Fauzan Zidni is a film producer from Indonesia who was behind a number of successful flicks, like the romantic dramas Republik Twitter and What They Don’t Talk About When They Talk About Love. As a movie enthusiast, Zidni is elated to see many foreign video-on-demand (VOD) streaming platforms operating in Indonesia. “For film producers, VOD services offer a valuable pathway to the global market through licensing and by producing original content. The pandemic has closed movie theatres for months, causing several production houses to release their films directly to OTT platforms,” Zidni told KrASIA.
The movie producer subscribes to several platforms, including Netflix, Disney+, Amazon Prime, and HBO Max. He does this because each platform, he said, has different strengths in its content. “Indonesia is a fragmented market, and we, as consumers, benefit from the increasing number of OTT platforms, because we have many options to watch our favorite movies or series.”
In line with what Zidni’s outlook, the over-the-top (OTT) market in Indonesia has been steadily developing over the past four years, following the upsurge in smartphone penetration and affordable internet access. The pandemic is also boosting usage, as total weekly streaming minutes for video on mobile reportedly grew 60% across Indonesia, Malaysia, the Philippines, and Singapore in the first trimester.
Even so, streaming platforms are after many more eyeballs. User penetration of subscription video on demand (SVoD) platforms in Indonesia will reach 4.7% in 2020 and nearly double to 9% by 2025, while revenue is projected to hit USD 140 million in 2020, growing at a compound annual growth rate of 23.4% to USD 400 million by 2025, according to Statista.
The leading local streaming platform Vidio was founded in 2014, operating under a subsidiary of Indonesian media conglomerate Emtek. Offering both free-to-air programs and subscription content, Vidio’s team claimed to have 5 million app downloads in April 2020, and its users visited the platform 60 million times a month.
Indonesians spend an average of about eight hours on their phone every day, according to a report by global social media marketing firm We Are Social and HootSuite. The report also said that 99% of the country’s internet users watch online videos every month.
Despite the high interest in online video, paid content is still seen by many to be a luxury. With its many videos that are watchable for free, YouTube is Indonesia’s second most visited website after Google, with average monthly traffic of 651.3 million. Moreover, illegal streaming websites are rampant in the country, so acquiring millions of paid subscribers requires OTT platforms to change deep-seated habits. Vidio has an advantage as it offers free programs in addition to the paid ones, hence the many downloads.
Nevertheless, Indonesia is still a hot market for online streaming, attracting the attention of large American entertainment providers. Netflix (NASDAQ: NFLX) entered the country in January 2016, followed by Amazon Prime Video later that year. Apple TV+ opened to Indonesian subscribers in 2019, while HBO Go and Disney+ Hotstar followed suit by launching their streaming services this year in February and September, respectively.
Other companies are making plays too. In June, Tencent (HKSE: 0700) acquired Malaysia-based streaming service iflix, which had a presence in Indonesia. The plan was to merge the platform with its own WeTV, which was built for audiences outside of China. For now, Tencent is plugging WeTV Indonesia content onto iflix.
With hopes of capturing young, urban, and increasingly affluent Indonesian internet users, these platforms are finetuning their offerings based on consumer preferences as they seek to dethrone Vidio’s leading position. First, 93% of Indonesia’s 170 million internet users access the web via their smartphones, according to the Indonesian Internet Service Providers Association. Secondly, there is a low willingness to pay for content and a high rate of piracy. Consequently, there is a preference for freemium services over monthly subscriptions.
Netflix and Disney+ Hotstar
Among many American OTT platforms, Netflix and Disney+ Hotstar seem to have the best offerings for Indonesian viewers. Nonetheless, despite a first-mover advantage, having entered Indonesia as early as January 2016, Netflix faced regulatory and localization challenges, preventing it from securing a dominant position in the market.
The company has however achieved significant growth after releasing a more affordable mobile plan for Indonesian users starting at IDR 49,000 per month (USD 3.30) in December 2019, marking more than a 50% discount on Netflix’s basic plan in the country that costs IDR 109,000 per month, according to a Media Partners Asia report.
Netflix is the first choice for most white-collar workers for its diverse, international content library, especially with its Hollywood hits and classic, all-time favorite American series such as Friends and Grey’s Anatomy. The platform also produces a generous amount of original programming, including critically acclaimed series like Black Mirror and Mindhunter, as well as globally relevant documentaries like The Social Dilemma, all of which are part of popular cultural conversations that many Indonesians contribute to.
In order to reach more local viewers, the firm has improved its mobile app user experience by providing Indonesian subtitles since 2018 and offering more local films and original productions as part of Netflix Original Indonesia, an initiative welcomed by regulators. And in January, Netflix Indonesia teamed up with the Ministry of Education to support the local film industry.
Netflix disclosed that it has over 1 million users in each of several Southeast Asian nations, without providing further details. But in the past weeks, Netflix has faced new competition from Disney, as streaming service Disney+ Hotstar went online in Indonesia in September.
Disney+ Hotstar immediately recognized the low willingness of Indonesians consumers to pay and debuted its service at an even cheaper price of IDR 39,000 (USD 2.60) per month, with an annual subscription option that takes the monthly cost down to under IDR 17,000 (USD 1.15).
The company also arrived better positioned than Netflix regarding local content as Disney+ Hotstar’s library includes over 300 Indonesian films, also providing features such as Indonesian language dubbing for some content, making it easier for viewers, especially children, to enjoy those shows.
Disney has also partnered with Telkomsel as a means to reach the telecom provider’s 160 million registered users as of the second quarter of 2020. With this partnership, Telkomsel’s users can subscribe to Disney+ Hotstar starting at IDR 20,000 per month. Disney’s entry into Indonesia has been relatively smoother than Netflix, which had a bumpy beginning as it was blocked by Telkomsel’s parent company Telkom Group for almost five years before Telkom lifted the ban in July 2020.
As the largest economy in Southeast Asia—and a huge customer base—Indonesia is certainly an important market for American streaming giants like Netflix and Disney+ Hotstar despite its relatively low monetization potential. According to a report conducted by an investment bank Jefferies, Netflix’s overall growth in the future will be driven mainly by international markets. A growing subscriber base can help the company improve its revenues and margins.
Tencent’s WeTV and iQiyi
Chinese entertainment platforms have positioned themselves differently from their American counterparts in Indonesia. Similar to a strategy already adopted in China, Tencent and iQiyi offer a freemium model covering a selection of free-to-stream content accompanied by advertisements with the option of buying premium plans for access to the complete library. Tencent’s overseas version of Tencent Video, WeTV, for instance, offers VIP access without advertisements at just IDR 15,000 per month in Indonesia.
WeTV offers local content, as well as movies and TV series from China, Korea, and Japan, all in almost equal portions, giving it distinct Asian roots that still carry diversity. Similarly, iQiyi also has a variety of Asian content. All non-local content is equipped with Indonesian subtitles on both platforms. Some Chinese shows on iQiyi even use Indonesian voiceovers to make them easier to follow.
iQiyi is still in its soft launch phase in Southeast Asia, but it has already achieved steady growth in Indonesia, according to a report from Media Partners Asia. The platform is currently offering discounted price at IDR 3,000 per month, while its premium account costs IDR 62,416 (for a yearly subscription)
While the likes of Netflix and Disney are hoping that their content libraries can entice enough users to fork over subscription fees, their Chinese competitors in Indonesia are looking to acquire users quickly via their freemium model, hoping to then convert their large user bases to paying users over time. With Indonesia’s rapidly expanding middle class, which includes one in five Indonesians, or 52 million people, the potential of the Indonesian market makes it unmissable for ambitious entertainment platforms.
However, for the time being, monetization remains an uphill battle. According to a survey conducted by Integral Ad Science, there is a great interest in free streaming content in Indonesia, with 84% of consumers willing to see ads in exchange for a video.
A gray market, where hackers trade streaming service accounts, remains popular in Indonesia and poses a threat to the success of paid content strategies. These accounts are even traded on popular e-commerce sites like Shopee, bearing similarities to how Chinese content accounts are traded on platforms like Alibaba’s Taobao—curtailing the profits of any company that draws subscription fees.
Whether platforms using a freemium model can cultivate a paying habit among their users remains to be seen, as average annual revenue per user in Indonesia’s SVoD market is set to reach just USD 10.77 in 2020, compared to USD 176.75 in the US and USD 31.94 in China.
Content is king
Pricing models and localization features impact consumers’ experience. But when it comes to streaming services, it’s the content that convinces users to pay.
According to App Annie, local platform Vidio is currently leading the OTT space as it is ranked second in the Indonesian Play Store’s entertainment category on October 21, after Google Play Games, while Tencent’s WeTV ranked fifth, followed by Hong Kong’s Viu. iQiyi is ranked ninth, followed by iflix. Meanwhile, American platforms Netflix and Disney+ Hotstar are ranked 12th and 23rd, respectively.
The top three platforms on the chart, Vidio, WeTV, and Viu have one thing in common—they offer more local and Asian content than other platforms. Evidently, the average Indonesian user has a strong penchant for Korean, Thai, and Chinese dramas over American films or TV shows.
In particular, Vidio stands out by offering a sports broadcasting service, which attracts more traffic during football seasons, according to people familiar with the matter. And its subscription setup includes a weekly option, making its paying users feel less boxed in.
With Indonesian users’ willingness to pay for content set to increase in the future, foreign firms will continue to explore and invest in a rapidly developing sector in Southeast Asia’s most populous economy.