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<h4 style="text-align: justify;">The electronic music industry in Indonesia will turn 60 years old in 2014, yet the industry is small relative to the size of Indonesia's population. How can the development of new music business models enable Indonesia to leverage the latent potential of the nation’s creative talent base, as well as participating more fully in a global industry that will be worth over USD 2 trillion in 2016?</h4>
<h5><b>Times They Are A-Changing</b></h5>
<p style="text-align: justify;">Indonesia's music industry has seen many changes in formats, fortunes and formulas since its start in 1954, when Bpk Suyoso Karono created the first record company (Irama) and set up a recording studio in his garage in order to capture the output of local artists.</p>
<p style="text-align: justify;">All the well-known characteristics of Indonesia - a growing population of young adults, a burgeoning middle class consumer base and a highly social culture - point to a vibrant and sustainable music industry for the largest economy in Southeast Asia.</p>
<p style="text-align: justify;">However, the vast majority of Indonesians do not pay for licensed audio or visual content - preferring instead to buy low cost pirated tracks, CDs and DVDs and to use free, unlicensed music download and streaming services.</p>
<p style="text-align: justify;">This has major implications for the growth prospects of the entertainment and media services sector in Indonesia, as it seeks to manage the transition of the industry from physical to digital product and services delivery.</p>

<h5 style="text-align: justify;"><b>Indonesia faces similar challenges to other markets</b></h5>
<p style="text-align: justify;">The worldwide music industry is emerging from an extremely tough decade of structural adjustment in the face of a steady decline in the primary source of revenue i.e. sales of recorded music. It is now evolving to a 360degree approach to monetising music content and associated products, services and events, using multiple channels to drive both revenue and market development funding.</p>
<p style="text-align: justify;">The stark reality in Indonesia is that 90% of all audio-visual material is pirated.  Consumers perceive unlicensed AV products to be ultra-low cost and significantly easier to acquire than legal content, and even major shopping malls such as Mangga Dua, Roxy Mas and ITC are packed with pirated video and audio materials.</p>
<p style="text-align: justify;">In addition, the growing access to the Internet via mobile devices (circa 55 million Indonesians have web connections) has made ‘free’ or ‘feels-like-free’ streaming and downloading of music the de-facto standard across all market segments.</p>
<p style="text-align: justify;">The Indonesian Record Industry Association (AIRI) Indonesian contends that record companies may suffer potential losses of up to USD 500 million per year due to illegal downloads of local music content by no less than 6 million people via the Internet.</p>
<p style="text-align: justify;">This unlicensed download behaviour has also precipitated a sharp decline in the sale of music CDs in Indonesia. From an annual sales peak of 90 million units in the mid-2000s, purchases of original music CDs totalled only 11 million copies in 2012.</p>
<p style="text-align: justify;">Although these numbers reflect the embedded interests of the industry establishment (and hence may denote a deliberately-stated ‘worst case’ scenario), there is general consensus that such piracy had seriously affected the domestic music sector in two critical dimensions:</p>

<ul style="text-align: justify;">
	<li>It has the effect of stifling the innovation and wellbeing of aspiring Indonesian artists</li>
	<li>It reduces the scope for legitimate employment opportunities in the music industry</li>
</ul>
<h5 style="text-align: justify;"><b>Yet Indonesia has consistently demonstrated that it is a unique market
</b></h5>
<p style="text-align: justify;">At around the same time that iTunes Store service was launched in the USA in 2003 as a legitimate, industry-supported alternative to online music piracy, the Indonesian music companies in conjunction with the mobile operators were planning the launch of ringback tones (RBT) in order to engage consumers in the paid purchase and use of licensed music content.</p>
<p style="text-align: justify;">Launched in 2004, RBT services (i.e. customised 30 second music clips that replaced the conventional network ringtone) achieved an aggregate penetration level of 10% of the total mobile subscriber base in Indonesia.</p>
<p style="text-align: justify;">The service generated gross recurring annual revenues in excess of USD 100 million in the period 2008 to 2010 - a profitable line of business for the operators in the face of gradually declining voice and messaging service revenues. At this time Indonesia was the fourth-largest RBT market in the world after Japan, South Korea and China.</p>
<p style="text-align: justify;">Many commentators regard the success of RBTs as a turning point for the music industry:</p>

<ul style="text-align: justify;">
	<li>The licensed content was resident on the mobile networks and hence not subject to piracy</li>
	<li>The service was affordable and convenient for subscribers - easy to find, buy and use</li>
	<li>Fulfilment costs were lower - with minimal investment in physical production or distribution</li>
</ul>
<p style="text-align: justify;">What this initiative also highlighted was the unique characteristics of Indonesia as a digital content market.</p>
<p style="text-align: justify;">Mobile users, particularly those in the younger demographic segments, saw RBTs as a natural extension of their desired ‘personal brand’ - choosing a song clip as a ringback tone in order to convey a particular emotion or sentiment was a form of self-expression that augmented their other social networking activity - Facebook posts, Twitter streams and micro-blog entries.</p>
<p style="text-align: justify;">Hence in Indonesia music is seen as a context for sharing experiences, demonstrating affinity and connecting at an emotional level with other members of a social circle. The role of the core music content becomes a peripheral factor for all but avid fans of the artist or the genre in question.</p>
<p style="text-align: justify;">And in this subtle, but profound, phenomenon lies the key to the future evolution of the music industry in Indonesia.</p>

<h5 style="text-align: justify;"><b>So what's next for music in Indonesia?</b></h5>
<p style="text-align: justify;">Music is a key driver of social media platforms across the globe. At an aggregate level, nine in 10 of the most watched videos on YouTube are music videos. Nine in 10 of the most-liked people on Facebook and seven of the top 10 most-followed people on Twitter are performance artists. Indonesia has played and will continue to play a significant role in the adoption and use of these applications.</p>
<p style="text-align: justify;">However the clincher for the music sector in Indonesia will be to leverage the industry eco-system in order to offer immersive, music-enabled peer group experiences that go beyond the provision of basic content to individuals.</p>
<p style="text-align: justify;">The following elements are part of this vision:</p>

<ul style="text-align: justify;">
	<li>The mass market communications power of broadcast media - Pay TV, FTA TV and local radio stations</li>
	<li>The deeply-embedded, intimately-connected mobile subscriber base</li>
	<li>The potential of both well-established and newly-emerging social media applications</li>
	<li>The appeal of high profile music events - concerts, festivals, personal appearances - undertaken by local and international artists</li>
	<li>The potential value of adjacent music-related product and service portfolios</li>
	<li>The imperative of consumer brands to extend their market presence and reach</li>
</ul>
<p style="text-align: justify;">The manner in which all of these components are integrated will determine how the domestic industry evolves in the digital age, in order that it may assume a position of influence and inspiration in the wider economy of Indonesia.</p>
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