Coming soon to Indonesia: a battle over the cinema industry

CJ CGV

19/02/2016 04:37

* Foreigners to be allowed to own 100 pct stakes in film 
industry 
    * Part of "Big Bang" liberalisation of SE Asia's biggest 
economy 
    * End of near monopoly over Hollywood movie distribution 
    * Indonesia has low number of cinema screens for population 
 
    By Eveline Danubrata and Hooyeon Kim 
    JAKARTA/SEOUL, Feb 19 (Reuters) - Indonesia's opening of its 
fiercely protected cinema industry is whetting the appetite of 
overseas firms such as South Korea's CJ CGV Co Ltd  079160.KS , 
looking to profit from an increase in the supply of foreign 
movies to a vast, underdeveloped market. 
    The movie market is one of dozens of industries Indonesia 
liberalised last week in a "Big Bang" shake-up that one minister 
called the largest opening of Southeast Asia's biggest economy 
to foreign investors in 10 years. 
    Under the new rules, foreign firms can hold 100 percent 
stakes in the film industry, including production, distribution 
and exhibition. Previously, the so-called "negative investment 
list" shut foreigners out of much of the industry. 
 urn:newsml:reuters.com:*:nL3N15Q0XZ urn:newsml:reuters.com:*:nJ9N13C00F 
    Tight regulation and censorship under autocratic former 
President Suharto left Indonesia's cinema industry stunted - but 
ripe with potential. 
    "Indonesia has long been a sleeping giant in cinema terms," 
said David Hancock, head of film and cinema at research provider 
IHS Technology. "For such a populous country, it has a low 
number of cinema screens and therefore a low number of visits." 
    The sprawling archipelago is home to 250 million people - 
many young and tech-savvy with a median age of 29. They are 
served by slightly more than 1,100 movie screens and go to the 
cinema less than once a year on average, according to IHS data. 
    South Korea, by comparison, with a population one-fifth of 
Indonesia's, has 2,400 screens and saw movie goers reaching 
almost 220 million last year, according to the Korean Film 
Council. 
    "We welcome the decision since it will become much easier 
for foreign firms to invest in Indonesia. We will continue to 
actively do our business there," said CJ CGV spokesman Cho 
Sung-jin. 
    CJ CGV, which operates Indonesia's second-largest movie 
chain CGV Blitz, plans to more than quadruple its number of 
screens in the country to 600 by 2020, Cho said. 
     
    "TOO RUSHED" 
    Young movie-goers, who complain that some blockbusters are 
slow to get a release in Indonesia, welcomed more competition. 
    "Sometimes the movies at Indonesian cinemas are not 
up-to-date enough," said student Marsya Karzinar. "If there are 
foreign cinemas that come in, and they can give good facilities, 
that would be good." 
    But, in a pointer to the problems that liberalisation faces 
in a country where foreign investors have often complained of 
economic protectionism and nationalism, some in Indonesia's 
cinema industry are fuming over the decision.     
    Johny Syafrudin, chairman of the All-Indonesia Cinema 
Owners' Association, said it was "too rushed" and would bring a 
flood of foreign movies that could erode the country's culture.  
    "They think that opening the foreign tap will bring in a 
good opportunity, but other cultures will ride behind these 
investors," he told Reuters. 
    Indonesia has a burgeoning domestic movie scene - with films 
such as martial arts action flick "The Raid 2" that played at 
the Sundance Film Festival in 2014 - and some filmmakers, at 
least, say they welcome foreign investment. 
    "We've been lobbying for the opening of the negative list," 
said Mike Wiluan, CEO of Infinite Studios. 
    "Because as a studio, we've been heavily involved in 
financing the production infrastructure from ground up...That 
requires a lot of capital and know-how." 
 
    LUCRATIVE NEAR-MONOPOLY 
    The stiffest competition foreign firms will face is likely 
to come from the Cinema 21 Group, founded by a cousin of Suharto 
and his business partners, which has enjoyed a near-monopoly of 
the lucrative movie import business for decades. 
    The group accounts for around 74 percent of the total movie 
screens in Indonesia, according to company data and industry 
estimates. It competes against two smaller rivals - CGV Blitz, 
which has about 12 percent, and Indonesian retail-to-media 
conglomerate Lippo Group's Cinemaxx. 
    Cinema 21 is ready to compete "healthily" in response to the 
liberalization, Corporate Secretary Catherine Keng told Reuters. 
But it also hopes the government will direct foreign companies 
to open cinemas in underserved areas to "avoid cannibalization", 
Keng added. 
    Cinemaxx CEO Brian Riady said it planned to triple its movie 
screens to around 250 this year.  
    "When you compare that demand with the supply of cinemas 
across the market, there is a pretty significant mismatch 
between demand and supply," he told Reuters. 
    On top of having to break the local stranglehold, foreign 
newcomers will have to jump other regulatory hurdles, such as 
restrictions on how close a foreign-owned cinema can be to a 
domestic operator. 
    The government is reviewing a rule requiring cinema 
operators to allocate 60 percent of their total screentime to 
local content, said Triawan Munaf, head of Indonesia's creative 
economy agency. 
    Tom Lembong, a former investment banker who is now President 
Joko Widodo's trade minister, told Reuters that ending the 
Hollywood movie import monopoly would lead to a huge increase in 
supply. 
    "We have a $10 billion trade surplus with the U.S.," he 
said. "One of the U.S. exports to Indonesia with the best 
prospects, in my view, is Hollywood movies and American 
entertainment content." 
 
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Graphic: Indonesia's cinema industry    http://tmsnrt.rs/211VGSZ 
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 (Reporting by Eveline Danubrata in JAKARTA and Hooyeon Kim in 
SEOUL; Additional reporting by Cindy Silviana, John Chalmers and 
Yuddy Cahya in JAKARTA; Editing by Alex Richardson) 
 ((eveline.danubrata@thomsonreuters.com; +62-21-29927603; 
Reuters Messaging: 
eveline.danubrata.thomsonreuters.com@reuters.net)) 
 
Keywords: INDONESIA MOVIES/