※ The contributions of external writers may differ from the opinions of KoBiz & KOFIC, and they do not represent the official views of KOFIC. 

The expansion of Netflix and other global Over The Top (OTT) services in 2016 marked a new era for the Indonesian film industry. However, how taxes are calculated and content screened remain issues.

The emergence of streaming services, marked by Netflix’s 2016 entry into the country—with others later following—has changed how Indonesians enjoy their movies. Notably, during the COVID-19 pandemic that began in March 2020 and resulted in social restrictions, over-the-top services provided entertainment alternatives for the public during their stay at home period.

In its 2020 study, US digital research firm The Trade Desk reported that Indonesians spent the most time accessing OTT content in Southeast Asia, with 66 million spending 3 billion hours a month through the year, and 42 percent of them watching Korean-made content.

Even with the pandemic declared ended and restrictions lifted, OTT services have remained popular, and figures released by the Tourism and Creative Economy Ministry have shown that the film sector is the quickest to rebound.

OTT platforms, local and foreign alike, played a major role in that rebound by screening local productions and cooperating with local production houses to create their own.

Filmmaker Anggy Umbara said that OTT platforms helped the Indonesian cinema to grow, citing his experiences in directing “Mukidi,” a joint production of MD Pictures and Prime Video.

“So MD contacted me to direct a few films, including Mukidi. It was never screened in theatres and was exclusively for streaming services,” Anggy told KoBiz.

Anggy believed that collaboration with OTT services is more beneficial for production houses.

“If movies that have finished their run at the cinemas are then streamed through OTT services, production houses could gain  second run revenues.”

Anggy further elaborated that OTT services could accommodate films that struggle to get screen space, especially considering that in 2024 alone, there will be close to 200 films produced, but only half could get cinema releases.

A teenager in Jakarta watches content from a global OTT platform, Saturday, Dec. 21, 2024

Censorship, Taxation Remain Major Issues

However, two major issues remain related to the global OTT services, namely tax regulation and censorship.

Head of the Indonesian Film Censor Board (LSF) from 2020 to 2024, Rommy Fibri, said that it has been difficult to screen content from global OTT services, especially for pornographic and violent elements, due to a lack of coordinating mechanisms between institutions and overlapping regulations.

While Indonesia subscribes to an open sky policy, meaning it will not screen internet content, the country has an anti-pornography law in place.

“So, on the one hand, it is easier to access content with pornography, and on the other hand, we have laws against such content,” Rommy told KoBiz.

Rommy is advocating for the Communication and Digital Affairs Ministry to establish a task force to enforce regulations on streaming services instead of leaving the task to LSF, whose jurisdiction is to regulate theater screenings as well as the content and advertising shown on television.

He added that the task force should not be focused on censorship either.

“They wouldn’t have the manpower for it, as one should ask, how many millions of films need to be censored? Therefore, we need a transfer of knowledge to service providers.”

“In enforcing compliance by OTT services, Rommy stressed that “Indonesia reserves the right to pick which content could be screened, and if they are not willing to comply, they should stay out.”

Rommy further explained that regulation on content does not clash with democratic principles, adding that democracy is also about compliance with laws in any country.

“If a content violates the anti-pornography laws, shouldn’t there be justice?”

Furthermore, the parental lock feature offered by platforms does not guarantee that viewers, especially children, wouldn’t be exposed to pornographic content, as not all Indonesians are aware of the feature.

“In fact, it is highly likely that it’s children who teach their parents about the services. So, it begs the question, has the government done enough to promote digital literacy? In various countries, minors who are middle-school students or younger are not allowed to access social media. And these are countries that are supposedly liberal and open-minded,” Rommy said.

A subscriber watches OTT content on a smartphone, Saturday, Dec. 21, 2024.

Similarly, digital economy and telecommunications analyst Heru Sutadi stated that enforcement of regulations on OTT platforms still overlaps with one another.

“We have KPI for television and LSF for cinemas, but no regulators for OTT services,” Heru told KoBiz.

Heru also suggested that the government could also impose another tax outside VAT on OTT providers.

“These providers all gain profits that are taxable,” Heru explained.

The Indonesian government recently announced it will raise taxes on luxuries to 12 percent from 11 percent starting next January. This will also affect services like Netflix, Spotify, and YouTube Premium.

With that in mind, Heru called for stakeholders to agree on a common terminology that defines luxury items or services.

“A car costs more than a streaming subscription. Can you really equate having internet access with luxury? You can’t. Internet access is part of human rights. It should be free. It’s not appropriate to tax it,” Heru underlined.

Korean Film Industry Could Serve As A Model For Indonesia

According to Rommy, the Korean film industry could serve as a model for Indonesia owing to multiple factors, including a healthy business climate.

“We could learn how their industry values actors and conduct their businesses, including having a fixed number of episodes. No party dominates the other,” Rommy explained.

Rommy added that gripping and engaging products are also indicative of the robustness of the Korean film industry.

“It’s like it’s better to hold going to the bathroom rather than missing out on the plot because the story is tightly knit.”

Furthermore, Rommy added that the Korean film industry also constantly brings the sublime side of traditional cultural values to the forefront. 

“For example, respect for one’s parents, even though they do not necessarily always adhere to such values.”

But more importantly, Rommy stressed, is that the Korean government gives its full support to the film industry.

“The industry gets everything it needs, including regulation. Here, we have two film directorates under the Cultural Ministry and the Creative Economy Ministry. This often results in a disconnect on how to tackle the issues in the industry. We should have just one authority calling the shots under one ministry,” Rommy noted.

About the writer

Ms. Ami Afriatni is a Jakarta-based journalist covering a wide variety of issues in Indonesia for over 15 years. Ms. Afriatni has served as a reporter and editor for local print and online media -Tempo and The Jakarta Globe- as well as television as a news producer.