In the daytime, nightclubs do not appear as they do during the night. Without the makeup of lighting and musical hypnosis, the disco halls look tired and somber. However, behind these walls while the sun is shining, other activities occur – those not shown to guests.
During the day, a nightclub is transformed from an entertainment location into a private business, with replete accountants, managers, workers and clerks. They come to work in the same manner as many people each morning, and during the workday create the necessary conditions for ensuring that the nighttime events occur without a hitch.
Looking at the ample numbers of expensive cars, elite houses and promotion of bank credits, one might consider that anyone can open a nightclub. In order to begin such a business from scratch, investment of between US$200-300 thousand is necessary. Such an amount is required for covering rental expenses and renovation of an appropriate location, the purchase and installation of the required equipment, and provision of ventilation and sound insulation systems.
Many people are attracted by the seeming simplicity of managing such a business, the relatively low level of necessary starting capital, and the high return on investment (ROI). That is why new nightclubs quite often appear in Almaty. Nonetheless, they disappear just as often too. First of all, this is because the management underestimates the complexity of the task in front of them. All managers of successful projects in the entertainment industry note that this sphere of activity is very specific, and requires a manager to possess special knowledge, as well as professional intuition.
Who are the managers and owners of successful projects? Information about the commercial activities and ownership structure of companies in our country is generally far from being transparent. This is doubly true with regards to nightclubs and entertainment centers. In this sphere of activity, many opportunities for money laundering are present, as well as those for drug dealing and prostitution. Yet, one must consider the security issues. That is why, regardless of the fact of whether a nightclub has anything to do with the abovementioned illicit activities, releasing the names of the business principles is not appropriate. Yet, if one takes into account unofficial information, all entertainment locations can be divided into three groups.
The first of these classifications includes large companies, which often operate in the spheres of trade and catering. They possess enough of their own capital, as well as having the possibility of securing loans, for opening a club. These businesses already boast a certain level of organizational experience in related service industries. Such nightclubs are usually overseen by a member of a family clan, which would be the owner of the parent business. They are usually afraid to trust any outsider or hired manager.
The second group is comprised of newcomers from Russia, where such types of business are already widely established. In that country, the start of a new project, in consideration of a more demanding public, costs several times more. For them, entering our market is more of a diversification of their business. And, the third group consists primarily of entrepreneurs, about whom all we know is that they are close relatives of certain famous politicians.
The success of a project primarily depends on the management. A club may have excellent lighting, sound system, bar, and so on, yet the place remains quite empty. And, vice versa, one may see the most elite visitors in a nightclub having but an average interior. The unanimous opinion of club directors is that the secret of such enterprises is in maintaining well-organized operations. Everything is important – starting from the right air conditioner all the way to face control (which patrons are allowed to enter). Nonetheless, the major attraction for the public is certainly a club’s program, including the use of popular DJs and performances by local and foreign stars.
The Almaty clubs receive a major part of their revenues from entrance fees, especially at the initial stage of their operations. If an entertainment location becomes popular, it is able to open up additional revenue streams through deals with producers of alcohol, tobacco products and energizing drinks. The parties usually agree on promotional actions that are to be carried out during the year, and sometimes negotiate exclusive sale of certain products at the club. An already developed location receives roughly equal shares of its revenue from entrance fees and contracts, with the latter supplying 25-30% of the total. However, as the number of visitors using club cards, which allow free entrance, increases, the balance of income shifts toward contracts.
Producers of goods consider clubs as some sort of advertising space, which has proven to be quite effective. They are ready not only to pay for their promotional campaigns, but also to make investment into the construction of new locations, or into the renovation of an existing nightclub. Moreover, space for promoting cigarettes or alcoholic drinks is constantly being limited through legislation. Giveaways of items branded with the logos of producers of those products that must carry health warning labels has already been prohibited in all locations, including nightclubs. Nevertheless, entertainment locations such as these remain effective sites for advertising alcohol and tobacco products. Aside from achieving a stable income, the clubs, for their part, are also interested in DJs and performers, who are invited by producers for their events, and who thus contribute to growing the popularity of those nightclubs. In addition, partners usually place television and radio advertisements about forthcoming events, which mention the name of the club.
These entertainment locations receive the remaining portion of their revenue from the bar and food service. To be honest, some clubs simultaneously develop other types of income streams, including bowling, billiards, and restaurants, among others. However, this is a completely different story. Nobody will say how much revenue an average nightclub receives per month. Nonetheless, we may roughly calculate the number. If the typical entrance fee is KZT 1,000 per each of around 300 paying guests three times a week, then the total monthly revenue [from these fees] would be approximately KZT 3.6 mln. Considering the fact that these entrance fees comprise about 25% of the total club income, one may derive that the official monthly revenue of such a club would be about KZT 14.5 mln (US$120 thousand).
The expenses of entertainment centers are nothing unusual: taxes, salaries, advertising, depreciation, utilities, and others. However, there are also some specific costs, including copyright fees for new music. If one plays a song, one must obey intellectual property right laws, and thus pay licensing fees. Officially, nightclubs pay these fees, which are small (only 3-4 calculated monthly indexes – around KZT 3,000 to 4,000 – per month, but still), to the authorized government body for intellectual property rights. However, none of the club managers truly knows where this money really goes. Are these funds actually transferred to Madonna and other famous celebrities?
The fact that DJs buy almost all of their discs on specialized internet sites, and receive them via mail, along with accompanying documentation, is noteworthy. During the purchase, they already meet the conditions of international copyright law, leaving nightclubs in Kazakhstan to pay for a second time in order to use these musical hits. Since the amount is rather small, everyone pays it without any complaints. Last year, the Internal Affairs Department carried out raids, during which they checked the copyright situation within nightclubs. In some of the locations, they confiscated certain discs, as well as the equipment on which they were played.
On of the more significant, though more pleasant, expenditure of nightclubs is the inviting of DJs and performers – those from Kazakhstan, the CIS, and further abroad. In order to invite a DJ from Europe, clubs pay more than US$10,000 (including air travel and hotel expenses), and for one from Russia the amount is around US$4,000 to 5,0000. Local DJs are paid from KZT 5,000 to US$500 per night. Star performers are much more expensive, and are thus invited more rarely.
As per the estimates of some managers of these projects, the ROI is about 60%. However, the major part of any net profit is reinvested into the further development of the nightclub. Interestingly, among club managers, no single opinion exists as to how often a club should be renovated, beginning from the idea itself all the way to the interior elements. Some believe that this should occur no less than once per year, while others do not even consider the issue until the number of clients decreases immensely.
As regards patrons of nightclubs, they make their choice among clubs as per some unexplainable rule, such as club promoters themselves cannot even comprehend. Eventually, as it turns out, one club is mostly visited by teens, another by prostitutes and their clients, and still another has a reputation as a place for drugs. In general, the attitude of clubbers is more liberal here than in Moscow. Sinisha Lazarevich, a famous Russian club promoter, stated in an interview with the television channel RBK, “We do it for beautiful women, Bohemia and the bourgeois.” According to him, out of all those wishing to get into a club, face control chooses only “the beautiful, the fashionable, the vivacious and the positive” ones. In his classification, the clientele of his elite Moscow club consists of: 1) the beautiful; 2) those with potential (meaning rich); and, 3) those who form public opinion (well known personages).
Leading clubs in Moscow are larger and more expensive than their Almaty counterparts. About 3,000 guests, and even more, may on the dance floor of such a location, while the booking fee of a VIP lounge may run to US$5,000 per night. One should note that Russians try to cultivate their nightlife culture in our country as well. Those nightclubs opened by Russians are considered to be the most stylish and advanced in Almaty. And, face control in those clubs is considered to be completely outrageous, as per local standards.
We requested directors of popular nightclubs to tell us about face control, drug usage, and other aspects of the club business.
general director of the entertainment complex Cardinal and the nightclub Pyramid:
Clubs are opened, and then pop like soap bubbles. Many people consider that this is a very easy business, yet it is untrue. Personnel, the necessity of face control, security service – all of these require a professional approach. One of the problems which all clubs encounter is the sale of drugs on their territory.
I believe that everything depends on the top management of the nightclub. Selling drugs is impossible without the top manager knowing about it. When I am asked, “Who do you think this comes from?” I always reply that it of course comes from the management. You are the chief of the club, and you decide what is to occur there. We also stop prostitution. When I started working in this club, we first cut out those patrons who, in our opinion, took psychotropic drugs, as well as those women who do prostitution.
This was mostly done with the help of face control. I myself like standing at the entrance and talking to clients. I have been in this business for ten years now. I began as a worker, then waiter, cleaned the tracks in the bowling alley, got introduced to people, and liked communicating with people. That is why I know some of the young clubbers personally. I can even say that they grew up in front of my eyes, and I know who is worth what. If I am not sure about somebody, I will watch that person, approach him, and speak with him. Of course, not all problems become immediately evident, but we do not allow access for many people. We also utilize other methods in the fight against drug dealing. For example, on June 1st, we held a special campaign in our club, “Youth against narcotics”.
About a quarter or a fifth of our expenditures are spent on guarding the establishment, as many people’s lives depend on this. Working as a guard in a nightclub is not easy. Darkness, flashing lights, loud music – such conditions make it difficult to control the hall. No less than six people guard the whole complex during one shift. On those days when we hold large parties in our club, policemen are paid to provide extra security.
When speaking about the commercial side of our business, one can note a general trend toward a decrease in the revenue of nightclubs. There are many reasons for this: some of the patrons have moved to Astana, the number of nightclubs has increased, as well as the competition between them, new technologies have appeared to allow high-quality sound in residences, and others. Some people may also be tired of the scene.
The peak of club activity comes during winter when many corporate parties are held. Summer is a season of vacations and exams, so club attendance decreases. This is why our entertainment complex receives most of its income during the summer from holding wedding parties, as we have a very sizable banquet hall. In order to stimulate interest in our club, we change the program every week, and invite popular DJs and performers, as well as changing the style and direction. Young people always like everything new, and the latest clubs are usually attractive to them just because they are in fact new. As regards Pyramid nightclub, it has been operating on the market for six years, and we need to constantly change in order to not be boring to our patrons.
Every twelve to eighteen months, our club changes its theme and design. It has been The Factory, Aladdin, and Pyramid. At present, we have a new theme – Night Flight. In order to decorate the club in this new style, we had planned on buying a real plane, and installing it in such a way as to have the front portion of the plane inside the club, with the tail section outside. However, we did not manage to buy a plane, yet mechanics created a mockup of an airplane for us, which currently acts as a key element for the clubs interior.
art director of the nightclub Da Freak
We have a progressive club with regards to music, which is why young people come to us. Thus far, we are not planning to change the concept of our club. We will only upgrade it, and improve the lighting and sound. The interior is not the most important aspect for us.
We also do not plan on diversifying the business, open billiard halls, or do anything along those lines, as from the very beginning we planned this project as a nightclub, just for our soul. We wanted to attract that group of young people who visit us now, as well as using that type of music we play now. This was the key objective when we carried the plan out. We are not businesspeople, and just receive satisfaction from our work. Our accounting office deals with commercial issues. If we were useless, they would tell us, “OK guys, we are not satisfied with your work.”
When the profit of our club begins to decrease, we become more active and set up intense and interesting parties. The main secret in [achieving the] popularity of nightclubs is in understanding the desires of the public. And when our desires match those of the public, work becomes much more interesting.
As regards drugs, they and club culture have always paralleled each other. Concerning our club, a bad reputation was stuck to us shortly after opening. Once when I was visiting my relatives, my younger sister, who is a teenager, asked me, “In which club do you work?” I replied, “In Da Freak.” She answered, “Really? Isn’t it a club for drug addicts?” All of my relatives looked at me in horror. I felt as if it were me who sells those drugs.
We addressed the narcotics office in the city Department of Internal Affairs. We just went there, met the department head, and explained the situation. We asked him what can be done. We did not want people pointing at us and saying that we turn young people into drug addicts. Tracing the sale and usage of drugs at a club is practically impossible. The primary club drug is ecstasy, which is in the form of pills that can be easily brought in, transferred and taken unnoticeably. Moreover, nightclubs are usually dark and noisy, with people having fun drinking and partying. Together with the city’s Department of Internal Affairs, we carried out a “Say no to drugs” campaign, for which we invited representatives of the police, journalists and clubbers. We have placed posters on this topic around the club. I know that similar measures have been taken at schools and institutes with the participation of the city administration. Explaining the harm of narcotics is very difficult if one does not wish to understand.
On the other side, I have a question for law enforcement agencies themselves: How can drugs enter our country at all? We should have a very strong state policy in place regarding [this issue]. Also, we should note that this problem not only exists in Kazakhstan. Our partner company, British-American Tobacco, sent us on an internship program to London for training. While there, we visited nightclubs of that city, and in those clubs every 20 minutes somebody openly approached us and offered to sell drugs. About 3,000-4,000 people visit those clubs each night, making watching everyone difficult. In general, the club culture in Great Britain differs a lot from that of our country. There, people go to nightclubs in order to have a rest. However, here we have certain individuals who specifically come to clubs in order to have a fight, to quarrel, and so on.
With regards to prostitution, girls here dance in such outfits… Defining whether or not one is a prostitute is very difficult. We are quite liberal as regards our public.
The RK Ministry of Internal Affairs intends to shut down 14 nightclubs in Almaty where drugs are distributed
According to Kazakhstan Today, the Committee for the Fight Against Drugs, under the Ministry of Internal Affairs, intends to shut down 14 nightclubs in Almaty, in which proof of narcotic distribution and usage has been evidenced. Anatoly Vyborov, Vice-Minister of Internal Affair and chairman of the Committee for the Fight Against Drugs, made this statement during the conference “Regional cooperation of mass media: Together against narcotics and HIV/AIDS” on June 9th in Almaty. Mr. Vyborov said that the work on collecting evidence on these entertainment locations where facts on drug usage have been noted had been started by his committee at the beginning of 2005. He stated, “We are carrying out intensive work with the help of [district] Akimats (editor’s note: local executive councils), and pass the information to the courts, in order to shut those nightclubs down and revoke their licenses.” According to him, mostly in Almaty clubs, the usage of synthetic narcotics can be noted, such as ecstasy and LSD, imported from Europe.