Indonesia: VOD Market Growth Brings Opportunities for Independents

In Indonesia, independent films face a number of obstacles including the near monopolization of theatrical imports, strict censorship, and high levels of piracy. In addition, the popularity of local Indonesian, Hollywood major studio, and regional Asian films have reduced demand for U.S. and European independent product.

The emerging VOD market offers some hope for independent films. There were 143.26 million internet users in Indonesia in 2017, rising 7.9% from 2016. Accessible, affordable content is slowly turning viewers away from illegal streaming websites. Censorship for VOD release is laxer than theatrical and television standards, allowing a wider variety of content. SVOD services specifically offer a greater amount of international programming. Younger viewers, who make up the majority of online streamers, are more attracted to U.S. programming than the overall population.

Independents have few options when trying to close a deal for theatrical release. Film importing and distribution is dominated by PT Nusantara Sejahtera Raya and its subsidiaries who sub-distribute movies on behalf of all major Hollywood studios and control the majority of film imports. Furthermore, international independent imports are mostly regional Asian films, not Western titles. Popular foreign cinema includes Thai, Japanese (drama and horror), and South Korean films. Only a handful of English language independent films are imported each year.

Indonesia is home to one of Asia’s most competitive and fastest growing television markets, ranking third in the region after China and India. Free TV broadcasters control the majority of the television sector. However, local programming is extremely popular with many of the productions done by the Free TV broadcasters themselves, including popular drama series and talent shows.

Pay TV penetration is incredibly low at 11%. While programming on local Pay TV channels is much more international than that of Free TV, it often features regional Asian content rather than U.S. TV series and movies. Chinese martial arts films, Bollywood titles, and Korean dramas have long been favorites for Pay TV viewers while Latin American soap operas have a growing audience.

Censorship is another major hurdle for any film hoping for distribution in Indonesia. Regulators prohibit the theatrical exhibition of any title featuring smoking, nudity, or extreme violence. Even a title that has passed censorship for theatrical release is not guaranteed to pass censorship for television. Television is especially strict with the channels’ own quality control department deciding whether a scene should be censored per the “code of conduct” and broadcasting standards. Unfortunately, the system of self-censoring has evolved into an overzealous restriction.

Piracy affects a film’s success in every sector. Titles become available on illegal streaming websites almost immediately after domestic release. Due to piracy concerns, most imported films are released on the same day as its domestic theatrical release. Additionally, an estimated 2-3 million homes receive illegal pay television signals.