Attachment 1 - Statement of Objectives - Media Activity.pdf

ACTIVITY TITLE: Media Activity (TBD)

1. INTRODUCTION

This Statement of Objectives (SOO) describes the objectives of the U.S. Agency for International Development in Serbia (USAID/Serbia) for an Activity that will address sustainable development of Serbian digital media, information, and communications sector stakeholders

2. PURPOSE:

This Activity will improve the economic sustainability and business development of Serbian digital media, information, and communications sector stakeholders.

USAID applies a holistic approach to supporting public access to fair, accurate, and relevant information. Under this Activity, potential digital media, information and communications sector Beneficiaries include, but are not limited to: entities that provide information, IT services, content analytics, audience measurement, establishment of new digital platforms, cybersecurity, or other services that can facilitate public facilitate public access to fair and relevant information, critical thinking or digital literacy skills necessary to navigate and participate in the 21st century information landscape (hereinafter, Beneficiaries).

The Activity will increase Beneficiaries’ managerial, technological, business, and financial skills in order to: develop their business, products and services; expand in existing markets or enter new markets; become more competitive for private financing; improve their ability to attract and employ financial resources; utilize potential of next generation networks (5G); and apply cutting-edge technological and cybersecurity solutions. The overall expected result of USAID assistance will be the Beneficiaries’ increased commercial orientation, financial sustainability, and higher level of technological skills.

3. DEVELOPMENT CHALLENGES AND OPPORTUNITIES:

Over the past several decades, the increasing convergence of media, digital services, broadcasting and advertising, expansion of fast digital networks and information and communication technologies (ICT) has driven global productivity gains and growth. Serbia is no exception to this trend. Serbia’s economic development, political and social stability rely heavily on information, communication and digital technologies. Sometimes called the fourth industrial revolution - characterized by a fusion of technologies that is blurring the lines between the physical and digital - the usage, creation, distribution and integration of information have become an issue of economic, political, and social significance. As a result, economic development, business creation, and political and social stability significantly rely on network security, citizen and business access to accurate and objective information, on their digital skills and education, on their ability to obtain and critically assess information, as well as on the overall regulatory environment for the development and application of new financial services and business, among other attributes.

Global trends in the media and information industry are moving in the direction of consolidation through partnerships between ICT and media industries, which benefit through the application of economies of scale deriving from horizontal, and vertical integration (production, distribution, and sales). However, the majority of Serbian media and information market participants are slow to adapt their business models to these market trends to position their companies in the new hybrid media-ICT market environment.

USAID-sponsored research has shown that small and medium enterprises (SME) active in the digital, information, and media sector have significant room to grow and develop their products, audiences, and services, but do not possess the knowledge and skills to ensure their economic development or financial sustainability. Among other things, USAID identified lack of credit history, lack of focus on growth and revenues, lack of business scalability, limited partnership/networking opportunities for economies of scale, and lack of business skills as key constraints for industry stakeholders to access finance and effectively utilize capital for development. In addition, digital transition, interactivity of new digital channels, as well as employment of digital tools for market expansion, monetization and audience engagement increases cybersecurity risks for users and providers of information services. Understanding and preparedness for cybersecurity challenges becomes an additional requirement for safe and uninterrupted engagement in the digital space.

USAID recognizes that, in general, Serbian small and medium enterprises (SMEs) have limited access to finance or ability to tap into capital markets, which inhibits their growth. This has a negative impact on Serbia’s overall economic potential. Financial and capital constraints are particularly acute for SMEs in the media, information, and communication sector. USAID assessments demonstrate that there are gaps in suppliers’ ability to address the full range of consumer preferences and their safe communication in the digital space. This represents an opportunity for the future growth of digital information platforms, as well as of the larger ecosystem of products that support access to information, such as e-payment platforms, on-demand-content solutions, audience measurements, consumer preference analysis, sales, high-speed networks utilization, cybersecurity, etc.

Overall, Serbia lacks a diversified ecosystem for alternative sources of financing outside of the banking sector, which is also a key constraint for Serbian SMEs throughout all economic sectors. Many of USAID’s economic growth programs have been working on changes to the operating environment in order to spur on more tools for access to finance1.. SMEs in the media and information sphere are no different.

The fundamentals for Serbian private sector to participate actively in the digital economy are present: According to the Serbian Agency for Telecommunications (RATEL), 93% of households in Serbia have a mobile phone, 71.2% have a computer, while 73.4% of Serbian citizens use the internet. Polls conducted under USAID’s Strengthening Media System activity, as well as other publicly available data, estimated that in 2018, 73% of the population was using ICT technologies daily (23% occasionally), including 56% of those above 50 years of age and 84% of those below 29 years.

In 2019 USAID estimated the total value of Serbia’s media market at close to $500 million per year. Over $220 million per year was generated through advertising, while an additional $120 million per year is generated through other commercial activities. The advertising market’s growth over the past two years was around 10%. While Serbia’s media market is saturated with more than 2,000 registered media outlets, in 2018 the industry had cumulative net earnings of around $50 million. This assessment of the size of the media market does not account for the 5 contributions of other service providers that support public access to fair, accurate and relevant information or increase media’s ability to effectively and safely communicate with audiences in

1 https://www.eib.org/attachments/efs/assessment_of_financing_needs_of_smes_serbia_en.pdf https://www.ebrd.com/publications/country-diagnostics/serbia the digital world. Therefore, the above estimate should be considered as a baseline rather than the total market estimate.

While the average digital media market share (% of revenues) globally is 40%, in Serbia the digital market represents only 16% of the commercial media market, leaving ample space for growth. At the same time, the digital media market reach (% of population that regularly access digital media) in Serbia is 71%. This digital reach is equal to the reach of TV - despite TV having 55% of the commercial market share (% of revenues) in Serbia. Even with the currently low monetization levels of its digital media sector, the average net returns in the Serbian digital market are 9%, as compared with 1% for TV. Furthermore, the digital ad market in Serbia is growing at the rate of 23.7% per annum (the second highest of such growth in Europe), while TV is stagnating both in terms of reach and revenues. If the current rate of digital market growth is sustained, digital revenues will exceed TV revenues in approximately six and a half years. This growth will likely be accelerated with the introduction of fast, 5G networks, increased application of cybersecurity tools and services, as well as advancement of the internet of things (IoT).

USAID recognizes that the global COVID - 19 pandemic has weakened global markets, resulting in emerging new risks and opportunities for business growth. However, USAID believes that the identified fundamental preconditions for growth in the media and information market remain and will be even more important in the post-crisis period. Digital disruption and technology continued to shape the next information revolution, a trend that will continue for the foreseeable future. This trend has been amplified by the pandemic as information and communication technologies - whether already adopted or newly utilized by previously untapped segments of the market - proved to be important for the global crisis response. As a result, only customer-oriented media and information industry stakeholders with a high level of consumer trust and cybersecurity protocols, adaptable business models, innovative products and services

- including cybersecurity solutions - and cutting-edge technology adapted to next-generation networks (5G) will be able to expand and become economically sustainable in the future.

In this context, Serbia’s low rate of digital market share, low level of stakeholders’ understanding of technology (both risks and opportunities), and their low utilization of advanced business and technological solutions presents an opportunity when combined with the rapid growth of the digital sphere. Forward-looking SMEs in the media, communication and information sector can catalyze this opportunity. Through ACTIVITY, USAID intends to assist those SMEs to adapt new business models, products, as well as apply technologies and digital solutions that will enable them to be competitive and further develop in the 21st century digital information and media markets.

4. OBJECTIVES OF THE ACTIVITY

Objective 1: Development and implementation of a business and technological development, and investment readiness program.

Improvement of the capacity of Beneficiaries to formulate and implement strategies to accelerate growth and revenues, access and implement cutting - edge technologies, and increase investment readiness.

Objective 2: Improve Beneficiary access to finance.

Improvement of Beneficiary financial and investment track record, increasing their attractiveness for commercial financial and investment institutions.

Objective 3: Outline design and investment partnerships for establishment of a stand-alone Fund for Media, Information and Digital Environment Innovation.

Identify and engage investment partners on the potential establishment by a third party of an Investment Fund, a Special Purpose Vehicle (SPV) within an existing investment fund, or similar financial investment / loan vehicle (hereafter the Fund) that can operate as a self-sustaining entity with the goal of providing sustainable business development finance and/ investment capital to professional media and other participants in the media, information and communication sector.

Results and Indicators

To achieve the Objectives, the Contractor must achieve the following results:

● improve the competitiveness of Beneficiaries through an upgrade of their business and managerial skills relevant to the 21st century market;

● increase Beneficiaries’ access to investment capital and development finance;

● increase Beneficiaries’ access and ability to utilize next generation networks (5G and

IoT), apply cybersecurity and cutting- edge technological solutions to gain competitive market edge and increase their market share;

● formulate an actionable set of recommendations on setting up a stand-alone investment fund, including attracting institutional and commercial co-investors, exit strategy, structure, management and oversight, and ethical investment criteria.

Indicators of success:

● Beneficiaries are forward-looking, technologically savvy companies adapted to 21 century digital markets.

● Beneficiaries develop business mentality, practices, and skills to become efficient, and growing business entities.

● Beneficiaries apply know-how to ensure the sustainable development of their companies and increase their sales, market share or audience reach.

● Beneficiaries establish an initial financial or investment track record recognized by commercial financial and investment institutions.

● Beneficiaries are able to qualify for and effectively utilize (SME) business development loans or equity investment.

● Any sub-grants to Beneficiaries are matched with third-party co-investments or other types of financial or technological support.

● Stand-alone Fund / SPV established with majority of third-party funding.

5. Other Information:

Continuous Learning

The Activity will enable adaptive approaches to achieving objectives, informed by ongoing changes in the operating environment (technological, contextual, political, economic, etc.)

relevant for the success of the Activity. The contractor shall continually assess the effectiveness of the interventions, evaluate whether those interventions are succeeding, apply lessons learned and adapt work appropriately.

USAID/Serbia recognizes that the success of the Activity will depend on the contributions of actors directly and indirectly engaged with the project, as well as institutions and processes beyond the manageable interests of the implementing partner, and that changes in the local context may have implications for the achievement of results. Therefore, significant shifts within the operating environment or the broader country context may require the adaptation of approaches and the revisiting of indicators to address these changes.

Coordination:

The Activity should be prepared to engage and coordinate with USAID bilateral and regional activities, including economic growth activities that are working on SME development and access to finance, USAID media activities , as well as with other relevant donor support programs.

Current programs include but are not limited to:

● USAID Cooperation for Growth Project: www.saradnja.rs

● Strengthening Media Systems:

https://www.irex.org/project/strengthening-media-systems

● Balkan Media Assistance Program:

https://www.usaid.gov/bosnia/fact-sheets/fact-sheet-balkan-media-assistance-program

● Women Entrepreneurs and Startup Founders Initiative:

http://belgrade.impacthub.net/

Period of Performance

The period of activity performance is five years.