How can the legalization of pornography affect the economy of Ukraine?

Recently, the discussion in the media around the adoption of bill No. 12191 and the possibility of decriminalizing erotic content and porn in Ukraine has become significantly more active. We have repeatedly highlighted the human rights and legal consequences of decriminalising pornography on our portal. However, there is much less information on the purely economic component of this process on the internet.

We would like to bring to your attention an excerpt from an article on this topic by Yaroslav Vinokurov (Ярослав Вінокуров), which was published on the Ekonomichna Pravda/ Economic Truth (EP) portal on 15 September 2023. It should be noted that in the two years since the article was published, all indicators of monetary turnover in the porn industry in Ukraine — and therefore the monetary indicators of possible budget revenues — could have increased several times over. (Legalife-Ukraine)

The full article is available at the link here

Despite criminal prosecution and numerous convictions for distributing pornographic content, Ukraine is part of the global porn market – both on the demand side and on the supply side.

In 2022, Ukraine ranked 15th in the world in terms of porn traffic consumption on one of the largest porn sites, Pornhub. Despite the war and the occupation of part of its territory, Ukraine dropped only two positions over the year.

On average, Ukrainian users spend 9 minutes and 57 seconds on Pornhub. 50% of them are people aged 18-34, 23% are aged 35-44, and 27% are over 44. 41% of all Ukrainian visitors to this site in 2022 were women.

In addition, Ukrainians are active users of OnlyFans. The OnlyFans platform charges users for access to creators’ content and has gained popularity for its adult entertainment and erotic content. Subscribers to content creators can view their content in exchange for a monthly membership fee: 80% of the fees go to the content creator, 20% to the platform.

The popularity of OnlyFans among Ukrainians is evidenced by the fact that in the first six months, the company transferred 34 million hryvnia in VAT to the Ukrainian budget.

Do Ukrainians shoot porn?

In addition to consuming porn, Ukrainians are actively creating it. Moreover, they have learned to convert income from adult content to support the Armed Forces of Ukraine.

On 8 March 2022, two users of the Onlyfans platform founded the ‘Teronlifans’ ("Теронліфанс") movement. Participants in the movement exchange donations made to the accounts of one of the charitable organisations for intimate photographs. By the beginning of August 2023, they had managed to raise around 31.48 million hryvnia in this way.

EP asked OnlyFans to provide statistics on the number of users from Ukraine and their earnings. However, the platform refused to provide such information, stating that it ‘does not divide content creators into categories, in particular by their place of residence.’

According to rough estimates, Onlyfans is used by 500 million people worldwide, of whom 2.1 million are content creators. On average, each content creator has 21 subscribers and earns $180 per month. At the same time, more than 300 content creators on the platform earn over $1 million per year.

It is unknown how many content creators on Onlyfans are from Ukraine and how much they earn. According to market estimates, there are hundreds of thousands of people.

Guy De Smet (Гі Де Смет), regional manager of the CAM4 webcam platform in Eastern Europe, believes that more than 200,000 Ukrainians may be posting pornographic content on OnlyFans. Assuming that each of them earns $180, the volume of this market could reach UAH 15.8 billion per year.

OnlyFans is a relatively new platform, but its emergence has already led to an increase in criminal cases for the production of pornography, according to lawyers.

"With the emergence and development of the OnlyFans social network, there has been a significant increase in the number of court cases to establish the guilt of suspects in the production and distribution of pornographic images through this network.

For example, in May 2023, a court in Kremenchuk (Кременчуг) found a married couple guilty and sentenced them to three years in prison without the right to hold certain positions. “However, this court released the defendants from serving their sentences, imposing a one-year probation period," said Larisa Velychko (Лариса Величко), a lawyer at the Gracers law firm.

The production and distribution of pornography through more traditional Internet channels, such as porn sites, is poorly developed in Ukraine. As a rule, professional porn actors from Ukraine go to work in studios located abroad, where the legislation on the circulation of such content is not as strict.

How does the webcam business work in Ukraine?

The webcam business is quite popular in Ukraine and is also illegal. Unlike working with Onlyfans, on webcam platforms, content creators communicate or put on shows for their viewers live.

To broadcast via these platforms, you can register an account yourself or use the services of studios. The latter help content creators with space, equipment and clothing.

Sometimes they conduct training for beginners. Content creators pay a commission for their services – 50-70% of their earnings. Studios that broadcast erotic and pornographic content are often targeted by law enforcement raids. Usually, these ‘mask shows’ end with offers to ‘resolve the issue peacefully’.

‘The price ranges from $10,000 in small towns to $50,000 in cities. Sometimes law enforcement officers offer a “subscription” for $1,000-3,000 per month to get the studio on the “leave them alone” list,’ says Guy De Smet.

Sometimes it is possible to avoid problems with law enforcement. Since the content is broadcast, not recorded or stored, it does not fall under the definition of Article 301 of the Criminal Code. In the court registry, you can find cases where the court acquitted webcam models and even awarded them compensation for moral damages.

Guy De Smet says that there are about 600 webcam studios operating in Ukraine through CAM4 alone, with a total of 25,000 models. The actual number of webcam models may be higher, as not all of them work through this site.

A webcam model in Ukraine usually earns 2-3 thousand dollars a month. If she works through a studio, she gives half of the amount to it. The volume of this market can reach 22 billion UAH per year.

Is pornography banned all over the world?

Ukrainian courts often refer to the International Convention for the Suppression of the Production and Distribution of Pornographic Publications in their rulings on the production or distribution of pornography. This document will celebrate its 100th anniversary in September of 2023.

According to the text of this treaty, which was proposed by the League of Nations (which was disbanded long time ago), the signatory countries agreed to introduce criminal liability for the production, storage, distribution, public display, import, export, trade, rental or advertising of pornography.

One of the signatories to the convention was the Soviet Union. At the same time, Ukraine is not among the 56 countries that are parties to the convention. Since 1923, attitudes towards pornography have changed around the world, and some signatories to the convention on preventing the spread of pornography have withdrawn from it. In particular, the Netherlands and Germany have done so.

"In most EU countries (Hungary, Germany, Greece, Denmark, Ireland, Spain, Cyprus, Malta, Norway, Poland, the Netherlands, Finland, France, Croatia, and the Czech Republic), pornography is legal. The publication and purchase of digital or other pornographic content is permitted, but with age restrictions, usually up to 18 years, and a ban on child pornography", notes Velychko.

Pornography is prohibited in Muslim countries and African states.

How can the legalisation of pornography affect Ukraine’s economy?

First of all, decriminalising pornography would save budget funds, as law enforcement agencies spend a lot of time and effort proving people’s guilt under Article 301 of the Criminal Code.

Investigators, prosecutors, and judges are involved in the proceedings, and state expertise services are paid for. Sometimes law enforcement agencies spend money on ‘operational purchases’ of pornographic content. This happens even during wartime, when the state obviously has much more pressing priorities for spending.

‘The cost and effectiveness of such regulation raises questions. It is difficult to catch people for such activities, so law enforcement agencies either have to make significant efforts or catch a small number of participants selected at random. In addition, this creates opportunities for corruption,’ says Dmytro Goryunov (Дмитро Горюнов), senior economist at the Centre for Economic Strategy.

BRDO experts have calculated that in 2021 alone, investigators could spend at least 85,500 working hours on 1,493 cases opened for the distribution of pornography.

According to the most conservative estimates, budget expenditures for investigating cases under Article 301 of the Criminal Code could amount to UAH 11.5 million. The actual time and budget expenditures could be five times higher, as investigations sometimes drag on for months.

Decriminalising pornography could also increase employment. "The porn industry has a low barrier to entry. All you need is a webcam and internet access. If a person suddenly loses their income or housing, this will allow them to earn something in the first few months – whether someone likes it or not," explains Ihor Samokhodskyi (Ігор Самоходський), head of the IT and Telecom Sector at the BRDO Office for Effective Regulation.

Also, the sphere of production of pornographic content can contribute to attracting investments in the economy. After all, you don’t need to build factories that could be hit by a missile at any moment to produce pornography.

Since pornography consumption is much higher abroad than in Ukraine (the United States alone accounts for 13-14% of the global porn industry’s revenue), legalising such content could become a source of foreign currency earnings.

In addition, this industry is innovative. ‘The porn industry is one of the drivers of technological development. For example, one of the motives for the private development of the internet was porn. At one point, it accounted for more than half of all traffic. VR technology also developed because of the porn industry,’ notes Samokhodsky.

Decriminalisation could give a boost to the development of Ukrainian services in the porn industry. After all, one of the co-owners of Onlyfans is Ukrainian Leonid Radvinsky (Леонід Радвінський).

How much tax could be generated by porn?

Platforms such as Onlyfans pay taxes to the Ukrainian budget. However, this tax is VAT (​​ Value Added Tax), which is paid by content consumers. On the other hand, the income of creators who sell this content is not taxed. If the income of Ukrainian content creators on Onlyfans amounts to 15.8 billion UAH per year, then in the event of their full legalisation, the budget could receive 3 billion UAH in the form of personal income tax and military tax.

Webcam studios do not pay any taxes either, instead enriching individual law enforcement officers and officials with bribes. If decriminalised, representatives of this industry are ready to register officially and direct these funds to the budget.

If there are 25,000 webcam models working in Ukraine and each of them earns $1,000 per month, the revenue from personal income tax and military tax alone could amount to about UAH 2 billion per year.

Text by Yaroslav Vinokurov (Ярослав Вінокуров)

Article published on 15 August 2023 on the portal epravda.com.ua