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Regulating imports of digital products sans protectionism
The majority of Indonesians, 73 percent, subscribing to online VOD streaming platforms primarily watch Korean dramas, followed by movies from the United States, with 69 percent of subscribers viewing them and then Indonesian movies, with 67 percent across all Indonesian subscribers watching them.
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Going down: Asmara Abigail’s character (center) is surrounded by other jobseekers for an unknown job in “Joko Anwar’s Nightmares and Daydreams”. (Courtesy of Netflix) (Netflix/-)
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recent editorial of The Jakarta Post argues that trade barriers will not shield us from global competition. This holds true, including for intangible products, which have become more prevalent in the digital era.
However, the dilemma does not force us to choose between laissez-faire and populist interventions. There is always a win-win solution that minimizes the economic cost.
Regulations on digital products are typically complicated due to the intangible nature of the products, the flow of which is often challenging to monitor and, in most cases, are transacted on a per-user rather than per-unit basis. Unsurprisingly, compared to tangible products, policy interventions on digital products have been limited and fragmented across countries. Moreover, discussions around the issue have been minimal despite the ubiquitous presence of the products.
Take the rising online streaming industry, also known as Video Entertainment on Demand (VOD), for example, which has transformed the audiovisual industry, offering viewers abundant content choices while posing economic and cultural challenges. Overconsumption of foreign over domestic content through foreign platforms means an outflow of economic rents from a country, while at the same time, persistent exposure to foreign content may risk the nation losing its cultural identity.
The condition is aggravated by the fact that the global online streaming market is dominated by three United States over-the-top (OTT) platforms: Netflix, Amazon and Disney+. These giant platforms also produce their own content, and if unregulated, they could prioritize their own over local content, intensifying the existing pressure on domestic content production.
As a response, policymakers worldwide, such as European Union member states, Australia, Canada, Mexico and South Africa have implemented protective measures to fight against the dominance of foreign content in their countries. Among the most adopted measures is a content quota, which refers to a requirement that providers of on-demand audiovisual media services under their jurisdiction secure a minimum certain share of domestic works in their catalogs.
Another popular measure is investment obligation, which corresponds to requirements for providers of on-demand audiovisual media services under a jurisdiction to contribute financially to the production of domestic works, which can happen through direct investments in content, such as the acquisition of rights or (co)productions or contributions to national funds.
