Nation on the Rise: Indonesia emerges as one to watch in Asia-Pacific growth markets
2017 was another year of good news for the exhibition and distribution industry, with the global theatrical box office hitting a record $40.6 billion. And the Asia-Pacific region is accounting for more and more of that growth: Receipts in the region were $16 billion last year—an increase of 44% over the past five years. The international box office as a whole (estimated by comScore through the first six months of 2018) delivered better headlines still, up 5% in U.S. currency, or $15 billion, compared to the first six months of 2017. And the Asia-Pacific market accounted for much of that growth.
Despite various geopolitical tensions, APAC’s most high-profile market, China, continued to grow. The China box office for 2018 (through to the middle of October) closed in on $6.9 billion. That’s an increase of 10.7% compared to the same time last year. A limp National Day holiday week indicates that growth will struggle to move beyond the 10% mark—though that’s still impressive for a market that has surpassed all expectations over the last ten years. Latest predictions have the China market outstripping the U.S. in 2020, based on a 10% growth rate.
On Oct. 30, at the Asia Society’s U.S.-China Entertainment Summitin Los Angeles, I previewed The Economic Contribution of Film and Television in China in 2017 report. Our research found that the film and television industry contributed a total of $108.4 billion to the Chinese economy in 2017. The industry’s overall economic contribution increased by $22 billion, or 25.5%, in a single year. The sector also supported a total of 4.6 million jobs and generated tax revenues of $21.3 billion.
Another key finding of our research was the explosion of growth in Over The Top (OTT) services in China. The sector, which includes Subscription Video On Demand (SVOD), Advertising Video On Demand (AVOD), online rentals and download-to-own, contributed a substantial total economic contribution of $10.2 billion and supported 430,000 jobs. The OTT business furthermore grew by $6.7 billion, an increase of 191% since 2016.
None of this growth would have been possible without the Chinese film industry’s brilliant, innovative thinkers—whose success was made all the more possible with a market of this size. In the OTT space in particular, the BAT companies—Baidu, Alibaba and Tencent—consistently leverage their substantive subscription base to deeply engage audiences with quality local and international screen content.
While China continues to dominate headlines, market analysts are turning their attention to the next big thing. With a population of over 265 million, Indonesia has quietly climbed the box-office charts to become the 15th-biggest market in the world, ringing in $345 million in 2017. The country has a large, young and digitally savvy population hungry for quality screen content and talent to burn.
But it’s a market where supply does not fully satisfy demand.
Up until the last few years, only those living in the country’s major cities have been able to enjoy the cinema experience. Major exhibitors have since recognized the potential in building new screens and theatres across the archipelago, and screen growth has doubled since 2012—especially in big-city fringes and smaller cities—to reach 1,638 screens by the middle of this year.
Following a regulatory review in 2016, the film industry sector was finally taken off the negative investment list and opened up to foreign investment. With this significant barrier lifted, the industry is hoping to attract offshore interest in both exhibition and production. And there are hopeful signs that investors are beginning to recognize the market’s huge potential.
While the Cinema 21 Group still dominates exhibition, new players are increasing their investments and expanding their capacity. A leading property corporation, The Lippo Group, backed new theatre brand Cinemaxx, which currently operates over 200 screens at 45 locations, and plans to expand their footprint to 1,000 screens in regions that, until now, were entirely un-serviced by the big screen. In October, it was announced that Mexican exhibition giant Cinépolis had acquired a minority stake in Cinemaxx. Korean exhibitor CJ CGV is also planning to aggressively scale up, with over 300 screens across 47 locations.
Meanwhile, the opportunity to view movies and TV shows on smaller screens has dramatically improved over the last couple of years. Despite Indonesia’s often-erratic Internet speeds and connectivity, a number of online video services have established attractive offers for the local market. The arrival of Netflix in the country prompted regional players HOOQ, Iflix and Viu to present counter offerings, while local players such as Go Play, a division of Go-Jek, seek to cross-promote their video services with a wide range of other digital, food and pay-per-ride services.
Mirroring a strategy of producing local films for local (and hopefully regional) audiences, companies like 20th Century Fox, Ivanhoe Pictures and CJ Entertainment have also partnered with local production houses to bring their production, distribution and marketing expertise to new feature film projects. This year, Fox worked with Sheila Timothy’s (2015 MPA Asia-Pacific Copyright Educator Award winner) Lifelike Pictures to release martial-arts comedy-fantasy Wiro Sableng, while Ivanhoe Pictures—fresh off the success of Crazy Rich Asians—announced a three-picture slate with three individual local production houses. CJ Entertainment, for their part, is skilled at local productions, having produced five local modestly budgeted films to some success.
As more films of all budgets are produced, the demand for highly skilled crews and international expertise in Indonesia has increased. Working with the producers association APROFI, the creative economy agency BEKRAF, and exhibitors and distributors, the MPA has regularly co-hosted film workshops, inviting international expert speakers to meet with local stakeholders and discuss budgeting, marketing and publicity, online content production and distribution, and market research and data management topics.
The tight-knit Indonesian screen community is very much aware of the exciting opportunity at hand and is eager to make their mark on audiences. But though festival success for films such as Marlinathe Murderer in Four Acts has helped focus attention on this emerging market, challenges remain, including: limited infrastructure and training pathways, persistent regulatory barriers to a fully open market, and the lack of attractive production incentives. Despite this, optimism and confidence abound, and gross revenues are on the increase. Time will tell, but Indonesia’s debut as a top-ten film market is soon to come.
 Artisan Gateway Report. Does not include online service fees as defined by China Film Fund.