Making money from copyright piracy in Indonesia

Making money from copyright piracy in Indonesia

Nicholas Redfearn
The Motion Picture
Association (MPA)

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.