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How can best regulate video-on-demand industry?
Should they be allowed to offer content to consumers without restrictions? Or should they be regulated the same way as conventional broadcast media?
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Piece of the pie: A man browses Netflix on his smartphone in
Temanggung, Central Java, on Sunday. The Taxation Directorate
General is discussing a value-added tax (VAT) with several technology firms after recently levying the tax on six companies, including Amazon and Netflix. (JP/R. Berto Wedhatama)
A
udience demand for quality, online content in Indonesia continues to grow and grow, as seen in the increase in viewing hours during the COVID-19 restrictions. By the yearend, it is estimated that nearly 23 million Indonesians will be using video on demand (VOD) services, an increase of nearly 50 percent from 2016!
Despite the demand for online content, running a VOD service is not easy. The sad news of HOOQ’s demise and the recent announcement that iFlix is being sold to Tencent at a significant discount illustrate the risks and challenges for players in this entertainment sector.
VOD services need to respond to ever-changing factors, such as finding content that viewers will watch, responding to a dynamic market, evolving consumer behavior and increasing expectations regarding technology. Moreover, according to Asia Video Industry Association (AVIA), 63 percent of Indonesian consumers (https://avia.org/newly-released-survey-finds-63-of-indonesians-have-accessed-streaming-piracy-websites-or-torrent-sites/) are still accessing content through illegal means.
One issue that has been debated for some time is if and how the VOD services industry should be regulated. If the government decides to regulate the industry, should it take a light-handed approach? This has been the case in New Zealand and Japan, where streaming services are able to self-regulate their content with little state intervention. This policy approach has served consumers well and allowed VOD services to flourish.
Currently, only one regulation applies to VOD services. Effective on Aug. 1, 2020, the Finance Ministry imposed value-added tax (VAT) on trade through electronic systems (PMSE), which affects VOD services. Aside from this, no specific regulations or any regulatory body exist for VOD services.
The absence of regulatory requirements for VOD services has tempted traditional broadcasters, such as the MNC Group, to question the balance in the game. Claiming that they are at a disadvantage, broadcasters are actively seeking to level the playing field. On June 21, 2020, RCTI and INEWS TV submitted a petition for judicial review with the Constitutional Court that challenges Law No. 32/2002 on Broadcasting. They are demanding that this law also applies to YouTube and Netflix.
The petition does not have a solid legal basis. The frequency, provision and ecosystem of VOD services are very different from TV broadcasting services. VOD services offer parental control and viewers can “pull” content, unlike conventional broadcasters that “push” content to a wide viewership. Meanwhile, the Broadcasting Law is now almost 20 years old and contains several outdated provisions.
