Support to SME Development in Armenia (SMEDA) Co-Funded by EU and BMZ, Implemented by GIZ’S Private Sector Development SC Programme

Support to SME Development in Armenia (SMEDA) co-funded by EU and BMZ, implemented by GIZ’s Private Sector Development SC Programme

Published by:

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

Registered Offices: Bonn and Eschborn, Germany

Private Sector Development South Caucasus EU Support to SME Development in Armenia (SMEDA)

Address: 12 Proshyan Street 0019 Yerevan Armenia

Phone: +374 010 269986 Email: [email protected] Internet: www.giz.de, www.smeda.am

Responsible: Katja Kammerer, Programme Director Private Sector Development South Caucasus Mariam Babayan, Acting Team Leader SMEDA

Author: Nina Iskandaryan, Caucasus Institute

Photo credits: © GIZ / PSD SC EU SMEDA Project

Design & Layout: © GIZ / PSDSC Programme

Yerevan, November 2018

The “Support to SME Development in Armenia” (SMEDA) Project is co-funded by the European Union and the German Federal Ministry for Economic Cooperation and Development (BMZ) and implemented by GIZ’s PSD SC Regional Programme. SMEDA is part of the EU4Business and EU4Innovation Initiatives.

The content in this publication does not necessarily reflect the views of the European Commission.

Contents

Executive Summary ...... 4

Stakeholder maps ...... 5 Film ...... 6 Fashion design ...... 7 Music ...... 8 Marketing and advertising ...... 9 Software and games development ...... 10

Value Chain Analysis ...... 11 General overview ...... 11 Film ...... 13 Fashion design ...... 15 Music ...... 16 Marketing and advertising ...... 17 Software and games development ...... 18 Economic assessment ...... 20

SWOT Analysis ...... 22 Film ...... 23 Fashion design ...... 24 Music ...... 25 Marketing and advertising ...... 26 Software and games development ...... 27

Recommendations for the development of CCI in Armenia ...... 28 Film ...... 29 Fashion design ...... 30 Music ...... 31 Marketing and Advertising ...... 33 Software and games development ...... 34

CCI of Armenia 2018 Stakeholder Maps

Executive Summary

This report presents the results of a comprehensive study of the Cultural and Creative Industries (CCI) of Armenia conducted in May-September 2018 with focus on Armenia’s main cities – Yerevan, Gyumri and Vanadzor – and five sub-sectors:

1. Film 2. Fashion design 3. Music 4. Marketing and advertising 5. Software and games development

The study was cross-disciplinary, based on a combination of economics and social science. It included the following steps:

• Stakeholder mapping that served to identify the main stakeholders of the industry and the ties between them; • Value Chain Analysis that was used to describe the legal and economic environment of each sector, its potential, prevailing trends, and the main challenges facing the sector • Recommendations on ways to tap into the potentials and address the challenges

The methods used to collect the data included desk research, participatory workshops in each of the three cities, and 46 semi-structured interviews with creative and business actors from all five sub-sectors, regulatory bodies, donors, support structures and educational organizations. A Sounding Board meeting was held by the SMEDA project in August 2018 to present the results of the study and discuss recommendations.

CCI of Armenia 2018 Stakeholder Maps

Stakeholder maps

The stakeholder maps are graphic representations of the main stakeholders active in the sub-sectors of Armenia’s CCI and the links between them.

The stakeholders are broken down into three main types: Private Actors, State Actors, and Civil Society Actors. In the maps, they are represented by sectors (top – Civil Society, bottom left – Private Actors, bottom right – State Actors). Some actors are of a mixed type, e.g. professional unions are both civil society and private actors; they are located on the borders between sectors.

The three circles in the maps represent the role of stakeholders with respect to the Cultural and Creative Industries, as follows:

Inner circle Key actors Middle circle Primary actors Outer circle Secondary actors

Actors that play mixed roles are placed on the borders between circles.

Symbols on the maps have the following meaning:

Solid lines symbolize relationships/connections Arrows symbolize the dominance of one actor over another Double lines symbolize partnerships and alliances V Veto players

CCI of Armenia 2018 Stakeholder Maps

Film

In the subsector of film, a significant role is played by state actors, due to the dependence of the subsector on state subsidies. Key veto players are the Ministry of Culture and the Cinema Centre, with some overlap in decision-making capacity; the role of the Film Commission remains undefined. Non-transparent ties between the Cinema Centre and the leading rental company also render the latter a veto player, with negative consequences for the industry. The situation calls for urgent changes in legislation and regulation.

CCI of Armenia 2018 Stakeholder Maps

Fashion design In the subsector of fashion design, state bodies have little engagement or impact. The primary actors in this subsector are chiefly small private companies and individual designers. The civil society segment is at early development stages.

CCI of Armenia 2018 Stakeholder Maps

Music Primary players in the music industry of Armenia include bands, music clubs and production companies surviving almost entirely on their own: civil society bodies are weak and have negligible influence, involvement of state bodies mostly concerns educational institutions with few ties to the industry.

CCI of Armenia 2018 Stakeholder Maps

Marketing and advertising

Leading players in this subsector are TV stations and municipalities which own outdoor advertising. Private players are still at development stages; civil society is all but nonexistent.

CCI of Armenia 2018 Stakeholder Maps

Software and games

In some ways, the map of this subsector can be seen as a model for the other subsectors: it has the most and the strongest primary actors, including private companies and vocational/in house training and educational institutions, and a strong and modern development actor, the Enterprise Incubator Foundation with joint engagement of the state, civil society and private sector.

CCI of Armenia 2018 Value Chain Analysis

Value Chain Analysis

General overview

The value chains of the selected CCI in Armenia share a number of parameters.

Understandably for a situation of transition to market economy, the weakest link in the chain is dissemination/trade, with the partial exception of computer games and software development, an industry that chiefly exists in Armenia in the form of outsourcing by Western companies that handle their own dissemination and trade.

However, when it comes to reaching the domestic market in Armenia, games and software producers face the same challenges as the other CCI:

• A small, unexplored and unstable domestic market, dictating the need to compete on international markets; • A small and insufficiently skilled workforce of managers, sales agents, producers and marketing specialists; • Common Soviet-legacy perception that it is below an artist’s dignity to sell their product, or even to view their creative output as a product. This leads to a tendency to skip the trade link in the chain altogether, going directly from production to exhibition, and to judge creative work on its assumed artistic merit regardless of market success.

The second parameter shared by all CCI in the selection is the insufficiency of most support functions, including

• Weak links to the formal education system, including higher and vocational education, which relies on outdated theoretical curricula irrelevant to the needs of the job market or development, underpaid faculty lacking experience in the industries, and students lacking understanding of ties between education and employment; • An emerging and so far insufficient industrial education system, i.e. in-house training, professional internships, master-classes etc. In this, soft & games are doing much better progress than the other sectors • Inadequate or lacking regulation: fuzzy laws on copyright and intellectual property, no efforts to punish piracy or otherwise address the atmosphere of total disrespect for copyright, lack of laws on particular industries, e.g. cinema, inadequate regulations for allocation of public funds to CCI • Chaotic situation in preservation/archiving, with the partial exception of cinema

Finally, the third shared parameter is shortage or inadequacy of ancillary goods and services: licensed state-of-the-art software required by CCI to be able to compete internationally, materials and professional equipment (fabric, musical instruments, audio, lighting and filming gear, computers for editing film and making animations, etc). In this respect, software & game development also stands apart. Summing up the shared issues, it can be argued that, with the exception of soft & games, Armenia’s CCI have to operate in highly challenging conditions – either struggling in the domestic market or facing huge competition in the international market – while largely lacking the necessary resources and skills.

CCI of Armenia 2018 Value Chain Analysis The value chains of the five selected industries are dissimilar in other respects. A key parameter is the extent to which the sector is market-oriented. In this respect, marketing/PR/advertising is the leading of the five sectors, sales being its raison d’être, closely followed by soft & games. At the other end of the range, there is the Armenian cinema industry that tends to spend money rather than make it, and sometimes ignores audiences altogether:

Market-oriented Marketing Soft&Games Design Music Cinema Non-market oriented

The other key parameter is whether most of the consumption takes place in the domestic or international market. Based on this criterion, CCI can be arranged as follows:

Domestic Design Marketing Music Cinema Soft & Games International

At one end, there is design, a grassroots industry operating almost exclusively in the Armenian market, and at the other, software & games, a sector imported to Armenia and still working predominantly for international markets. Music, marketing and cinema are located between these two poles; the specific configurations of the chains will be explained in the sub-sections below.

CCI of Armenia 2018 Value Chain Analysis Film

The value chain of the cinema industry makes it distinct from other CCI by the following parameters

• Strong dependence of most players on government subsidies, the corrupt and non-transparent allocation of which disrupts key links in the value chain – between creation and production, and between production and dissemination. • The absence of a domestic market for the products due to negligible numbers of cinemas and universal disrespect for intellectual rights/copyright in Armenia • The lack of capitals/funds in Armenia that could potentially be invested in the cinema industry: given the high cost of modern international-standard cinema and animation, Armenia’s investors cannot afford them.

The Soviet Armenian film industry was state-funded and disintegrated in post-Soviet Armenia which could no longer afford it. Armenia had a ‘cinema city’-type Soviet facility called Armenfilm, or Hayfilm in Armenian, sold in the 1990s to an American Armenian business operator in an effort to secure investment, which was stipulated by the contract but never happened. The buyer returned Armenfilm to Armenia in the 2010s but all that remain are dilapidated buildings. There is no equipment, no ancillary services or personnel capable of providing them, no infrastructure.

To replace Armenfilm, the government established a body called the Cinema Center affiliated with the Ministry of Culture, which is in charge of distributing public funds allocated to the film industry. The system is reportedly corrupt, non-transparent, inefficient and plagued with conflicts of interest. In the last decade, the equivalent of about a million US dollars per annum was allocated from Armenia’s state budget for production of films, including feature, documentaries and animation (there is also a separate budget for festivals, education, travel to international events etc). A third of the $1 mln is consumed every year by the Cinema Center for salaries and running costs. Some of the funds are allocated directly by the Ministry of Culture, bypassing the Cinema Center, on a non-competitive basis, including $100,000 yearly given to Sahakyants Animations to produce one full feature animation every five years. Until recently, the same amount went annually to the Hayk Documentary Film Studio affiliated with the Cinema Center, producing documentaries of dubious quality; this practice was stopped by the previous Minister of Culture.

According to stakeholders, funding for production is often given by the Cinema Center in the form of grossly overpriced services (such as rent of equipment and workdays of electricians, soundmen and cameramen) by one particular company, Apotheosis, which happens to be owned by the deputy director of the Cinema Center. Only a few well-networked companies actually get any funds.

In late 2016, the then-newly appointed Minister of Culture launched the setup of a new body, the Film Commission, which was to be registered as an independent non-commercial entity (but still hasn’t been). He hired American Armenian Arsen Baghdasaryan as Film Commissioner, making him head of one of the Cinema Center’s departments so far that the Commission still does not exist on paper. The commissioner was assigned two tasks: preparing a Cinema Law and a set of new regulations for the Cinema Center that would establish transparent, corruption-proof and merit-based procedures for allocation of public funds to the film industry, and launching a large-scale project similar to the one currently implemented by Georgia, which would market Armenia as an attractive filming location for international companies, contributing to the development of the domestic film industry through shared use of facilities, equipment, services etc. The commissioner has been unable to move any closer to either of the goals, the first due to consolidated resistance of Armenia’s filmmakers to the “too business-oriented” model he proposed, and the second, in his own words, due to the inertia of the state bureaucracy (or perhaps some of the planned investments may have been hard to secure).

CCI of Armenia 2018 Value Chain Analysis Creation The filmmaking that emerged in Armenia over the last two decades has so far failed to become an industry; it is represented by a number of individuals and small companies, most of which rely on one individual or married couple. Each of these players pursues their own strategy, depending on their skills, experience and networks. The SMEDA-led establishment of the Independent Filmmakers Community has been the first successful effort to unite some of the players around a shared agenda, at the moment topped by protesting against the Film Commissioner’s projects and demanding his resignation. The creators come from various backgrounds; only a few are graduates of the Institute of Theatre and Cinema, some have studied or worked abroad.

Production Since filmmaking is expensive, the main challenge is to secure funds for production and post-production; no Armenian filmmakers have so far reached the level of making profit. Some companies have relied on close personal ties to the Cinema Center or MoC to get public funding for their films; some have pursued this strategy unsuccessfully. A handful has been able to co-produce films with European, US and/or Russian companies; one is currently trying to crowdfund their next film. Some manage to raise funds from private donors or foundations. Co-production with foreign production companies is seen by most stakeholders as the only viable solution for feature films and animation. Armenia has membership in Eurimages, but its filmmakers are struggling to secure sufficient domestic funding to be eligible for co-production on the Eurimages platform, and to conform to the Eurimages regulations. Reportedly, 3 Armenian films were submitted to Eurimages in 2017 and of these, two are being produced. Some stakeholders find companies abroad willing to co-produce their films, and act as minority producers, with most of the funding coming from abroad.

Dissemination/Trade With just 5 cinemas in the capital and one each in Vanadzor and Gyumri, dissemination in the domestic market is irrelevant for the sustainability of the film industry. So are online sales, due to disrespect for copyright. TV stations sometimes cover some of the production costs in exchange for broadcasting rights, and sometimes it is done by Sharm, Armenia’s largest marketing and TV production company reported to secure production contracts with Public TV on a corrupt basis with heavy kick-backs. According to stakeholders, unless a TV station has paid for broadcasting rights in advance, it actually charges Armenian filmmakers for broadcasting their films on the grounds that it gives them publicity and that viewership is insufficient to generate income from advertising. According to stakeholders, very low-budget films such as the Supermama comedy have managed to break even from a combination of box office and co-production with a national TV station. Of all the film production companies of Armenia, only several have been able to handle the dissemination of their products in international markets. Among these, Bars Media documentary film company stands apart by its independent strategy. It has never sought public funding; having grown from a team of war reporters in Karabakh, it has learned to produce for European, US and other markets, including Japan, and makes quite a few of its films in Africa, Asia and other parts of the developing world. Other companies partnered with European producers who handled dissemination in their countries.

Reception/Transmission Given the small number of cinemas and weak traditions of cinema-going, this function is mostly fulfilled by film festivals, of which the most prominent in Armenia are Golden Apricot for feature, documentary and short films, and Reanimania for animated films. Golden Apricot gets about a quarter of its annual budget, $100,000, from the Cinema Center, and raises the rest from corporate sponsors and private donors. Reanimania is not sponsored by the state at all. Both festivals attract prominent filmmakers and quality entries from the rest of the world and create a platform for Armenian films. There are complaints from stakeholders that Golden Apricot is becoming a club, increasingly difficult to enter, but it is hard to judge if they are founded.

CCI of Armenia 2018 Value Chain Analysis Armenian films also compete in international festivals and a few have won prizes in recent years, even though not at the most prestigious ones. SUPPORT FUNCTIONS All cinema stakeholders stress the lack of secondary professions: cameramen, soundmen, electricians. The only stable job market for these professionals in Armenia is television; some also make side incomes by filming weddings. Since television requires a different skill set, filmmakers often have to fly crews in from abroad, and unless plans to make Armenia a location where international filmmakers shoot their films come to head, this situation is not going to change because the domestic film industry cannot provide enough jobs for these professionals. However, a positive contribution from television is the availability of highly skilled specialists in special effects and film editing.

Fashion design

The entire value chain of the Armenian design industry takes place in the domestic market. There is perception among stakeholders of the need to reach international markets but no clear vision of how to achieve this goal, and so far, no efforts at synergy with the marketing industry. There is a SMEDA-supported Fashion and Design Chamber in which some designers have memberships. There is also a SMEDA- supported project on Establishing Business Club for Fashion and Design (implemented by Business Club for Impact and Fashion and Design Chamber) which aims to create a joint platform for creative industry, namely through the fashion and design cluster that will contribute to the development and enhance the sector’s competitiveness (funded by the European Union and the German Federal Ministry for Economic Cooperation and Development (BMZ).

Creation Most designers work as individuals; the companies are usually run by one person. The industry is new in Armenia, born within the last two decades. All stakeholders stress the insufficiency of education in this sphere; many are self-taught.

Production Fashion design in Armenia has f ew links to the larger players in the textile/clothing manufacture industry. Most designers are also tailors, making the clothes they design. A few clothing design companies are in fact small clothing manufacture companies that produce certain quantities/sizes of each item.

Dissemination/Trade Designers sell the clothes they produce in their shops or Armenian brands concept stores, via social networks and websites, almost entirely on the domestic market. Revenues are barely sufficient for subsistence and insufficient for growth. Some income is made by making bespoke items, clothes for television shows etc. Whereas in Yerevan, dozens of individuals and companies are present on the market, in Vanadzor and Gyumri, there are just a few designers who barely manage to sell anything in their home cities and are looking to sell their designs online, chiefly to Russian companies. This may have to do with the aesthetics of Armenian design being culturally closer to Russia and generally the post-Soviet world than the West or other international markets, and with insufficient English fluency compared to much better command of Russian amongst Armenians.

Exhibition There are a few fashion shows in Armenia but they are not game-changers. Fashion and Design cluster representatives are exploring ways to set up a shared space/hub that could host the designers and companies, enabling them to join efforts to improve marketing and brand visibility, and to conduct exhibitions, festivals, fairs and training.

CCI of Armenia 2018 Value Chain Analysis Music

The focus of the study has been on classical, jazz and rock music, none of which are capable to operate as successful businesses in Armenia, or, arguably, in most other places in the world. The stakeholders in this industry are, on the whole, struggling to make ends meet, including bands with strong domestic reputations and history, such as Bambir from Gyumri, Vordan Karmir and Lav Eli from Vanadzor, and leading Yerevan-based bands such as Time Report or Nemra.

Most of the value chain of this industry is located inside Armenia, although the most successful bands and musicians also perform abroad, including at competitions, if they find sponsors or have enough private resources to finance the tours, and sometimes get prestigious awards. The music sector is not united, there is no sense of industry; every band and individual struggles on their own, competing in the tiny market and looking for international tours, even though the same individuals often perform in several bands, including state orchestras. To make a modest living, some leading musicians teach music school and travel abroad to play with various bands. For many Armenian musicians music is a hobby: they earn money in other sectors and make music in their free time: they have day jobs in engineering, IT etc., and in the evenings they give concerts.

Creation The musical tradition dates back to the Soviets: the USSR invested into classical music, and Armenia has preserved some of the infrastructure, still teaching hundreds of music teachers and players at vocational schools (colleges) and high school (called conservatory), funding a State Theater of Opera and Ballet, a National Philharmonic Orchestra, Armenian State Jazz Orchestra, Chamber Music Hall, and so on. The state-funded classical music scene is ridiculously underpaid, allocation of public funds is reportedly corrupt, and management ineffective. There is a steady flow of classical musicians from Armenia to Europe, including Germany and Switzerland, where they are reportedly quite competitive.

In the late Soviets, ideological pressures in Armenia were less stringent that in most other parts of the USSR, and Armenia build comparatively strong jazz and rock sectors; many leading Soviet and post-Soviet jazz musicians started their careers in Armenia. Probably as a consequence of this tradition, there are now dozens of rock bands in Armenia despite the small audiences. There are also several non-state-funded jazz/classical music orchestras, and many individual jazz/rock musicians. One of rock bands in Armenia, Bambir, survives from the 1970s. Some prominent musicians perform classics, jazz and rock (including pianist Vahagn Hayrapetyan, sax player Armen Hyusnunts).

Production With few exceptions, production is the weak link in the value chain of Armenia’s music industry, due to the general shortage of money in the industry, exacerbated by the tiny size of the domestic market, lack of trained and experienced producers, and lack of ancillary and support links of the chain. Musicians have to do with cheap old instruments and poorly equipped halls. Of ancillary services, recording studios are adequate quality and affordable. State-of-the-art albums by Armenian bands are few especially given that selling them to a profit is not possible (pirated DVDs are widely sold for 4 Euro apiece in Armenia).

Dissemination/Trade Renting concert halls is too risky for most bands as the tickets might not sell out. Selling DVDs or paid downloads bring almost no income due to total disrespect for copyright and widespread piracy across the post-Soviet world. Although there is an organization in Armenia supposed to collect fees for the use of copyright-protected music, it is ineffective. Copyright owners have to register abroad. For many bands, music clubs and radio stations are the main venues for revenue generation. There are a dozen clubs in Yerevan, and none in Gyumri (there was a jazz club several years ago, but it shut down very soon). There is one jazz café in Vanadzor. In Gyumri and Vanadzor, talented young musicians chiefly perform at weddings and parties to make ends meet. Many stakeholders mention the absence of medium- sized concert halls as one of the concerns. Music clubs do not have enough seats to make revenue from 16

CCI of Armenia 2018 Value Chain Analysis concerts sufficient for subsistence; a jazz or rock musician reportedly gets paid under 30 Euro per concert in the best clubs in Yerevan (if they are paid at all). New bands often play for free in popular clubs for the sake of visibility, in the hope of getting hired to play at private parties or corporate events. However, some bands, especially old-school ones, resent and even avoid playing at parties as a form of “selling out their art”.

There is a clear lack of organizations that would regulate the field, protect the rights of musicians, help them coordinate their activities and solve their issues. There are Armenian Jazz and Rock Associations, but they do not appear to communicate with jazz and rock musicians except to invite them to festivals. Concerts abroad do not usual ly bring profit due to costs of travel, but are important for recognition and networking, including getting a chance to play with better-paid Western bands. In terms of sales, the sector is struggling. No single band has found a successful business model. It is likely that there aren’t any, and the only way to help this sector survive would be through charity or synergy with more profitable industries.

Reception/Transmission Armenian radio stations and Youtube are the main platforms for transmission. Radio stations, especially those that promote jazz and rock, broadcast music by young bands so as to give them country-wide visibility. Monetizing Youtube views from Armenia has not been possible since the new Youtube policy was put in place in March 2018. Even before it was, there weren’t enough views. Jazz and classics get thousands or tens of thousands at best. The most popular Armenian rock groups, such as Bambir, Vordan Karmir, and even the Armenian Navy Band led by a Grammy-winning American musician, get up to 150,000 views, still not sufficient for monetization.

For the sake of comparison, Armenia has a music industry that is successful as a business, called rabeez – an original unsophisticated genre of popular music played in restaurants, at weddings and parties, with a simple dance rhythm and sentimental lyrics, combining elements of Armenian ethnic music and Russian blatnyak (urban underworld and prison songs). Rabeez is a thriving industry by Armenian standards, making income from the domestic market and outside markets, chiefly in the Armenian Diasporas in the U.S. and Russia. The business model used by rabeez relies on its wide popularity, reflected, for example, in the fact that rabeez hits get up to 6 million views on Youtube. The model is therefore not applicable to the less popular genres.

Gyumri and Vanadzor are known as the birthplaces of Armenian rock, but now most jazz, rock and classical bands are based in Yerevan. Vanadzor has two widely popular rock bands, Lav Eli and Vordan Karmir, and a jazz trio. Gyumri is home to Armenia’s oldest and most popular rock band, Bambir.

Marketing and advertising

Most of the value chain of Armenia’s marketing, PR and advertising industry takes place in the domestic market.

Creation Marketing, PR and advertising are new occupations in Armenia. Formal education in the sector is irrelevant with a few exceptions, e.g. the French University. Large companies or branches of international companies, e.g. mobile phone and internet providers, often hire expats to handle their marketing as the local workforce is inadequate to their needs. Many small and medium businesses, including in the CCI, do not have dedicated marketing staff and do not cooperate with marketing companies. Cooperation across the sectors could potentially create more marketing jobs. There are no real associations in the sector; bodies bearing that name, APRA (Armenian PR Association) and AMA (Armenian Marketing Association) are in fact companies operating on the market, not unions of industry players pursuing common agendas.

CCI of Armenia 2018 Value Chain Analysis Production Leading companies on the market have their specific niches. APRA, loosely affiliated with the previous government, specializes in media campaigns. Breavis (formerly IPSC) specializes in research (opinion polls, sociological studies, market research), with government bodies amongst its leading clients. Deem Communications is contracted by the EU Delegation to Armenia to handle its communication; it also implements projects for international development foundations. Publicis Armenia is a representative of Dutch-owned Publicis Hepta Group, chiefly catering to international clients. Doping Co does market research and marketing. Spring PR is a medium sized local market oriented PR company. Many media companies have created small departments and also provide marketing services.

Dissemination/Trade Awareness of the need for marketing, PR and advertising services has increased, and more companies have been able to afford it in the last decade. Stakeholders name television and online media as the largest clients for marketing, PR and advertising services in Armenia. However, Armenia’s media environment is dominated by one holding company and affiliated players. The dominant player creates an uneven playing field by dictating prices and making exclusive advertising contracts banning clients from advertising in non- affiliated media. Most large contracts for producing TV advertising go to the two large players on the market, Sharm and Paradise. Another issue is the lack of an independent media research body (known in some countries as a joint industry committee) that would measure media audiences and provide data to businesses, which they could use to design advertising campaigns. Many of Armenia’s online media have counters installed but have been known to tamper with their traffic flows, so the advertisers don’t trust them. For TV stations, audience data are collected using “people meters”, operated in Armenia by a branch of a German company and available for steep fees. Unlike Armenian companies, international businesses are reluctant to unroll their campaigns in the absence of audience data across the sector. Lack of audience research also leads to corrupt practices, when advertising agents demand kickbacks for placing their company’s ads with a particular media outlet.

Reception/Transmission Television is the main platform, with the Internet catching up quickly. Municipalities are important players in outdoor advertising; new platforms are explored as the market for these services grows, but rather slowly given the modest purchasing power of Armenian citizens. In Gyumri, there is one marketing company, Compass Consulting, led by the head of its Chamber of Commerce. In Vanadzor the only form of marketing is outdoor advertisement, the main actor of which is the local municipality. There is no local company involved in marketing.

Software and games development

This sector stands apart from the other CCI due to having originated abroad and existed in Armenia for over a decade in the form of outsourcing by larger Western companies before native startups began to appear. Amongst these, there are three Armenian game development companies (Rockbite Games, Noor Games and Triada Studio, the first two dedicated to game development and the latter combining it with other activities), and several dozen software developers. The rest are branches of international companies. Hence, most of the value chain, except creation, is located outside Armenia, and all other functions do not develop in Armenia. Like in the other CCI, the domestic formal education system is not considered to be strongly relevant to the sector. However, vocational and in-house education/training is comparatively well developed due to the existence of a relatively large and lucrative job market.

Creation The products are created in Armenia, or jointly with coworkers in other countries in the case of international companies. Most of the workforce is young, with a significant and increasing rate of young women. Many of the developers are self-taught or have taken vocational courses, and do not have university degrees.

CCI of Armenia 2018 Value Chain Analysis Production Most of the production takes place abroad, except in the case of native companies. Given that dissemination and trade happen on international markets, the products have English-language interface and have sufficient quality to compete globally.

Dissemination/Trade, Reception/Transmission The dissemination and sales are global in this sector, as are exhibitions, fairs, forums etc. Domestic sales are negligible; on the whole, this sector tends to ignore the domestic market. Therefore, the soft & games sector has few incentives to cooperate with other CCI; however, synergy options can be considered, including the gradual blending of film, animation and game industry.

CCI of Armenia 2018 Value Chain Analysis Economic assessment

Given the shortage of dedicated official statistics and only a small pool of research data outside the SMEDA project, any economic assessment of the CCI in Armenia can only be approximate. This assessment was made using official statistical data adjusted for shadow economic practices, data from other studies, and results of the current study.

Annual turnover of selected Armenian CCIs in 2017-2018, rough assessment

Film $2 mln

Fashion design $6 mln

Music $23 mln

Advertising, marketing & PR $56 mln

Software & games $115 mln

Detailed assessment by industries

The annual turnover of Armenia’s film industry can be estimated at around $2M (this estimate was also confirmed by the film commissioner). Financing by the Armenian state amounted to $1.5M in 2016 1; financing procedures and amounts did not change in 2017 or 2018. Of the rest of the funding, most comes in the form of private donations. Around 40% of the funds go towards salaries, 10% for travel, and about 45% towards other costs the bulk of which is rent of equipment.2 Revenues in the film industry are low; most Armenian films just cover their costs, with the filmmakers/production companies receiving modest fees for their work. Armenian films account for a tiny share in the revenues of cinemas. Mostly showing Russian and American films, cinemas in Armenia probably have a combined annual turnover of less than $2M.3 Adjustment for shadow activity is not necessary, because over half of the funds come from the state, and a significant share of them is kicked backed to officials and their businesses. These kick backs arguably amount to at least as much as the shadow part of the industry (e.g. donations in cash from which taxes are not paid).

The number of people involved in fashion design in Armenia can be estimated at 500, which includes designers, tailor’s shops, fashion houses and studios4. The gross income of fashion designers in Armenia is unlikely to be above the average in the economy5; the annual turnover of fashion design can thus be estimated at $6M while net income is less than $1M. No adjustment for shadow activity is necessary as WDI data used to generate this estimate is already adjusted for shadow economy.

1 Social Conditions in the Republic of Armenia 2016. National Statistical Service of Armenia, 2017. Movies Production. pp. 518-9. http://www.armstat.am/file/article/soc_2016_25.pdf 2 Ibid 3 Calculation is based on the estimated audience of an average film screening, the average cost of tickets and the average number of film screenings per day/year at Armenia’s main movie theaters. 4 Rough estimate made based on empirical experience, companies list and the Yellow Pages directory of Armenia 55 World Development Indicators, GDP per employee rate in Armenia 20

CCI of Armenia 2018 Value Chain Analysis

The official turnover of 19 state concert halls in Armenia in 2016 amounted to $5M.6 In 2018, given the growth of the economy and increasing inflow of tourists, thus number may be expected to grow to $6M. Private music halls and clubs (plus the bars/restaurants that have live music) probably generate as much as state halls. There are several sound studios working in the field, music bands, radio stations, which altogether could generate between 4 and 5 mln USD per annum. Sales of CDs, DVDs of local production could generate about $1M. Considering that some income of the bands and sound studios comes from concert halls, the official overall turnover of the music industry can be estimated at $16M; with shadow activity included at the standard 30% rate, the annual turnover could reach $23M.7

According to official statistics, Armenia’s total official turnover in advertising and market research in 2017 was $38 million, of which just $6M was generated in market research.8 2018 has seen 20% growth in this field;9 we can thus expect the official advertising and market research turnover to grow to $45M, of which market research will generate up to $8M. At the same time, some organizations combine market research and sociological or consultancy activities and it is not completely clear if different activities of the same organizations were assessed by the statistical agency separately. Since this estimate is based on official data, it needs adjusting for shadow activities. The average shadow turnover for Armenian industries is 30%10 but the estimate for shadow activity in advertising and marketing is 20% because the sector works with information, media and large partners, which makes it more transparent. The turnover of marketing/advertisement can therefore be estimated at up to $56M, up to $10M of it in marketing research. Net income is mostly generated by advertising and is highly concentrated, probably up to $15M.

The officially reported turnover of software and services sector in the ICT industry (excluding providers) amounted to $613M, with annual increase at about 20%.11 However, just $274 M out of 613M is made in programming and IT consulting, and just 40% of companies produce games or software (other than banking, hardware-related, database-related, IT-services, System design and network systems, etc).12 The software and games creation industry’s official turnover in 2017 can thus be estimated at $110M. Since this industry is export-oriented, has tax exemptions and is high above survival level, the adjustment for shadow activity need not be higher than 5%; hence, annual turnover in 2017 was closer to $115 mln. According to the Armenia 2017 ICT report, people employed in ICT in Armenia include 12 300 technical specialists and 3000 managerial staff. If an average games and software producer has the same number of employees as a non-creative software producer and IT consulting company, approximately 5000 people are employed in the production of games and software. There were 650 companies operating in the ICT field (448 of them local) plus about 150 startups. Of these, an estimated 270 companies engage in software and games production to various extents.

6 Social Conditions in the Republic of Armenia 2016. National Statistical Service of Armenia, 2017. Movies Production. pp. 520-5. http://www.armstat.am/file/article/soc_2016_23.pdf 7 Statistical Yearbook of Armenia, 2017. National Statistical Service of Armenia, 2017. Trade and Services, pp. 352-379. http://www.armstat.am/file/doc/99504413.pdf 8 Socio-Economic Situation of Armenia, January-December 2017. National Statistical Service of Armenia, 2018. Trade and Services, pp. 44-65. http://www.armstat.am/file/article/sv_12_17a_126.pdf 9 Socio-Economic Situation of Armenia, January-May 2018. National Statistical Service of Armenia, 2018. Trade and Services, pp. 39-42. http://www.armstat.am/file/article/sv_05_18a_126.pdf 10 Hrant Mikaelian. Shadow Economy in Armenia. CI, Yerevan – 2107. http://c-i.am/?page_id=1375 11 State of the Industry Report: Armenia’s Information and Communication Technologies Sector in Armenia. Enterprise Incubator Foundation, 2017. www.eif.am/files/2098/Armenian-IT-Industry-Report-/2017-ICT- Industry-Report_eng-FINAL-.pdf 12 Ibid, p. 50 21

CCI of Armenia 2018 SWOT Analysis

SWOT Analysis

SWOT analysis was used to assess the strengths, weaknesses, opportunities and threats for each of the sub-sectors of Armenia’s CCI.

The SWOT tables for each sub-sector are shown below. The following general conclusions can be made from the SWOT analysis of the five CCI:

• The main strengths of Armenia’s CCI are the people and their dedication to the creative endeavours • Most opportunities involve networking and collaboration with other players in the industry, on domestic and international level, linkage amongst CCI and to other industries, and capacity building, including in business, management, communication and specific skills • Major weaknesses stem from Soviet-legacy approaches, including weak ties to business, reluctance to operate on the free market, and dependence on state subsidies • Brain drain from the provinces to the capital, and from Armenia to richer and more developed countries are amongst the key threats

Main conclusions of the SWOT analysis for particular areas, sub-sectors and regions are as follows:

• Diaspora involvement in a sub-sector significantly adds to its strengths and creates opportunities • In all sub-sectors, some of the weaknesses concern education, and, correspondingly, some of the opportunities are connected with boosting educational capacities • In Gyumri and Vanadzor, the main weaknesses of the CCI stem from the lack of local infrastructure • The sub-sector urgently requiring legislative and regulatory reform is film, where the lack of the reform has become a key weakness, stalling development and creating new threats for the industry

CCI of Armenia 2018 SWOT Analysis

Film

Strengths Weaknesses

• Human resources including older and young • Corruption, kickbacks, and weak link to filmmakers with various degrees of experience viewership in allocation of state subsidies, and success creating few incentives to enter markets and • Government subsidies enabling minimum apply business models survival levels but also causing weaknesses • Lack of progress with adoption of a Cinema • Experience in documentary filmmaking for Law and new regulations for state subsidies international markets built during and after the • Too few cinemas to expect revenues from local Karabakh war markets • Diaspora Armenians enabling ties to • Disrespect for digital copyright minimizing international professionals and markets revenues from online and DVD sales • Some spillover from ICT, e.g. skilled video • Low quality of education for filmmakers and editors, special effects experts technical professions (camera, light etc.) • Golden Apricot, Reanimania and other • Almost no education for agents, producers, festivals offering opportunities for visibility and gaffers and other managerial professions networking • Shortage of secondary professions • A professional association established with • Shortage of infrastructure, monopolism in SMEDA support (Filmmakers Community) equipment rentals • Weak traditions, Soviet legacy approach to business

Gyumri: several older filmmakers and some youth, Gyumri and Vanadzor: the only local infrastructure a film club for filmmaking is linked to the State Institute of Vanadzor: a club of enthusiastic youth Theater and Film Opportunities Threats

• Co-production with international companies • Reduction of state subsidies that could destroy including via Eurimages most of the industry while also making the • Distribution in other markets, primarily in survivors more competitive developing countries (Eastern Europe, Asia) • Piracy preventing revenues from sales and chiefly via co-production partners jeopardizing future development • Collaboration with games, advertising, videoclip production • Building managerial and business skills in the industry, training agents and enabling networking • Creation of film clubs and discussion formats. including within tourism programs

Gyumri and Vanadzor: building capacity of young Gyumri and Vanadzor: local enthusiasts might filmmakers in the two cities relocate or give up filmmaking

CCI of Armenia 2018 SWOT Analysis

Fashion design

Strengths Weaknesses

• Some capacity for education and vocational • Mostly active on domestic market, low training penetration to international markets • Local production of diverse style, price and • Weak ties to the textile industry quality • Weak marketing and branding • Use of online platforms and social media • Low English proficiency marketing • Aesthetics often incompatible with European • Some associations including Business Club for market Impact, Fashion and Design Chamber • Poor links between education and market • Some online sales mainly on Russian and the • Concentration in Yerevan. CIS market due to Russian language, existing • Low business skills, disrespect for business ties and suitable aesthetics • Lack of fashion journalism and fashion PR • Some successful designers e.g. Vahan professionals. Khachatryan

Gyumri and Vanadzor: a few textile companies, a Gyumri and Vanadzor: almost no local capacity few individual designers and students Opportunities Threats

• Revising PR and marketing strategies, building • Competition with international brands marketing skills, training specialized marketing • High cost of designer clothing and low and advertising professionals purchasing power of Armenian customers • Launching a creative fashion hub • Low prestige of local products, preference for • Organizing more fashion shows, including international brands during festivals • Weak business capacity • Linking designers to textile industry • Linking to other CCI, including cinema, IT and advertising that need costume design • Industrializing services in existing niches, primarily prom and wedding dresses • Using Armenian Diaspora ties to enter international markets • Developing fashion journalism

Gyumri and Vanadzor: linking local designers to Gyumri and Vanadzor: unless local purchasing textile companies power increases, local market for fashion design will not develop

CCI of Armenia 2018 SWOT Analysis

Music

Strengths Weaknesses

• Soviet heritage educational institutions with rich • Shortage of medium size concert halls and halls classical music traditions with appropriate acoustics • State-supported concert halls, theaters etc • Ineffective associations (mainly organizing performing classical music festivals) • Good quality jazz, rock and folk musicians and • Shortage and poor skills of managers (producers, bands, mostly youth, some professional and some administrators, PR managers, impresarios etc.) combining music with other work • Shortage of some technical professionals (audio • 10-15 popular clubs in Yerevan that perform jazz, engineers, clipmakers) blues, rock, folk and similar genres • General disregard for copyright and poor • Social media used as a tool of dissemination, enforcement of copyright laws exhibition, live streaming, especially for radio • Weak linkage between market and educational stations and sale of tickets institutions • Some tourist packages include tickets to music clubs, jazz, rock and classical music festivals Gyumri and Vanadzor: almost no infrastructure for Gyumri and Vanadzor: Rich rock traditions dating performance (few halls, almost no sound studios or back to USSR (Bambir, Lav eli, Vordan Karmir) rentals of music equipment) Opportunities Threats

• Building capacity of music producers and • Emigration from Armenia, relocation to Yerevan managers from the provinces drains the industry • Cooperation between educational institutions and • Clubs easily go bankrupt (including due to clubs/concert halls/bands dependency on beverage distributors) • Cooperation with other CCIs: production of • Centralization (industry develops mainly in soundtracks for films, games and advertisements; Yerevan) performances at festivals and exhibitions • Soviet legacy attitudes to business: musicians • Building business capacity of successful bands refuse to work with producers and marketing • International cooperation through Diaspora ties professionals (Arto Tunjboyajyan, Andre Simonyan, Serzh Tankyan, Sergey Khachatryan, Sergey Smbatyan, Tigran Hamasyan, etc.)

Gyumri and Vanadzor: potential for tourism; some human resources (bands, musicians) and institutions (Vanadzor: Artist.am cultural center,J azz café, Gyumri: Atchemyan theatre)

CCI of Armenia 2018 SWOT Analysis

Marketing and advertising

Strengths Weaknesses

• Media companies, chiefly television, dominate • Short tradition, small domestic market on the market • Poor education and vocational training in the • Existence of several active companies (Deem fields of marketing, advertising and PR Communication, Publicis Armenia, APRA, • Weak cooperation with domestic companies, Breavis) cooperating with EU and other especially small and medium businesses international players • Absence of strong associations • Existence of branches of international • Existence of dominant players in the field of companies media and media marketing • Growing market and growing awareness • Lack of an independent media research body amongst businesses of need for M&A services • Concentration in Yerevan • Numerous festivals (music, film, agricultural products) requiring advertising, marketing, merchandizing etc • Growing popularity of education in marketing, PR and advertising • Presence of skilled market researchers Gyumri: few players; no educational capacity; Gyumri: one marketing agency doing some outdoor advertising owned by municipality capacity building and consulting; Vanadzor: few players, no educational capacity; Vanadzor: some advertising in media outdoor advertising owned by municipality Opportunities Threats

• Increasing awareness of the need for • Inability to compete with strong international marketing, PR and advertising services players • Cooperation with other CCI, elaboration of • Monopolization of marketing and advertising marketing policies: marketing of fashion by domestic media companies products, links between advertising and • Poor or slow development of business filmmaking, advertising for music clubs and preventing growth of marketing and advertising bands, marketing of IT products market • Cooperation with Armenian SME • Decrease of purchasing power of the • Skills and capacity building leading to population leading to decline of incomes in professionalization of the field marketing and advertising • Targeted usage of innovation, IT and online marketing • Using marketing and advertising to develop tourism; branding of Armenia and its tourist attractions • Delivery of Armenian products to foreign clients (B2C) can develop the field

Gyumri: building capacity of the marketing agency, Gyumri and Vanadzor: unless there is substantial creating educational bodies business growth in these cities, local marketing Vanadzor: link to tourism and advertising will not develop

CCI of Armenia 2018 SWOT Analysis

Software and games development

Strengths Weaknesses

• Presence of international companies with • Domestic formal education is not strongly history and high standards relevant to the market • Vocational and in house training capacity • Small size and instability of Armenian market • Large and lucrative job market, competitive job • Production and sales mostly take place abroad environment • International and domestic companies in the • Creation carried out in Armenia sector tend to ignore the Armenian market • Products are globally competitive, have • Brain drain to international destinations English-language interface and high quality • Some actors are not good at protecting their • Skilled workforce with high percentage of copyright, some copyright theft takes place youth and growing percentage of women, popularity of IT education amongst youth • A variety of exhibitions, fairs, forums • Some regulation of copyright • Supportive state policy • Foreign and domestic investment into the sector • A boom of investment into startups, of which many are in the IT sector

Gyumri: Techno Park, Tumo, local startups. Gyumri and Vanadzor: almost no domestic market, Vanadzor: Techno Park, local startups. brain drain to Yerevan Opportunities Threats • Cooperation with other CCI in Armenia: tools • Brain drain affecting the situation in the job for marketing and advertising, merger between market games and film industry; custom soundtracks • Disappointments following the startup boom, for games; 3d modeling for design; quick failure of many startups cooperation with a creative hub • Copyright theft • Cooperation with Armenian businesses • Cooperation with public administration to enable efficient and transparent governance, data storage, processing and presentation • Development of apps for tourism • Improving coordination between formal education and the job market • Making Armenia an IT education hub for Georgia and other post-Soviet states (Central Asia, Belarus, Moldova, Ukraine) • Development of professional associations in the sector • Training young professionals on copyright Gyumri and Vanadzor: matching local educational Gyumri and Vanadzor: bankruptcy or relocation of capacity to needs of local market (e.g. teaching local companies to Yerevan due to brain drain embedded programming)

CCI of Armenia 2018 Recommendations

Recommendations for the development of CCI in Armenia

Two recommendations concern Armenia’s CCI in general, including Yerevan and the provinces.

1. Addressing the situation with massive copyright infringement

Utter disrespect for copyright in Armenia (as in other post-Soviet states) is preventing the CCI from raising incomes. This is especially problematic in the internet, where music, images, films, ads, games and software are pirated on a massive scale. While Armenia is signatory to international copyright agreements and has a state-of-the-art law on intellectual property, enforcement is lacking. Authors barely ever sue for copyright infringement, and bodies in charge of enforcement are passive, waiting for claims rather than moving proactively. A massive crackdown on users of pirated software, torrents, and the like, is in order. An awareness campaign could help alert the public to the fact that downloading pirated content is stealing and that illegal use of others’ intellectual property deprives artists of a living.

2. Boosting the business skills of the CCI

The CCI of the former soviet world are just learning to be businesses; many artists resent the idea of needing to sell their creations and having to cater to the tastes and needs of the consumers, or making efforts to change these tastes in order to be financially successful. While this is a problem for artists worldwide, in post-soviet countries the challenge may be bigger because the market is a relatively novel phenomenon here. CCI need training and awareness-raising on marketing, PR, advertising and public outreach. Agents, marketing and production managers are lacking in most CCI. To be able to succeed internationally, the CCI also need to boost their communication skills and English proficiency. Networking, in the domestic as well as in international industries and markets, also needs more attention. Apart from basic marketing skills, the CCI need help with learning to use data of market research, to analyze their own market performance, and elaborate marketing strategies. The Marketing and PR industry could be of help to other CCI while also benefiting from widening its client base, improving the artistic quality of its products (video, music, animations, images, designs, games etc). This calls for a synergy between Marketing and PR and other CCI. The establishment of a truly inclusive Marketing/PR association in Armenia (described in the section on Marketing/PR below) could pave the way for setting up a project of collaboration across CCI.

CCI of Armenia 2018 Recommendations Film

Yerevan

• Supporting legislative and regulatory reform With the change of government, discussions of the new Cinema Law have started from scratch. Adoption of Cinema Law is needed for the proper regulation of the sphere, especially with regard to collaboration with international companies, including via Eurimages. New regulations for allocation of state support are essential to enable effective, transparent and fair and distribution of funds, elimination of monopolies in the sphere of equipment rentals, and creation of incentives to produce films that are competitive on international markets, attract viewership and truly serve to promote Armenian culture worldwide. It is important to encourage the filmmaker community to take a more constructive stand on the planned reform, putting personal disagreements and hurt feelings behind, and focusing on the future of the industry rather than the allocation of subsidies.

• Helping the filmmaker community focus more on the viewer and the market Many in the filmmaker community of Armenia are focused on securing state support for their productions and are reluctant to change their style to be more viewer-friendly and market-friendly. It would help to re-orient the filmmakers towards box-office success as an important criterion of quality and a key goal in terms of financial sustainability. Trainings on marketing can help, as can the education of agents and production managers, and exposure to international experience, especially of countries comparable to Armenia in size and economic capacity.

• Creating formats for sharing equipment and other resources Filming equipment is scarce in Armenia and expensive to rent. The filmmaker community can be helped to invent and implement solutions for shared use of equipment, e.g. pooling or raising funds to buy equipment and then take turns using it for filming based on a schedule. Other resources, such as sets, studios, services etc. can also be shared within the community.

• Advocacy for revision of the state’s strategy with respect to education of film professionals Although the State Institute of Theater and Cinema in Yerevan and its affiliates in three other towns are quite large and expensive to maintain, the quality of education they offer in the sphere of film in Armenia is below standard. One of the reasons is that good professionals are needed to teach the skills, and they are scarce; in the provinces, there are none. The tradition is not strong; the quality standards are not very high. A possible solution could be to downsize the institute, or at least its filmmaking department, and use the funds to provide scholarships to several students a year (e.g. one filmmaker, one cameraman, one lighting expert, one agent, one production manager…) to study abroad, preferably in a small country with developed cinema traditions, such as Sweden, or a larger but post-communist one with a strong tradition, such as Poland. The scholarship can be awarded as a loan which needs to be repaid unless the student returns to Armenia and

Gyumri and Vanadzor

• Capacity building of young film enthusiasts In Vanadzor and Gyumri, there are groups of young enthusiastic filmmakers who produce short films, animations and the like. They would benefit from training on filmmaking skills, management, outreach, English proficiency, and from networking with peers and more experience professionals in Yerevan. There are also two or three professional filmmakers in Gyumri who need to be included in projects that run in Yerevan – the filmmakers’ community, trainings, workshops, etc. They may need help with travel expenses and accommodation.

CCI of Armenia 2018 Recommendations Fashion design

Yerevan

• Marketing to increase product prestige locally Proper marketing and PR tools can ensure good quality branding for Armenian fashion design products and increase their prestige locally, helping them to compete against international brands. This could be reached through various steps from revising PR and marketing strategies to training specialized social media marketing professionals, fashion journalists etc. This will require closer cooperation with the marketing and advertisement industry.

• Developing the culture of Fashion Weeks in Armenia This could include holding more fashion shows, establishinga a new “Armenian fashion week” brand, or organizing the already existing Yerevan Fashion Week more frequently. The fashion weeks can attract international participants, make the Armenian fashion industry more vibrant and open, and boost tourism, especially if their activity is linked to a creative hub.

• Helping Armenian designers participate in fashion shows abroad more frequently If Armenian fashion designers participate in fashion shows abroad, they will network, learn and establish international business contacts, as well as represent Armenian fashion culture on an international stage. Boosting international cooperation will broaden audiences and increase the potential market. This could be done through utilizing personal ties of certain Armenian fashion designers or the Diaspora ties.

• Moving closer to the Western market According to designers, most of their international sales are to the Russian market. There are at least two reasons for this. One is that many designers can communicate in Russian but few are fluent in English. Better command of English will make it easier for Armenian designers to establish ties with Western companies and get access to markets. The other reason is that the style of Armenian design is closer to what is popular in the former USSR; more exposure to Western style can be achieved by means of training, education, shared activities, exchange projects, master classes, internships and experience sharing with international designers and also with Armenian designers who studied or worked in the West.

• Industrializing services in existing niches The biggest demand for custom-made clothing in Armenia is for proms and weddings. However, the Armenian design industry does not capitalize on this demand. Most clients use the services of individual tailors for prom dresses (chiefly based on designs from magazines), buy/hire wedding dresses made abroad, and increasingly order online, from countries like China. Should the Armenian design industry start catering to these needs, they could make a good and stable income.

Gyumri and Vanadzor

• Creating informal education opportunities in Gyumri and Vanadzor Some education and vocational training opportunities exist in Yerevan but not in the provinces. Informal education centers (e.g. Fashion Campus) could be opened in Vanadzor or Gyumri to develop local capacity and prevent the local designers from migrating to Yerevan.

• Including fashion in creative hubs and associations in Gyumri and Vanadzor Existing platforms for cooperation amongst Armenian fashion designers can expand to Gyumri and Vanadzor, in order to revive the local design fashion culture and gather local fashion designers in one association for joint capacity building and experience exchange.

CCI of Armenia 2018 Recommendations Music

Yerevan

• Establishing a creative business incubator A business incubator would provide the industry with a range of services that can contribute to boosting business (following trainings and awareness-raising on importance of copyright protection and application of business skills). It can create ties to digital marketing (digital advertisement and online sales), accounting/financial management, access to bank loans (for organization of concerts, arrangement of tours, etc.), grant and investment management, links to partners and access to sponsors, business training programs, copyright lawyers, etc. Creation of an incubator will require networking, data collection on experience of existing incubators, elaboration of a business plan, and fundraising (from the state, foundations, private organizations etc).

Since the idea of setting up a creative hub in Yerevan is already being explored, it may be feasible to include the incubator in the hub. As it has been discussed at the workshop in Yerevan, the hub/incubator can incorporate a sound studio, a shop for music equipment and rentals, a music studio for radio stations, a rehearsal room, a concert hall, and a café. Due to low running costs, the services will be cheaper (or some even free), and beginners will have one more venue where they can perform. As it has been suggested at the workshop, the hub can establish linkages with hubs in other post-soviet states (namely Tallinn Creative Hub in Estonia, https://kultuurikatel.ee/en/tallinn- creative-hub/kultuurikatel/, and Fabrika in Georgia, https://fabrikatbilisi.com/about-us/, mentioned by British specialists). If hubs cooperate, they can organize concerts – exchange visits of musicians, disseminate videos; the music studio can livestream on social media.

• Cooperation between educational institutions and music clubs Clubs can serve as a platform for performance for graduates of music educational institutions: graduates will be able to gain practical experience and have access to the market, and clubs, in their turn, will have suppliers of new professional musicians. Schools and universities (non-specialized ones) can invite graduates and beginner musicians playing in the clubs to perform for free in their halls (it is common practice in post-soviet states, but it is not generally popular in Armenia). This way, young musicians would get access to larger audiences, and new generations will get exposure to non-mainstream music genres – classical, jazz, rock, blues, ethno – which would help these genres survive. The Yerevan State College of Variety and Jazz Art came up with an initiative to gather all the beginner bands playing in clubs and pubs on the same stage so as to bring their audiences together (each club has its own regulars, and bands playing in one club remain unknown to the audiences of other clubs). The initiative failed due to the lack of coordination. Since educational institutions specialized in music are subordinated to Ministry of Culture, it would be easier to organize cooperation with the involvement of the ministry and perhaps also the creation of an organization that would act on the behalf of clubs.

• Establishing a framework for cooperation with other CCIs Although the industry cooperates with other CCIs, due to common use of networks and informal ties, this cooperation lacks rules and procedures (especially those related to copyright protection) that would make it profitable for all stakeholders. The music industry could cooperate with film studios, PR and marketing agencies (particularly those specialized in digital marketing, since given the disregard for copyright, musicians need to learn how to raise incomes through digital advertising and selling their products online), and game development studios. If an incubator is created, it can also serve as a platform for maintaining ties among all the stakeholders.

• Boosting international cooperation, including via the Diaspora Famous musicians of Armenian origin can serve as mediators between Armenian and international musicians, producers and impresarios. To make the music industry sustainable, Armenian 31

CCI of Armenia 2018 Recommendations

musicians need a platform or channels for interaction with foreign colleagues experienced in making music financially viable. Diaspora Armenians could be co-opted to network internationally on behalf of Armenian colleagues. International exposure is essential for Armenian bands to learn production and marketing skills, to attend international festivals, get acquainted with world trends, find business opportunities and partners. An additional avenue for networking worthy of exploration would be attracting international musicians to Armenia’s inexpensive decent quality sound studios.

• Creating new infrastructure Armenian non-mainstream music bands cannot afford renting large concert halls for 800+ people but do not make enough from smaller concerts for audiences below 300. If built in Yerevan, one medium-size concert hall seating between 400 and 700 would enable non-mainstream bands to survive from concert revenues and perform in adequate acoustic conditions, i.e. have better chances to deliver successful performances and attract sponsors. Raising funds for construction would probably have to involve a combination of public and private funding; the Ministry of Culture could cooperate with the municipality and private investors.

Gyumri and Vanadzor

• Creating hubs in Vanadzor and Gyumri To keep the music industry alive in Vanadzor, it may be worthwhile to explore the option of transforming the Artist.am cultural centre into a hub. With additional funding or cooperation with other hubs, it would be easier to make enhance music life in Vanadzor. The Clocker band is already planning to create something similar in Vanadzor. Vordan Karmir, Lav Eli, and other famous bands from Vanadzor can also be contacted for discussion of this option. The hub could host acafé, club, etc., since now there is no infrastructure in Vanadzor that could attract tourists.

In Gyumri there is infrastructure that can serve as a hub. Vardan Adjemyan Theater is already serving as something similar. Creation of hubs will require cooperation between local popular musicians, the local and regional authorities, and international partners (Artist.am is already cooperating with Italian counterparts).

• Linkage to tourism in Gyumri and Vanadzor

The tourism goals for Gyumri and Vanadzor are similar: it’s important that the tourists stay at least one night. At present, most tourists spend a few hours sightseeing in Gyumri and go on to Yerevan or Georgia; sometimes they do stay the night, as Gyumri has a few nice hotels, but have nothing to do in the evening. As to Vanadzor, tourists come to Lori province to see the monasteries in the mountains but do not linger in Vanadzor at all, since there is little to see there. The goal for Gyumri is therefore to provide night-time entertainment and increase the number of tourists who stay one or maybe even two nights. For Vanadzor, the goal is to actually get the tourists to stay one night, after sightseeing in the mountains, and a creative location with entertainment is essential. Once entertainment options are created, tours to Gyumri and Vanadzor can be marketed using music. Bambir band launched such an initiative, but it failed. This will require cooperation between municipality of Yerevan, regional authorities and travel agencies.

CCI of Armenia 2018 Recommendations Marketing and Advertising

Yerevan • Building educational capacity One of the major problems in the field is the irrelevance of the workforce. A multi-level solution for the problem is required. First, there is a need to enhance cooperation between companies and higher educational institutions. A platform for cooperation must be created, where representatives of educational bodies and companies can coordinate supply and demand. Second, specialists already working in the field must periodically update and improve their skills and knowledge by taking part in vocational trainings. In this respect, experience exchange with leading international companies is needed.

• Creation of a professional marketing/PR association In order to create a competitive atmosphere in this field, it is necessary to establish a strong and independent union or association. First, the association can coordinate cooperation with educational institutions. Second, they can collect data and provide necessary information about services of PR, marketing and advertising companies in Armenia. An online database with the names of the companies, services that they provide, and the pricelist will facilitate the overall process and increase demand. Third, within the framework of an association, local companies can enhance their internal links, establish networks with other industries, and build a professional community.

• Creation of a Joint Industry Committee for media research A joint industry committee for media research is an independent body, usually set up by the news media, that collects data on the audiences of all types of media and provides the data to advertising/marketing agencies and advertisers; this data is necessary for the design of advertising campaigns, and absolutely has to be objective and not tampered with. Such a media research body could also be loosely affiliated with a professional marketing association.

• Creation of a common platform with other CCI The establishment of strategic alliances and a common platform for partnership with other CCI is another priority for the industry. For instance, targeted marketing for fashion products and their advertisement could open new potential markets and attract tourists who appreciate hand-made dresses. Proper advertisement for music clubs and bands will enable them to reach greater audiences. Effective cooperation between the IT and marketing industries can boost the development of online marketing. Common trainings, seminars, workshops can serve as a platform for representatives of various CCI to get to know each other, establish business alliances, identify common interests and reach agreements of future cooperation.

• Internationalization of local companies Taking into account the fact that the local market is comparatively small and poor, internationalization of Armenian marketing companies can result in the expansion of the market itself. Cooperation with branches of international companies, participation in international fairs will largely contribute to it. Access to the international market can further attract new foreign clients.

Gyumri and Vanadzor

• Capacity building and informal education Networking and establishment of business alliances is especially important for companies and entrepreneurs to start working in the provinces; at the moment, marketing and PR are almost nonexistent in Gyumri and Vanadzor. Capacity building and informal education is required for both marketers/advertisers and local business representatives in order to raise awareness about the importance of proper and targeted marketing, and introduce some tools and techniques.

CCI of Armenia 2018 Recommendations Software and games development

Yerevan

• Making Armenia a regional IT/high-tech education hub Armenia is a regional leader in IT. It has potential to consolidate regional capacity and serve as an education hub for Georgia and other post-Soviet states including Belarus, Moldova, and Central Asian states. Availability of high qualified professionals, low prices for education and success stories make it much more achievable. Language is not an issue because IT is taught in English and most professionals have good command of it. Achieving this goal will require developing educational infrastructure and raising awareness among target countries.

• Enhancing engagement in the domestic market International and domestic companies working in the sector mostly ignore the Armenian market as its size is relatively small; production and sales chiefly take place abroad. Areas for local market engagement include:  cooperation with public administration to augment transparency, enhance good governance and boost quality of public servises. Development of mobile applications for tourism can increase the attractiveness of Armenia  cooperation with other CCI and other industries, especially Marketing and PR (it would increase technical quality and outreach of marketing and PR services while also helping the IT sector to develop new and better marketing and PR strategies) and Film (making Armenian movies more technically competitive, moving towards a merger between film and games)

• Enhancing link between formal education system and the market Young professionals often participate in vocational trainings after graduation. Constant connection between institutions of formal education and representatives of the job market is necessity. To solve this problem, it might be useful to create a unified centre, which will coordinate and periodically present new requirements of the job market to the institutions of higher education. It will provide services and consultancy. The unified centre can create and maintain a database of required positions and newly graduates to regulate offer and demand in the job market.

Gyumri and Vanadzor

• Building educational capacity In Gyumri and Vanadzor, it is important to match local educational capacity to the needs of the local market, e.g. using existing university capacity in higher mathematics in the teaching of IT disciplines, assessing local employment opportunities in the planning of educational programs at the Gyumri and Vanadzor Techno Centers, adjusting university curricula to the needs of the job market.

• Services to local authorities and regional administration Services could include, for example, digital data storage and developing regional tourism applications.