Rostyslav Kulyk, Key Executive MBA graduate of LvBS of UCU, CEO and founder of the ticket service “Gastroli.ua”.
He started his career at school. He is a cybernetic economist and worked for an IT company for three years. He completed his studies at LvBS at the beginning of the quarantine and the crisis. He is convinced that online in this business will never replace offline.
«Gastroli.ua» is a convenient and safe service for the sale of tickets to concerts, festivals, football, theaters, nightclubs and other events in Ukraine. The company works in two directions – organizing concerts and selling tickets. Starting in the spring of 2014, today “Gastroli.ua” is one of the most popular ticket services in Ukraine. The company is about to launch a powerful mobile application that should turn over the market.
Rostyslav Kulyk shared his own experience of doing business, the challenges he faced during the pandemic, told about the importance of training on the Key Executive MBA program and how the event industry will recover after the Corona crisis.
Rostyslav, could you please tell us about your business history starting from the concert organizer to opening of one of the most popular ticket services in Ukraine «Gastroli.ua»? How did you manage to refocus your favorite activity to your own business?
This is a long story, lasting for 15 years. I started my career at school, holding discos, and continued at the institute. After that we worked on a big project at that time in “Romantic” club on Pohulianka: we delivered equipment from Poland (we didn’t have such equipment here yet), printed posters on a risograph and made tickets with our own hands. I remember that the entrance fee for such a big event cost about 2 UAH.
It was quite a long time ago, and gradually it was onward and upward from there, we started working with singers – from small underground groups to A-list celebrities, then with foreign stars working in electronic music, big festivals and so on. We are probably one of the first in Ukraine to start organizing concerts of electronic music world stars and later of foreign performers.
It means that we have been working as concert organizers for at least 15 years and as a ticket operator for 6 years. At that time, we paid fairly high commissions to existing ticket operators.
I had the illusion that I would be able to make my own ticket operator very quickly and I would spend 20-30 thousand dollars on it – that was only the first budget. As a result, the company increased to 50 people, dozens of programmers in a year and more than a million dollars was spent.
It took us one year to write software. At first I thought it would take us two-three months, but then we decided to launch high-quality product. We seem to have succeeded. We focused on producibility and user’s interface, which at that moment (I believe even now) is a showcase for our users, both clients and intelligent systems. It is necessary to realize that the customers who buy tickets are only 5% of our project, 95% are Promoter 2.0 intelligent systems, which is a flight control center for organizers who collect Big Data, analytics and it provides many convenient tools for managing your own ticket business. That is to say, it is a whole system, which from the start of the event to the scanning of tickets for this event gives the organizers a full cycle to comfortably work with their needs in ticket sales. It’s not just a transaction – these are much deeper tools.
«Gastroli.ua» is a Lviv startup, which has spread around the whole of Ukraine. What challenges have you faced at different stages of doing business?
There are many of them; I will single out a few quite complex ones. The first is that we developed very quickly; we grew twice a year for three years. This is a normal situation when a business does not keep up with its own development. And of course, there have been many different fuckups and troubles along the way, just a lot of them. But the main reason is not even that we developed too fast, we were simply not ready for it. And we rectified the mistakes and played by the ear.
The second problem on the way to development was the issue of our large cash flow, which was very difficult to control, because of the company’s huge flows of money, we are speaking about hundreds of millions. And when you do not have time to calculate this prodigious amount, you do not have time to calculate the margin, you do not understand where you earn and where you spend, what you contribute – it turns out, that we grow all in all, and in capital position we also grow, but in terms of cash flow and business marginality we moved on the wrong way. That means that we have wasted too much of these resources.
And the third problem – for some reason we thought that the client means everything for us and that was a wrong thought. It means that we made any possible customization for any client, whatever he/she wanted. For example, “”I want my badge to be printed at the conference when my ticket is scanned, and my name, position, and everything else can be seen there.” And we did it all for free. And at some point, our software product was no longer stable, as it should have been, but became a product where many different feature sets were added, written chaotically, unsystematically, without proper checks, tests, and so on. Therefore, the system was very large and unstable. That is why, we concluded that we do not have to be led by the nose by every client, we better lose him/her, but we will have a stable service that will work and bring profit. Over time, we have rewrote all these services and made a more powerful and stable system.
The event industry and show business have suffered the most from the Сorona crisis. What was the hardest and how did you initially respond to the challenges?
I’ve always said that I’m ready to change places with any of my friends who has, for example, a pizzeria or a jeans store. Our industry has suffered the most not only because of the total ban on mass events around the world – this is the first thing that has been banned and the last thing that will be “scraped” basically. Here the question is how cash flow is formed. The Cash flow for any event is formed so that we first “buy” the performing artist, then buy the location, then agree on an advertising campaign and launch the event. That is, the cycle of the event can last, for example, if it is a big festival, a year. If we speak about a big stadium concert it can take about 7-10 months. For the small concerts it works exactly in the same way. The problem is that the services we have already sold tickets for (and in the country, I think, there are already “in the air” tickets which cost at least a billion hryvnia, which is hundreds of thousands of customers in general in the industry, and so around the world), could not be provided to customers. And it is impossible to give a refund. The money spent on advertising companies, a priori was lost. In numbers, in three days we stopped active projects (we went on radio stations and there was outdoor advertising – city lights, billboards. We had lost 100 thousand dollars, and then realized that nothing would be done. This happened on our small scale. On a nationwide scale, these are just epic proportions. To put it bluntly, if we make an analogy with a restaurant, it’s if we had known that we had invited a hundred guests and bought food for all of them, and all these products were spoiled. Besides, we still had to pay salaries to the chefs, pay for electricity and all the other expenses. Approximately, it is on this scale.
The second problem is that half of the artists cannot physically put on the rescheduled concerts. And if the concert is not postponed, then all tickets must be refunded. In fact, the organizer is responsible for each ticket, but he no longer had this money at the time of cancellation. It means that the organizer had invested money – had already spent it and had already lost, and in addition, he needed to refund all the tickets to the people.
And here, from both the organizer and the ticket operator’s sides there is a total struggle: customers who adored us, at one moment hated us.
Absolute hate, absolute abhorrence and in many cases absolute misunderstanding: “We don’t care what is going on, give us our money and we do not care a stitch.” Of course, there are a lot of loyal audiences, about 90% of them. But these 10% of “difficult” customers basically set the tone and make a fuss all the day long. All call centers in Ukraine closed in a month. Absolutely all. Just morally, not for all the money in the world, neither for 20 nor for 40 thousand UAH salaries, for any salary, we could not find a person who was ready to listen to the flow of hatred all day long in the call center.
And then the standard problems began – lack of money, the signing off of dozens and hundreds of people. Because in March, as soon as the quarantine began, we postponed all the concerts to April, in April – to May, in May we thought that the maximum by mid-summer everything would end. This is when we talk about single concerts. If we talk about festivals, where 100-150 artists are announced, it is, roughly speaking, impossible. The borders are closed; foreign stars cannot fly at all.
That’s why we didn’t just suffer, because we were closed. Nobody covered all the investments that had been made. That is why we have suffered the most.
It is clear that for almost 1.5 years of the quarantine the industry has suffered appalling losses. What, perhaps, drastic actions did you have to take?
Of course, radical steps are the signing off of 95% of employees. We closed about 200 ticket offices, lost the entire IT department (now building it out again), back offices, accounts department, many offices, franchises… This is a huge number of people and appalling losses. Financially, it is millions of dollars.
In numbers, our finances have declined significantly according to the previous years’ turnover. In March 2020, it was 1% of the March 2019 turnover, 2% – in April, 3% – in May, and so far we have only about 5% of pre-quarantine turnover. This means that I paid extra for each ticket sold. Why? Because when there are a large number of transactions, you have a smaller number of costs (staff, taxes, offices, programmers) per ticket. As they became 95% less, each transaction is unprofitable.
The problem with the ticket business is that it is impossible to close it. It would be a great pleasure for me to take a drastic action, close the office and throw the key away if there were not a million of customers, who we had to postpone hundreds of concerts for and honour our commitments to them.
I would change my business dimensions with great pleasure and I would do just fine in my life.
This is probably one of the few industries where online is not an option. You have tried many formats: anti-concert, drive-in cinema. Have it come to the targeted results or is it still impossible to replace live entertainment?
It all doesn’t work. If such giants as “Netflix” or “YouTube” with billionth budgets have failed to do online gigs, how can anyone else do it? Of course, there is an example of the Korean group called BTS, which has broken the world record by selling a huge number of tickets (the size of 20 stadiums) for their online concert. And if we talk about the classic life event, it is not just something that can’t be replaced at all, it’s just a utopia. All the people who went there lost their money. Besides, the artists and social networks, and the whole modern world have lost the value of this product. Try to remember the time when during the quarantine we could open Instagram or Facebook in the morning and see Lady Gaga, The Rolling Stones or anyone else singing for us, because all the artists sang and talked to their fans. So, if I can come in and see it for free, then why do I have to pay money for a ticket? But there is another factor called engagement with the concert. I watched Zucchero’s concert from his kitchen – I’m at home, started to cook, then someone called and I got distracted, no friends and so on. Going out to a concert is still a group event.
Therefore, it is clear that the online version does not work and will never work. We thought a lot about VR technology, augmented reality, etc. Today, I am putting this idea off for exactly five years or decades. I’m so disappointed by online that I don’t want to do it right now. Online has killed live communication, so we won’t think about it yet.
How do you recover after a Corona crisis? What do you draw your attention to?
We are lightening the burden more and more day by day when we manage to organize new dates for the delayed concerts. You can’t imagine how we breathe with a sign of relief and happiness when we hold an event which has already been put off three or four times. We pay extra for all those events. There is no profit for us, but we are shrugging off millionth obligations towards the audience. I believe (and I’m not talking about business now) that it gives a lot of inspiration at least to start thinking about how to recover. After all, it is impossible to think how to recover when you have a lot of problems. As an analogy to life, if there are problems in the relationship, deterioration of parents’ health or your child is neglecting schoolwork, you can’t make a breakthrough in business. And the same situation is here: if we do not repay all our obligations towards the organizers and the people who bought the tickets, we will not be able to regain our feet. This is the first moment.
Secondly, we are planning very well-managed and powerful steps into the future. Now, for example, we are building a large summer concert hall at «!FESTrepublic» under a large awning for 1.5 thousand people. We will hold an “Underhill-festival». This has become possible. And we are already calmly planning the year of 2022 – today we are “buying” world artists to come to us to Ukraine. I’ve read an interesting article by Michael Rapino (the chairman of «Live Nation Entertainment» – the largest company in the world, in fact a monopolist, which has exclusive 10-year contracts worldwide on U2 or Madonna’s concerts, which means that all show business is concentrated in this company. – Editor’s note). In this article he says that according to their calculations, in 2022, compared to 2019, the number of events is five times exaggerated. In America, where the concert infrastructure is much larger than ours, they are already falling apart at the seams, because they do not have time to put in the dates for all willing artists.
That means that now we can get the Renaissance, as after every crisis. It all depends on the Planet global markets, whether the population will have money, how it will come out of recession and many other factors.
But our exit plan is to prepare as much as possible for 2022, and this year to discharge all the pendant obligations. That’s what we do, holding small occasional events. We will not be able to hold large, grand-scale and very large-scale events this year.
Speaking of your business enlarging, it seems that just before the crisis you started approaching other markets. Tell us more about it and what stage are you at now?
We had a clear vector of development, which was the export of software for similar ticket services in different countries. I have traveled to many countries and we have signed many contracts to have our Ukrainian software there. But for now we are not even trying to return to these dialogues, because they have the same situation as ours. They also stopped everything, so now this plan is put off until at least 2022. I understand them, as fellow tradesmen, that they do not have money now for any software updates. First they need to survive and then think about how to develop.
How has studying in the Key Executive MBA program at LvBs affected your business?
I am glad that I found the time and energy to write my diploma thesis. It seemed to me that in my mental condition at the time of these lockdowns it was impossible, but the training put fresh heart into me. If to put it nicely, it is clear that I received great acquaintances, good knowledge, and an incredible business tour to Canada, training with lecturers, mentors, tutors and …classmates. I also received a lot of understanding of business processes in a new way, new visions, new missions, and new goals. And all this is true.
Speaking of facts, I believe that after this crisis, 90% of textbooks can be thrown in the trash. Everything we read about fundamental things is not true now; it is nothing more than erudition. For example, for the last 40 years we have been taught that the customer means everything. And it turns out that the client can hate you in a second, even if you have been everything for him for many years. I have already mentioned this.
It means that we are completely wrong when we speak about the customers’ loyalty, we are completely wrong about the employees’ loyalty, as they cannot be returned to work with any amount of salary, because they just became lazy. Nowadays, by the way, this is a problem in all developed countries such as: Canada, America and so on.
And the owners like me now, sit and think: “I borrowed money from all over the world to provide you with some income during the quarantine, and it’s so hard for you to get in shape again.” This is a great insult.
The same can be said about the fight against peers; it seems to me that after the Corona crisis, business models in the world will change. In general, I think that in a year the world has changed dramatically, and we have seen that people and businesses are just people and businesses. I have already got a good education and business education, I believe that I‘ve got a very good business education; I began to take it with a grain of salt. I can name a dozen books which, if given to ten businessmen to read now, ten of them will have a smile from what they read. Because everything is different now. And these are world bestsellers. This will work differently now and this is my conclusion in the last year.
What were your expectations for the program and what motivated you to get a business education?
For about 5 years I had been planning to enroll for an MBA. I didn’t understand what it was.
I am convinced that 99.9% of people also do not understand what an MBA really is and how it transforms you.
I always found an excuse. But at some point I came there, got acquainted, listened to a demo lecture, then (not without a magic kick in the butt, of course) I passed an interview, passed exams – that was the point of no return. I remember coming out after the first lecture with all my classmates, by the time the evening came I felt absolutely comfortable, I realized that I was getting a charge out of the situation. What’s more, I enjoyed each module. It’s like a hobby – I was interested in learning. There were some subjects I did not understand, they were difficult for me, and I thought that I did not need them at all and they were uninteresting. But then it turned out that that was exactly what I used in my work, and that gave me the results. That means that you need to undertake some efforts and certain discipline. This is not easy, because the requirements are quite high and it is a shame not to meet these requirements. So you sit down at night and study.
It seems to me that it is necessary to come here as an adult and a conscientious person, after a 10-year path in business (otherwise they will not accept here). First of all, you communicate with everyone like you, with those who can give their expert opinion. Secondly, you already have your own opinion, no one will force ideas upon you, but you will listen, because you have already made mistakes and came here because you do not want to repeat those mistakes.
We know about your plans to create an innovative mobile application for buying tickets, this, in fact, was the focus of your diploma thesis. At what stage is this project now?
Due to the quarantine, we put the project on hold. We haven’t worked on the product for almost a year and have only resumed work on the mobile application in the last few months. This is an application with socialization that should provide a lot of new features and opportunities for both organizers and users. There is a very interesting marketing component. But we are still thinking about launching of the app. In fact, it should be launched by mid-summer. The only question is what will happen in the middle of the summer in the market taken as a whole, whether it will be a good time to launch it or not. If the period is successful, then we will run, if not, we will wait until better times. It means that operationally we are ready; just we are waiting for a proper market moment. I hope that this application will turn over the market.
Last year you received an award from the Lviv Business School, and the alumni community also noted you. What means the LvBS community and this award for you today?
It seems to me that the award was given to me out of pity, because my business has suffered the most… But the community for me is definitely a communication platform that I am not shy to apply to. Let’s say I have a lot of business contacts, but sometimes it’s embarrassing to run to them. And the LvBS community gives a feeling of easiness and unity. I can confidently call even a person I don’t know much and say, “We’re members of the same family, please meet with me” – and it’ll always be happy to meet me, because that’s the atmosphere. What I mean is that the business school community supports and helps. I think I am also useful for the community, I always return their lead, and that’s okay.
Imagine that the quarantine will end soon. How do you think companies will return to “normal pace of life”?
Here I would divide the companies into three types – mid-sized, small and large business. I think all small companies will survive, strangely enough just because they are small. All large companies are forced to survive. They will recover longer, for years, but they are forced to survive, because people have devoted their lives to these brands, to these corporations, so they can’t just leave the market. And the biggest problem, I think, is with medium-sized companies, which, as a rule, dominate as there are 70-80% of them. I think they will have a pretty serious liquidity problem, because if you imagine that tomorrow everyone will have been vaccinated and allowed absolutely everything, then I am not sure whether mid-sized business will be able to honour its commitments.
Looking back and having business experience during the pandemic, what three tips would you have given yourself at the beginning of quarantine? What would you, as a leader, do differently?
I have only one piece of advice. In the past I mistakenly thought, having read hundreds of books about business, that you need to save the brand and pay everyone – the organizers, customers and everyone who is necessary to be paid. As far as I would be the only one on the market who did it, tomorrow I would have millions of customers and organizers, because I was the most stable and I paid everyone. Yes, because of all these payments, we lost a million hryvnias a day. The money ran out pretty quickly and events did not resume. That means I should have saved that money for a rainy day and played “on credit”: if the event is postponed – to pay extra when it happens. Here’s this one but great tip.
There is another one, but it is immoral: to dismiss everyone immediately, to leave the employees without salaries, to close all the offices and to stay secure in the red. But even now, having had such an experience, I would not do it. From the business point of view this advice is correct, but ethically it is not.
The speaker was Natalia Fanok