing the average ticket up to 125 UAH ($4.4), which helped improve the financial performance of the program.

The final tier focused on the wealthier side of the audience – with 14 million unique monthly users, a sizable chunk of UP’s comes from the country’s elites – but also the ones interested in the broadest range of engagement. 

Called the “UP Editor’s Club”, this tier is made up of members invited either directly by the editor-in-chief or recommended by one of the existing members. The fee for most members is high at $1,250 per year – $1,000 to cover the core fee and $250 to go into a pool for valuable members who cannot cover the dues. It is made up of a wide range of people, from SME managers to philosophers.

Club members join a private chat for discussions and attend monthly offline events (COVID restrictions permitting), with discussions on important social and political issues and guest speakers – typically prominent historians, activists, or entrepreneurs.  

Looking ahead

The combination of these helped UP enter a new and promising line of business – back to the direct relation with readers that was the hallmark of media when they sold subscriptions and were able to invest money into both great content and a great product. 

We forecast that reader revenue will grow an astounding 2,000% in Ukraine this year, compared to 2019, and will continue on a strong (if more reasonable trajectory) afterward. It is the role of innovative media to lead the way and continue reinventing membership – after all, this relatively new solution has not yet finished evolving. 

Interesting times await us. Media will be transformed by the new revenues stream. While not all will succeed, those who do will come out stronger and better equipped to tackle the difficulties that lie ahead. Who knows, they may even be able to challenge the dominance of the oligarchic media in the foreseeable future.