Making money from copyright piracy in Indonesia

Nicholas Redfearn, The Motion Picture Association (MPA), Jakarta

In Asian countries like Indonesia the problem of copyright piracy is often regarded as something which only affects foreign copyright holders. Clearly it does affect them. The US motion picture industry loses hundreds of millions of dollars a year in Asia and billions worldwide. With 90%-95% piracy levels, most new movies are pirated by local VCD factories, or by imported DVDs, sometimes before they even hit the big screen. By the time they are released on home video in Indonesia, pirate copies have flooded the market. But in a country with such extreme levels of piracy like Indonesia, its not just Hollywood that is losing money.

Copyright piracy is not just the developed countries' problem. Every year millions of pirated Indian and Chinese movies are sold in Indonesia; yet filmmakers in Bombay and Hong Kong receive nothing. They unfortunately do not have an industry organization like the Motion Picture Association of America to lobby for protection of their rights. They are just overlooked. Eventually the Indian and Chinese governments are going to realize how much their companies are losing and take steps against government's like Indonesia's.

Pirates of course do not restrict themselves to one type of illegal product. They make pirated movies, pirated music, pirated software pirated games and also pornography. The latter is where much of the big money is. That is why piracy is so inter- connected with Asia's criminal gangs. Taiwanese and Malaysian Chinese finance much of the Indonesian pornography and piracy industry, carefully hiding themselves, so they cannot be captured, behind Indonesian frontmen. But make no mistake - Indonesia is a thriving manufacturer of pornography. The streets of Glodok are full of the most extreme pornography, to the shame of the nation, yet nothing is done about it. It is just a matter of time before exports into other countries of Indonesia's pornography are uncovered.

The Indonesian film industry has many difficulties including funding and lack of facilities. But one of its major problems is piracy. Films such as Sherina and Pasar Berbisik are pirated in huge numbers. The pirates don't care about or contribute to the local film industry - they just want the fast buck. That is one of the reasons the film industry finds it hard to make a return on an Indonesian movie.

In revenue terms, the business of importing and selling films, is one of the biggest losers. Because the film industry is closed to foreign investment in Indonesia, the biggest losers to piracy are not the movie companies themselves. Sure, royalties are paid on western movies to the copyright owner, but these are often only 30%-40% of the retail price. The remainder of the losses are losses suffered by Indonesian businesses. For they are the movie theaters (such as the 21 Group), the home video licensees, their distributors and their retailers (such as Disctarra).

At the moment DVD piracy is taking off in Indonesia. But DVDs are predominantly made in Malaysia not Indonesia. Most of the DVDs on the market in Indonesia are pirated Malaysian imports. Its Indonesia's neighbor which is making the money, not even Indonesian pirates, out of DVD piracy. The disks are mostly smuggled or imported through illicit dealings with Indonesia's customs, evading excise duty and censorship.

The Indonesian government is also one of the big losers from piracy. It loses the following:

1. Censorship fees, when pirates release movies illegally.

2. Video products are subject to 10% sales tax, which the pirates do not pay.

3. Pirates operating underground factories will rarely pay corporate or business tax either.

4. Legitimate DVDs are subject to 10% duty. Since most pirated DVDs are smuggled these illegal imports are contributing to the estimated US$600 million in 2001 which Indonesia lost in unpaid excise duties.

These are all taxes which the legitimate Indonesian VCD business would pay if it could sell more legitimate products. Pirates are able to keep their prices down because they do not pay these taxes or the royalties to the artists, studios and owners.

Indonesia's social systems lose out too. Pirates import technicians from overseas, rather than train Indonesians, unlike legitimate factories. They pay bribes to police and authorities in order to cover their tracks, which perpetuates Indonesia's corruption, collusion and nepotism (KKN) problems.

So next time you buy a pirate VCD, remember how much money is being stolen from Indonesia by the pirates. And the government should consider supporting its own people by taking a stand against copyright piracy - through strong enforcement, deterrent penalties such as proper jail sentences, and introducing regulations to control optical disk production, as many of Indonesia's neighbors now have.