Joseph Hwang
* The statistics cited in this article are from the "2023 Music Industry White Paper" published by the Korea Creative Content Agency, part of the Ministry of Culture, Sports and Tourism of the Republic of Korea.
1. Indonesian Music Industry
The Indonesian music industry has experienced a notable expansion in recent years, as evidenced by the findings of the International Federation of the Phonographic Industry's (IFPI) "Global Music Report 2023." This report indicates that the Indonesian music market reached a valuation of $195 million in 2022, representing a substantial growth of 71.1% compared to the previous year. The expansion of the music market can be attributed to two key factors: the resumption of musical performances following the disruption caused by the global pandemic, and the increased penetration of the internet, which has positively impacted the growth of the music market. One of the distinctive features of the Indonesian music market is the predominant consumption of music through on-demand music services, as opposed to paid subscription-based music streaming services.
In 2022, there were 210 million internet users in Indonesia, representing a 57.9% increase from 2018. This has facilitated increased consumption of on-demand music services within the Indonesian music industry. It is reasonable to posit that the number of internet users in Indonesia will continue to expand. It is projected that by 2027, the Indonesian music market will reach a valuation of $297 million. The Indonesian market is significant to the K-pop industry, as it has the largest population in Southeast Asia (4th largest globally). Furthermore, there is considerable growth potential.
In 2022, the Indonesian digital music market is projected to generate approximately $83 million in revenue, representing a 16.9% year-on-year increase. The proportion of the Indonesian population, that is subscribed to paid music streaming services is less than one percent. Consequently, the Indonesian digital music market is still in its infancy. This indicates that music streaming is still largely free. Because of this free-oriented consumption, digital music platforms rely on advertising to generate revenue rather than paying for music. It is notable that advertising accounts for over half of their revenues. In light of this, it is reasonable to posit that streaming ad revenue will grow more rapidly than digital music paid subscription revenue.
2. Indonesian Popular Music Preferences and K-pop
In 2022, the top 50 music charts in Indonesia were dominated by artists from other global regions, including those from the K-pop genre. K-pop artists vied for chart positions with international artists such as Justin Bieber, Ariana Grande, and Bruno Mars.
BTS's "Fake Love" occupies the second position, BLACKPINK's "Shut Down" was situated at the thirteenth, and NCT Dream's "Beatbox" was located at the sixteenth. All three experienced a surge in popularity in Indonesia. The ascendance of K-pop artists in Indonesia is predominantly attributable to the advancement and expanded influence of social media, which has facilitated greater accessibility to the K-pop culture. Furthermore, the quality of K-pop artists' music, stage performances, and the artists' appearance attractiveness are significant factors in their popularity.
Global music labels are present in Indonesia. In addition to these international entities, Sony Music Indonesia, Universal Music Indonesia, and numerous local record labels are active participants in the Indonesian music market. Notable local record labels include Musica Studios, Aquarius Musikindo, Trinity Optima Production, and AFE Record.
3. The Significance of K-Pop's Entry into Indonesia
The Internet and social media have been instrumental in the popularity and recognition of K-pop globally. The paradox is that while digital networking technologies have been instrumental in the success of K-pop, the sale of physical products such as CDs and vinyl has also become an important source of revenue to maintain fandom.
The retro phenomenon has emerged as a prominent trend within the Indonesian music market. This is perhaps unsurprising, given that paid streaming accounts for less than one percent of the population. Additionally, it is a social phenomenon that encompasses a prevalent global demographic: the MZ generation's affinity for retro culture. This is reflected in the growing interest in vinyl among the MZ generation, which has resulted in the resumption of vinyl production in Indonesia after a 50-year hiatus. Sony Music established Megah Music, a label dedicated to the Indonesian national music genre known as "Dangdut," intending to supply vinyl albums and digitize and re-releasing Dangdut, which was popular from the 1990s to the early 2000s.
It is widely believed that the low penetration of credit cards is responsible for this phenomenon. For online music platforms to expand, they must establish a payment system. However, this initial step is often hindered by a lack of infrastructure. In this context, the growth of mobile subscriptions and online paid services has encountered significant challenges in the Indonesian music market.
K-pop artists possess a distinct advantage over their counterparts from other countries, as they can effectively mitigate the impact of cultural and economic disparities. It is feasible to develop bespoke products to cater to the market for physical album sales, as well as business plans that link live performance music products. Additionally, Indonesian fans have demonstrated a favorable response to K-pop artists, suggesting that these artists may possess a competitive advantage over their international counterparts in the Indonesian market.
The development of the Indonesian music industry is hindered by the prevalence of copyright infringement and the absence of a robust copyright management system. Nevertheless, the Indonesian government, spearheaded by the Ministry of Tourism and Creative Economy (Kemenparekraf, Kementerian Pariwisata dan Ekonomi Kreatif), has been striving to revamp the system. In 2019, the government enacted the "Creative Economy and Industries Act," which significantly enhanced the efficiency of the royalty collection system. The music industry has been designated as a sector of the creative economy and is the recipient of policy-level support. Furthermore, a system has been initiated whereby financial institutions were permitted to extend loans using intellectual property rights, such as copyrights, as collateral. Moreover, President Joko Widodo has announced a project; Supporting was aimed at music concerts and license registration, thereby providing a boost to the Indonesian music industry. Consequently, the Indonesian National Copyright Council amassed approximately Rp25 billion in copyright royalties during the latter half of 2022.
Indonesia has a large population and a potentially lucrative market that is likely to experience rapid growth. It would be prudent for K-pop to devise a well-considered strategy for the Indonesian market and to prioritize the development of a market presence that aligns with local preferences. It would be unwise for K-pop to overlook the world's fourth most populous country.
* References and quotations:
https://welcon.kocca.kr/ko/info/trend/1953646
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