Crimean time

KaZantip - Republic with its Own Economy

by Alex Shale

07 February, 2014

In order to make the festival a success Nikita Marshunok created a utopian republic with its own laws, system of government and traditions.

August evening at the Crimean coast of the Black Sea. Thousands of young people gather at the beach looking forward to the sunset. As the sun hides behind the horizon, hundreds of air balloons rise in the air, being accompanied by the sound of rapturous applause and shouting. Then everyone bursts into dance on the open-air dance floor. KaZantip festival starts that way every evening. This merry spot is well known not only in Crimea but also far beyond Ukraine and Russia. The British newspaper The Guardian regularly includes KaZantip in the rating of the best European festivals. You can see a lot of French, German, English people and other foreigners here. VIP guests also often come to the festival.

 Nikita Marshunok

This year KaZantip celebrates its 22-nd birthday. "Republic of Happiness", as the organizers call KaZantip, extends over 12 hectares of coastal land. At the time of the festival, the founder of the Republic, 50-year old Nikita Marshunok patrols its territory on a segway. Marshunok has managed to build a business that earns up to 10 million dollars for only one summer month.

"If it wasn't for the wind, I would have owned a large bank now", Marshunok smiles. In 1983, he took a great interest in windsurfing. Once he searched for a good wind and his path took him to the Cape of KaZantip in the northeast of Crimea. He liked the place very much. Since then he and his friends have returned there every summer.

In the early 1990s, the hobby grew into a small business. Marshunok founded the Russian Funboarding Association (windsurfing on a short board) and, under the umbrella of the RFA, started holding competitions at KaZantip. The organization was funded through membership fees. The end of championship held in 1993 was marked by a rock concert. Marshunok calls this event "the starting point of KaZantip".

It took KaZantip just a few years to turn from a windsurfing hangout into a major festival of electronic music. Marshunok found a very special venue for the event - an abandoned nuclear power plant close to the beloved cape. Soon the entrepreneur assembled a team of allies, including the editor of a popular youth magazine, promoters and DJs. This team set a new direction for the festival.

At first, the festival offered free admission to the public. Marshunok says that he created KaZantip not for the sake of money but for the soul. The costs were rather modest - several thousand dollars for the equipment and electricity. And as for DJs, they played music for free. The organizers of KaZantip under the guidance of Marshunok first earned peanuts: the revenue was made up from souvenirs and so called viZas - plastic cards of the festival.

Music was played at the nuclear power plant for five years, until the local authorities banned the event because of the rumors of the drug mafia based there. In 2000 the festival had to move to a new place and it ended up near the Bay of Sudak. At that time KaZantip got its first sponsors - Procter & Gamble, a consumer goods company and two years later - Baltika, the largest brewing company in Russia.

In 1999 Marshunok fell out with his first partners and decided to develop this project as a real business. In order to avoid problems in the future, he needed the support of the Crimean authorities. And he finally received it. Andrey Filonov, Youth Policy Adviser at the Council of Ministers of Crimea helped to officially lease the land near the village of Popovka for the festival. Together with Andrey and his friend Nikolay Karpov, Marshunok registered the trade name of KaZantip.

Kazantip Festival

Marshunok announced that KaZantip should be called a republic and its territory should be enclosed with a fence, and declared himself a lifetime president Nikita the First. In order to enter the self-proclaimed republic one had to buy a viZa for 10 dollars. However, it is possible to get into KaZantip for free. The only condition is to have a yellow suitcase with chrome plated corners, which became the symbol of the festival. "I'm proud that I made thousands of people paint their cases yellow", says Marshunok.

Every year the price of viZa increases but the attendance keeps rising about 20% per year. The number of dance floors in KaZantip has increased from two in 2001 to ten in 2012. Marshunok personally selects DJs and gets involved in the light show setup. After the festival is over, he "cleans the republic" - destroys things that he does not like. Then he leaves for the Philippines for half a year. Right after the New Year a team of 20 people comes to him and they plan the next festival. KaZantip does not have its permanent headquarters.

The target participants of KaZantip are always outgoing youth, hung up on "house" and "techno" and ready to live it up. "If I were only interested in the commercial side, I would try to get as many people as possible, but those would not all be interesting to me," Marshunok stated.

Such an approach is very appealing to the sponsors. Coca-Cola and Global Spirits are among the main partners. According to the official information of the sponsor agreement between KaZantip and Global Spirits, the sponsorship costs the alcohol holding around $400,000. "The festival gathers bright, progressive and creative youngsters. Such people are normally the trend setters," say representatives of Coca-Cola. Last year Kyivstar, Ukraine's largest mobile network operator, was the sponsor of the festival. This company installed a leased line to provide broadband internet access in the festival area.

Marshunok noted that sponsor's money accounts for only 14% of the overall revenue. In the future, he would like to do without sponsors at all. What is so uncomfortable about the sponsor? First, they demand exclusiveness and limit the right of visitors to choose. Under the contract, only alcoholic drinks produced by Global Spirits can be sold at the territory of KaZantip. Second, Marshunok is annoyed with the hackneyed way the sponsors promote their brands.

The main source of income for KaZantip is the entrance fee. A single day stay on the territory of the republic costs about $100, a multiple-entry long-term viZa costs more than $250. According to the information provided by the organizers and the Ministry of Resorts and Tourism of Crimea, about 100,000 people attend the festival every year. Among them about 6000 are DJs, their friends, invited guests that do not pay for their viZas. About one third of the visitors buy multiple-entry viZas.

Kazantip Rave

One more source of KaZantip's revenue is renting out space and facilities for bars and cafes. Anyone interesting to Marshunok can rent a place for their business. The rental rates range from $5,000 to $20,000 per season. The festival normally features about 50 such bars and restaurants.

A simple math calculation shows that KaZantip earns more than 15 million dollars of income per season. Although Marshunok says that the actual revenue is lower, he would not open up all the financial books of his business.

And what about the image of an area infested with drug dealers? According to the information of the Ministry of Internal Affairs, they recorded 14 incidents of illegal drug trafficking during the festival in 2011, and 23 cases of drug abuse were reported in 2010. The owners of KaZantip do not deny that the guests sometimes take light drugs. "They are adult people, and I'm not a doctor," Filonov says. The only anti-drug measure that is taken here is a free handout of posters demonstrating the harm of drug abuse. Public safety and order are maintained not by the police officers but by the private security guards who do not care what the guests smoke. The securities get involved only when they see someone becoming aggressive, abusive or out of control. Every now and then, the drug issue is used as an excuse to take action against the festival. In 2003, the Crimean government banned the festival, but Marshunok played cunning: he renamed the event into "Z Republic" and held it at the same time and the same place.

Being sly is not enough to protect business. "We are able to build relationship with the authorities," Marshunok says. Our friends outnumber our enemies." "True independence is possible only if strong connections are there," Filonov clarifies.

The best way to build loyalty with an official is to invite him to KaZantip. For instance, Mr. Liev, the Minister of Resorts and Tourism of Crimea, who was present during the opening ceremony, wrote the following on his Facebook page the next day: "The opening day was a great success! The guys who organized the Z Project are brilliant! I would love to be helpful to them."

The festival contributes to the wealth of the inhabitants of the village of Popovka. The turnover in Popovka during the two weeks of the festival reaches its annual figures. The hotel prices near KaZantip soar three to five times: a standard room costs $100 per night. However, the high prices do not stop the guests. KaZantip is probably the main attraction for the foreign tourists that come to Crimea.

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