Netflix’s woes and wins in Indonesia

Indonesian regulators are not quite ready to ‘chill’ yet at Netflix’s growing presence and popularity among citizens, but things could be looking up for the US-based streaming and content giant.

When Netflix first arrived in Indonesia back in 2016, state telecommunications provider Telkom announced it would ban the streaming company on all its platforms and services, including on those of its subsidiaries. 

Chief among reasons for Indonesia’s unease with Netflix was that it failed to navigate the complex regulatory hurdles of operating legally in the country. 

As was the case with Uber, global tech companies were encouraged to open a local office, hire local employees, pay corporate taxes as well as value-added taxes (PPn) on every transaction that happens on their platform.

In fact, the country passed a law in December 2019 requiring companies that profit in its internet economy – possibly the fastest growing in SEA by 2025 – to appoint a local representative and pay applicable taxes. 

In the crosshairs of Indonesia’s Finance Minister Sri Mulyani are digital services behemoths the likes of Netflix, Google, and Facebook. 

Drawing on the success of Singapore and Australia in imposing taxes on these global tech giants, Indonesia sees it as only fair that Netflix pays a cut to the government for its millions in annual revenue despite not establishing a physical presence in the country. 

Netflix’s ongoing troubles are however, not just regulatory. 

Many of the US streaming and content giant’s production have been censored for violating the strict moral or religious mores Indonesia is known for.

For starters, films to be released in the country need to first have a censorship letter granted by the Indonesian Film Censorship Agency (LSF). The LSF reviews movies for content showcasing violence, gambling, drug abuse, pornography, or scenes that could lead to sectarian conflict, blasphemy, crime, or the degradation of human rights. 

Telkom did briefly consider the possibility of lifting its ban late last year citing potential demand from an estimated 4 million users. 

But to date, subscribers cannot access Netflix on the state-owned enterprise’s network.  

Yet, it continues to be the Muslim nation’s top 5 most popular streaming apps among smartphone users, according to App Annie.

The appointment of newly minted Education and Culture Minister Nadiem Makarim, whose track record includes founding Indonesia’s most valuable unicorn to date, could nevertheless signal the start of a cosier relationship between the country and tech startups. 

Early this year, the previous co-founder of Gojek announced a US$1 million partnership deal with the US streaming giant to develop Indonesia’s creative industry. 

Having scooped up 24 nominations at the recent Oscars, Netflix would be an ideal creative partner for content creators and film activists to elevate Indonesia’s creative ecosystem. 

Regulations and partnerships aside, other government ministries are proposing new, and changing demands on the media services and content company. 

In the past few months alone, Communications and Information Minister Johnny G Plate has called for the company to lower its subscription fees or make them free. He also previously requested that Netflix delay its release of foreign content in the country to prioritise local content. 

The corporate tax reforms, slew of regulations, strict censorship, and wavering demands on Netflix – all indicate a love-hate relationship that is unlikely to end anytime soon. 

One can only hope that widespread demand among viewers and million-dollar creative partnerships will sweeten the deal for a developing country grappling with the content company’s growing economic and cultural significance in Indonesia.

Indonesian triad crime thriller The Night Comes for Us became Netflix’s first local debut in 2018 as part of the company’s efforts to embrace the local market. Photo credit: Netflix