EPISODE 8
TRANSCRIPT

Episode Eight

Streaming Media

in the Spotlight:

Edy Sulistyo of GoPlay

IndoTekno Podcast, 21 July 2020

(past transcripts)

 

ALAN  0:11  
Welcome to our eighth episode of Indo Tekno. I'm Alan Hellawell, founder of startup advisory firm Gizmo Advisors, and Venture Partner at Alpha JWC Ventures. For our Indonesian listeners: pendengar Indonesia dapat membaca transkrip Bahasa Indonesia kami. This week our discussion shifts into Indonesia's online media landscape. We're very pleased to have Edy Sulistyo, Chief Executive Officer of GoPlay, which is Indonesia's premium video subscription on demand platform. Great to have you today, Edy. Edy, can you give us a sense of your background and your path to becoming CEO of GoPlay?

EDY SULISTYO  0:50  
I actually never dreamed of becoming the CEO of a company. I have always been an entrepreneur all of my life. I started my journey when I was in high school. And all I wanted was to build a product that can be useful for many people. My first entrepreneurial journey in the event-and-entertainment industry started back in 2009. I founded a company called eEvent. And then after that, that company got acquired by a company in 2013. And then I went back to Indonesia and founded a company called LOKET. That company ended up being acquired by Gojek in 2017. And since then, I've been leading the entertainment division in Gojek. And around 2018, we had this idea to make an impact in the film industry in Indonesia. Gojek, meanwhile, had a vision to remove daily frictions. And this is one of the industries, and one of the verticals, that probably is not really looked into. And we believe that, because the number of screens in Indonesia is very, very little (we only had about 2100 screens in Indonesia by the end of 2019), a lot of the Indonesian content has never gotten the premier stage that it deserves. So by doing the digital distribution platform, we thought that we could increase the quality, we can increase the distribution channels of Indonesian content, and we decided to build GoPlay. And that's basically where we are right now.

ALAN  2:30  
Now, many of us know the basics of the market. Indonesia has a population of more than 270 million. It has an average age of 30 years old. And thus I assume much of the population are digital natives. And they're much more accustomed to online media. And we have a fast rising mobile phone penetration. Now Edy, can you outline in greater detail the more fascinating parts of this group which you envision becoming GoPlay customers?

EDY SULISTYO  2:57  
Yes. So to begin with, we realize that the willingness for people to pay for content in Indonesia is quite low, which is quite understandable, because if you look at the industry in China, or maybe the industry outside Indonesia, the willingness for people to pay in the early days is always similar. So nobody really wants to pay for content. And this is what we've been seeing in Indonesia. So, we think that if we want to really make an impact, I think we should really make the algo, the platform, so that we can distribute the premier and the premium Indonesian content. By doing that, we are actually targeting mostly the A and B in the "middle-up" market to begin with. We believe that if we can do this, then we can collectively increase the quality of Indonesian film and at the end of the day, it will help us to become the distribution platform so that we can reach more audience and we can multiply the industry in a greater way.

ALAN  3:51  
Now Edy, "Media Partners Asia" in recent research profiled a clear surge and video streaming in the first few months of year, which was basically the outset of the COVID 19 pandemic. Viewing-time-per-user grew roughly 150%. A McKinsey and Company report moreover revealed that roughly half of Indonesian respondents expect to spend even more time watching online movies and shows. Can you share with us any interesting facts and figures about consumption patterns in the COVID era in Indonesia?

EDY SULISTYO  4:24  
Actually the pandemic has resulted in many consumers engaging in more online entertainment, especially staying at home. For GoPlay, we have seen an increase in subscriptions during this time. We've seen a significant increase actually during this time. As a result, consumers spend a lot of time streaming high quality local film and series content, indicated by a roughly 10-fold increase in the total time spent by  GoPlay users. Meanwhile, in an effort to remain productive at home, people also participated in various online events. We actually see about a 32 times increase in the number of online events available on the GoTix platform, which is very exciting.

ALAN  5:05  
Even now, in July of 2020, it does seem as though quality local content in Indonesia is still limited to a small percentage of feature films. If I'm not mistaken, roughly 35% of films in Indonesia are locally produced in terms of ticket sales, versus, for instance, nearly 65% in China. Edy, what are your expectations of growth around locally produced content in Indonesia?

EDY SULISTYO  5:32  
I actually see quite a bright future for this because in 2015, that number was roughly about 20%. And then, in 2016, it started to increase to about roughly 25%, 30%, all the way to 2019. Based on the ticket sold, the ratio of Indonesian content is roughly 40-something percent. We just good news for all of us. Obviously, all of us want to have Indonesian content to perform better than foreign content, which indicates that people start to believe in the local content. And Indonesia is actually very rich in culture and tradition. So this brings a lot of influence to the movie and the local content in Indonesia. And we have a lot of potential. And we know for sure, based on the numbers, that the movie and the content creator in Indonesia are very talented, and they can produce high quality content. And in fact, amongst all of our fellow markets in the region, Indonesia is actually considered one of the countries with the most potential for growth according to discussions at the 2018 CineAsia. And we also see that the local creative industry has improved tremendously over the years. And this is very, very exciting with cinemas now closed and shut down temporarily. But if not, if there were no pandemic we were actually expecting that this year, the ticket sales of the local Indonesian content would exceed more than 50%. 

ALAN  6:55  
Understood. Well, that's the key phrase: "if the pandemic were not here." Because my next question does relate to the offline entertainment infrastructure. If we look at online media as an alternative to that incumbent offline network, such as the movie theaters you've mentioned, it does indeed look as though Indonesia is primed to see a leapfrog toward online media consumption. The US has an estimated 12.4 theatres per 100,000 in population, which is more than 20 times the penetration of Indonesia at only 0.6 theatres per 100,000 population. What might such a disparity mean for online media consumption in Indonesia going forward?

EDY SULISTYO  7:35  
Obviously, it will create such a unique opportunity. And at the same time, there is a lack of number of screens impacting the distribution of our local Indonesian content. Local Indonesian content has to compete with their foreign counterparts. We need to have additional channels, so this is why we are creating GoPlay to begin with, because we feel like we know that GoPlay, or the digital channel, will never replace the offline experience. But at the same time having the online distribution platform like GoPlay, it will help to distribute the content in such a bigger way. And especially now that we are part of the Gojek ecosystem, we have access to probably more than half of the Indonesian population. And hopefully, by doing this, we can be that platform to distribute the local content. And at the same time, from the movie creator point of view, or the content creator point of view, they will have a way to showcase their talent. And most importantly, now that we have this access to a huge number of people, then we are in the best position to help multiply the industry and also shape the future generation of Indonesia through the positive content.

ALAN  8:46  
Now Edy, one of the fundamental questions that providers of content, whether offline or online, must ask is: Will the Indonesian patron pay for the service? Americans like myself are world-renowned for paying for entertainment and media. PwC, for example, expects per capita spend in the US to be nearly $2,300 in 2021, which is more than 10 times China at $220 per capita. Indonesia is forecast to spend $84 per capita in 2021. That's less than 4% of US levels. Isn't it hard to capture a slice of an already small media spend wallet? And what gives us confidence that that pie is going to grow quickly for GoPlay?

EDY SULISTYO  9:31  
Well, in order to answer that, we have to dissect, and try to understand, why that number is so low. Based on our research, we realized that there's two things happening here. One: in general, the willingness of people to pay for content is still low. But another issue is because credit card penetration in Indonesia is also very, very low. This is why we at GoPlay are in a very unique position to do this, because we can solve the payment issue because we have GoPay, which is one of the largest digital wallets in Indonesia. That allows us to charge a subscription fee, and we can do this recurringly. And this will allow us to actually identify those people who have spending power, which allows us, again, to uniquely position ourselves to capitalize on it, and grow the business in a most efficient way. But in terms of the content, the willingness to pay for the content, based on the research that we have also done, and we also see in China, it actually took China about seven years from the first OTT (over-the-top content) launch back in the early 2010s. 2018 is actually the first year when China saw the revenue from subscriptions exceeding the revenue from the AVOD for the very first time in the OTT history of China. 

ALAN  10:47  
AVOD meaning advertising-video-on-demand, is that right? 

EDY SULISTYO  10:51  
Correct. Correct. The fact that revenue from subscriptions exceeds the revenue from advertising basically shows the the willingness for people to pay for content increases over time. And one of the key primary factors is that there's a lot of influx of content; there's a lot of good quality content. And people started to believe in the local content more. And the awareness and the knowledge actually helped to contribute to people paying for the content. On Gojek, to help accelerate that process, we are doing a lot of bundled pricing. So, we're more like the Amazon Prime strategy, if you're familiar with that, where we bundle a subscription together with other Gojek product, which again, allows us a very unique situation as well. We can make GoPlay as a platform very accessible and affordable for many people. So they can start getting the subscription by buying, let's say, a GoFood and GoPlay subscription, and then they can get GoPlay access for free. And by doing that, not only can they get the GoFood vouchers or benefit, they can also enjoy a GoPlay subscription for free for 30 days. And by doing that, they can watch the content and then they start to realize that, "Oh, now Indonesian content is much better than before." And the willingness to pay starts to develop. And hopefully, we can accelerate that process.

ALAN  12:12  
Interesting. So there's a very basic principle, which is, the willingness to pay can be driven by the ability to pay and the ability to pay has been not a frictionless experience. It sounds as though another component of your strategy is encouraging basic behaviors. And if we can do bundling, or various other strategies, we can make media consumption more accessible to the user. That's how you really start these basic behaviors that you talked about growing over a 10 year period in China, is that right? Continuing along this line of discussion, I remember seeing a survey of Indonesians explaining why they don't pay for OTT, or "over-the-top" subscriptions. The most common response at 34% was "these services are too expensive, and I don't see value." Now, how do we address this perception?

EDY SULISTYO  13:08  
This has been an ongoing challenge. We've seen that the quality of Indonesian content has improved dramatically in the past few years. But we need to let people know that the quality has increased so that they're willing to watch. So this pandemic actually brings a lot of "blessing in disguise" kind-of opportunity. Maybe because they are running out of good content to watch on different OTT. And many of them decided to give it a try. In March, we were running a campaign and we opened our access. We gave a free trial, we let people try our services, and they started watching some of our content. And we've seen a lot of positive feedback. We've seen a lot of encouraging feedback from people who actually never watched Indonesian content before. And after they watch it, they started to say that "Wow, apparently Indonesian content is much, much better than before." Because most people think that Indonesian content from what they know is always a soap opera kind of quality, like what we seen on the on the free-to-air TV. And after they see the premium content, not only did they start to fall in love with it, but they started to become proud of Indonesian content. And they decided to tell their friends. And we've seen that people started to see the value of the subscription. This is actually exciting because, after the pandemic is over, we've seen the light at the end of the tunnel that the market for Indonesian local quality content will grow significantly because the market has expanded.

ALAN  14:40  
Edy, a very basic question. Are Indonesia's mobile networks robust enough to stream high quality content?

EDY SULISTYO  14:48  
Well, we strongly believe that internet penetration and digital infrastructure will obviously continuously accelerate in Indonesia. If you look at the year-on-year data, even the decade-on-decade data, Indonesian internet and infrastructure has improved tremendously. The Indonesian government is obviously also improving the digital infrastructure by building, what they call the "internet highway" or something like that. They are recently completing the last leg of fiber optic network that will bring the high speed internet to even the poorest regions in Indonesia, including Papua. So, we see the number of the internet users in 2019 also increase about 10% compared to the previous years, and this will definitely continue growing.

ALAN  15:34  
Now Edy, Google disclosed some interesting 2019 numbers around YouTube recently. For instance, the YouTube TV streaming bundle at the end of last year had more than 2 million subscribers, and YouTube Music and YouTube Premium had more than 20 million paid subscribers. YouTube's subscription revenue now has a $3 billion annual run rate and YouTube ad sales last year, meanwhile, totaled $15.1 billion. How do we think of revenue mix in Indonesia online media; between advertising revenues, subscriptions and other sources longer term.

EDY SULISTYO  16:08  
I think it has to be mixed. I think for us in GoPlay, we are primarily a subscription-video-on-demand (SVOD) platform. So most of our revenues come from our subscription model. And, if we go deeper into that, we actually derive most of our subscription from the bundle. We bundl through a Gojek product in the Gojek platform. On top of that, of course, we also have our advertising revenue on our platform. And we also recently introduced our pay-per-view platform as well, so that we can help the content creators that right now are having some difficulties in generating cash flow due to the shutdown of the cinemas. So we're helping them to generate additional or alternative revenue by having the pay-per-view features on our platform. And on the content side, we are actually doing a revenue sharing model with the content creator and the production houses. Because we believe that if we do this revenue sharing, and we can do this in the right way, we can actually increase the revenue. And we actually remove the cap versus if we buy the content directly outright. So it will not incentivize the content creator to actually produce high quality content. But then if we're doing revenue sharing, in a way we are incentivizing them to produce high quality content because they want to get practically unlimited revenue from the content and the IP that they produce. So, a combination of that will allow us to generate a quite a unique business model that right now is applicable in Indonesia.

ALAN  17:42  
Got you, so we're talking about a diversity of revenue streams. 

EDY SULISTYO  17:46  
Correct. 

ALAN  17:47  
With regard to local content, Edy, which locally developed movie or series has been most successful on GoPlay? And what can you share with us about the pipeline?

EDY SULISTYO  17:57  
Before the pandemic, we've seen many of our users consume our content from the mobile device during travel, during commute time. So usually, if they do that during the commute, the kind of content that works really, really well is usually the short form bite-sized content, maybe about 10 to 15 minutes long. And it varies: comedy, drama and stuff. And after the pandemic happened, we've seen a shifting in behavior. And we've seen that more and more people started to consume content, our content, from home, when obviously because they need to stay at home. But we've seen that behavior shifted, and the kind of content that they watch has also shifted. They like to enjoy a little bit longer content, like maybe about 30-to-45 minutes, an hour long. And they enjoy drama or TV series, the thriller genre. So I think, depending on the behavior of these people, I think they have a certain content that they like. So we do have a few of our originals that have been performing exceptionally well. Such as Gossip Girl Indonesia, which we licensed directly from Warner, and then we create the Indonesian version of it. And we give a lot of Indonesian touches. We introduce a lot of Indonesian culture through the content. For example, in the original series, they're celebrating Thanksgiving. Obviously, we don't have Thanksgiving in Indonesia. So we changed it to the first day of Ramadan, for example. So, we are giving this a little bit of a unique touch; an Indonesian kind of content, or cultural touch. It actually helps us to customize and build the unique content for an Indonesian audience. We also have "Saiyo Sakato". We also have "Tunnel", which we adapted from the Korean TV series. And we also have "Bukan Keluarga Biasa", which is more like a Kardashian kind of reality show. And we have a few more in the pipeline that are very, very exciting, including Gossip Girl season Two. 

ALAN  19:53  
Fascinating. There's an interesting mix of importing the basic idea from other markets, then customizing significantly to the uniqueness of the Indonesian market. Now, you've mentioned several times the relationship with Gojek. Can you quantify some of the advantages of our relationship with Gojek? Can you give us any sense of total potential subscribers, current downloads? 

EDY SULISTYO  20:17  
Gojek right now in Indonesia has been downloaded more than 150 million times. And obviously, one user potentially also has access to a few people in that household. With GoPlay, it is a bit unique because with GoPlay, you don't have to use the same access that you have in Gojek. You can also share it with your siblings or your parents or maybe anyone in your household. So we've seen that this relationship with Gojek is very, very helpful for GoPlay, not only from the number of users point of view, but also from the bundling. Because from this bundling, as I mentioned earlier in our discussion, with this bundling we can actually target specifically a certain user. Let's say we want to target the GoSend user. We've seen that the logistic services in Gojek have increased also, quite interestingly, during the pandemic, because I think people are staying at home more. There's a lot of homemade cooking. And a lot of people are actually using more and more logistics services. And we capitalized on that by bundling that with GoSend. So, while transport and GoRide and GoCar got impacted a little bit, we see certain bundles have also increased significantly. On top of that, one of the advantages of the relationship with Gojek is the access of the data. Gojek collected tons of data from the user. And this helps us to create a unique kind of content. We can create a unique experience for each of the users. We can customize the experience so that, when they open GoPlay, we know what they like, we know their preferences, and we can customize it based on the data that we have. So there's a lot of advantages actually.

ALAN  21:58  
So there is very much a Big Data facet to the collaboration which I had not thought about. 

EDY SULISTYO  22:03  
Yes. 

ALAN  22:03
Any more qualitative, longer term strategic synergies with Gojek that we haven't discussed? What gives us advantage relative to the past streaming portals that may have partnered with telco players or media giants, etc.? 

EDY SULISTYO  22:19
Obviously, the most important thing is the payment because, as I mentioned, the credit card penetration in Indonesia is very, very low. So being part of the Gojek ecosystem will help us tremendously, especially in the payment ecosystem. We have GoPay access. We can target a certain demographic of user who have GoPay. Doing this product bundle, we can tap a unique segment of the user who may be only using one product, but not using the other product. And on top of that, I think the telcos and the other media companies could also be beneficial, and eventually we might want to partner with them as well. And we are very open to partnering with everyone, including the telcos and other media companies.

ALAN  22:58  
Now Edy, I want to address the perennial debate as to whether online media can be profitable or not. Let's start with a more challenging reality. I would guess that YouTube was unprofitable for at least the first 10 years of its existence since being founded in 2005. And frankly, it's not clear whether it consistently makes a profit even to this day. Closer to home, we've seen the demise of at least two streaming media platforms in Southeast Asia. What might have gone wrong here that we can avoid? 

EDY SULISTYO  23:30  
I think focusing on local Indonesian content is the key. I think this is something that we have a very unique advantage of being a homegrown product. We understand what the locals want to see. We understand how to tell a good story. We know who is the local player that basically can produce a certain type of genre. And I think that a new combination of that will definitely help us. And we're very bullish about the future of the local and Southeast Asian online entertainment company. If you look at the GoPlay focus area, the overall OTT, we understand that OTT is not, and will never be, a "winner-takes-all" market. As you can see from Netflix, for example, we know about 70% of Netflix subscribers also subscribe to the other OTT's. The same thing in China: we've seen that multiple OTT's in China also have a lot of overlap with the other OTT's in China. So this is why we believe that in Indonesia, or in general, OTT will never be the "winner-takes-all" market. And by focusing on local Indonesian quality content right now, we've seen that the mapping and the competitive landscape in Indonesia is well established. We are the only one that is focusing on the local premium Indonesian content. And then, of course, we also have a little bit of Southeast Asian content on our platform. Choosing this unique market segment allows us to focus, and hopefully we can avoid the same mistakes that the other OTT's have made in the past.

ALAN  24:59  
You've mentioned several times now, Edy, that content costs are a big part of the business model. Netflix this year alone is likely to spend roughly $17 billion on content. In China, both Yoku and iQiyi have run losses every single year since their founding in the early 2000s, almost exclusively due to the ever rising content costs. How do we intend to successfully manage this part of the P&L?

EDY SULISTYO  25:24  
We're doing it a little bit different here in Indonesia. When we acquire content, we acquire the content using a revenue-sharing basis. So we want to be seen as a digital platform that can help content creators to grow beyond just content creation. We want them to be able to get additional revenue not only from their content, but also from their IP. So, as I mentioned in the previous question, as we are providing this revenue share, we are actually allowing them to get more revenue based on the minutes watched on our platform. This is more like a Spotify model. We learned from Spotify. If we can incentivize these content creators the right way, allowing them to make more money by generating more minutes watched on our platform, it will incentivize them to keep focusing on building more premium quality content that people will want to watch, rather than content that they make for the sake of making content. By doing this, we're hoping that we can work with all these content creators. And we can help them by generating more revenue and, at the same time, they can help us to provide more content for our audience.

ALAN  26:33  
Now on the much more positive side of this spectrum that I've laid out, we again have Netflix which has seen profit every single year since 2005. Edy, what aspects of that business model would match with ours?

EDY SULISTYO  26:46  
Well, I think Netflix is also predominantly SVOD, or subscription-video-on-demand. Although we are also SVOD, we have to diversify the revenue stream because the willingness for people to pay for content in Indonesia is not yet there. By providing a combination of different streams of revenues, it will allow us to not only be sustainable, but also help the industry. And hopefully we can find a way to continue to be the platform that these content creators can use to showcase their talents.

ALAN  27:20  
Edy, do we see opportunities and other markets such as Vietnam, Thailand or Singapore?

EDY SULISTYO  27:26  
I think there's always potential to go there. But I think for now, based on the data, we only have about 51 million tickets sold in the cinemas last year. And that 51 million consists of about 30 million unique audience members that actually buy tickets. That means that, out of 270 million people, about 240 million people in Indonesia never buy Indonesian content or movie tickets, which means that the market potential in Indonesia is still huge, and it's still untapped. So we want to make sure that we stay true to our vision on how to multiply the Indonesian film industry, and at the same time, we can be that platform to help the content creators to showcase their talent. And hopefully we can also use this to shape the future generations of Indonesians through positive content.

ALAN  28:11  
Edy, this has been an absolutely fascinating tutorial on online content in Indonesia, and we wish you the very best in meeting all those milestones that you've laid out. Well, this concludes our eighth installment of Indo Tekno. Again, thanks so much for joining us today, Edy. 

EDY SULISTYO  28:28  
Thank you. 

ALAN  28:28  
This podcast was translated from English to Bahasa Indonesia by Alpha JWC Ventures. Terima kasih untuk mendengarkan. Sampai jumpa lagi!

Transcribed by https://otter.ai
 

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