The economic contribution of the film and television industries in

The economic contribution of the film and television industries in

The economic contribution of the film and television industries in Indonesia Oxford Economics – formerly Oxford Economic Forecasting – was founded i...

1MB Sizes 0 Downloads 2 Views

Recommend Documents

The economic contribution of the film and television industries in China
Chart 1.1: Direct GDP in the Chinese film and television industries, 2014 ..... around 23,600 cinema screens in China in

Economic Contribution of the Japanese Film and Television Industry
domestic industrial organizations. We would like to thank the organizations below ... 1.2 RESULTS FOR ECONOMIC CONTRIBUT

Economic Contribution of the Indian Motion Picture and Television
DTH. Direct To Home. OTT. Over The Top. EBITDA. Earnings Before Interest, Tax, ... The Indian motion picture and televis

Study on the Economic Contribution of Copyright Industries in Turkey
List of Abbreviations. 8. Special Thanks. 8. Executive Summary. 9. 1. INTRODUCTION. 13. 1.1 Current Situation. 13. 1.2 O

The Economic Contribution of Copyright-Based Industries in Lithuania
Aug 28, 2013 - Lithuanian Department of Statistics. LTL. Litas (Lithuanian currency). NACE. Classification of Economic A

The Economic Contribution of Copyright-Based Industries in South Africa
Jan 4, 2012 - Figure 24: Trade Balance: South Africa Printing, Publishing and Recorded ... judged by its contribution to

The Monster in the Television: The Media's Contribution to the
Kimberlianne Podlas, The Monster in the Television: The Media's Contribution to the Consumer Litigation Boogeyman, 34 Go

economic contribution of copyright-based industries in finland - WIPO
tribute to their surrounding economy during the process in which they are created, reproduced, distributed and used. Hen

the economic contribution of america's farmers and the importance of
Sep 8, 2013 - United States, and population growth in the decades ahead will be concentrated in ... agriculture, includi

'The Economic Contribution of the Forestry Sector in Scotland'
indicators included in the SFS Implementation. Plan. These are: • Forestry's contribution to Scottish Gross Value. Add

The economic contribution of the film and television industries in Indonesia

Oxford Economics – formerly Oxford Economic Forecasting – was founded in 1981 to provide independent forecasting and analysis tailored to the needs of economists and planners in government and business. Oxford Economics commands a high degree of professional and technical expertise, and has a staff of over 70 professional economists. Offices are located in Oxford itself, London, Belfast, New York and Philadelphia. The company also specialises in economic contribution assessments. This is a major focus of the organisation and involves the analysis of the economic and social contribution of particular sectors, investment projects or tax proposals. The company has undertaken a very large number of previous studies in this area covering topics such as defence, transport, media, tourism, manufacturing and energy. Oxford Economics is also one of the world’s leading providers of economic analysis, advice and models, with over 300 clients including: n International organisations, such as the World Bank, OPEC and the

Asian Development Bank. n Government departments in many countries, including HM Treasury in the

UK; the US Department of Treasury and US Office of Transnational Issues; Ministries of Finance in, for example, Saudi Arabia, Slovakia, Bulgaria, Azerbaijan, Turkey and Egypt; the Economic Development Board in Libya; and tourism boards in the EU, US, Abu Dhabi, Dubai and the Caribbean. n Central banks around the world, ranging from the UK and Spain to Chile,

Hong Kong, Korea and Thailand. n A large number of multinational blue-chip companies across the

whole industrial spectrum, including, for example, IBM, Intel, BP, Shell, Unilever, HSBC, Banco Santander, Swiss Re, DaimlerChrysler and Boeing.

Contents 1 Key findings

2

2 How we arrived at these figures

6



2.1 Direct economic contributions

6



2.2 Additional economic contributions

6

3 Film industry

7



3.1 Film production and distribution

7



3.2 Film exhibition

8



3.3 Home entertainment

8



3.4 Trends over time

9

4 Television industry

10



4.1 Television industry

10



4.2 Trends over time

11

5 Conclusion

12

6 Detailed methodology

13



6.1 Quantifying the direct contribution

13



6.2 Modelling the total economic contribution

14



6.3 Adjustments for leakage and double counting

15



6.4 Estimating GDP, earnings and employment

16



6.5 Modelling tax revenues

17



6.6 GDP measure

17

The economic contribution of the film and television industries in Indonesia

Key findings

1  Key findings Chart 1.2: Direct employment of the Indonesian film and TV industry, 2010 (persons employed and percentage split)

The film and television sectors make a notable direct contribution to the Indonesian economy… n Oxford Economics estimates – based on official and other data – show that

Film production & distribution: 22,225; 12%

the film and television industries directly contributed an estimated 7,675 billion Rupiah to the Indonesian economy in gross domestic product (GDP)1 in 2010. In the process they directly supported 191,800 jobs and generated some 785 billion Rupiah in tax revenues.

Film exhibition: 379; 5% Mass video manufacture: 19; 0%

Chart 1.1: Direct GDP of the Indonesian film and TV industry, 2010 (billions of Rupiah and percentage split)

Video retail: 15; 0% Video rental: 95; 1%

Film production & distribution: 1,922; 25%

Television services: 162,454; 84% Total: 191,779 jobs Film exhibition: 379; 5% n The film and television industries’ direct contribution to GDP in 2010 was

Mass video manufacture: 19; 0%

equivalent to some 0.12% of total national income. Comparing this contribution with some other sectors officially classified as part of the ‘creative industries’ cluster, the industry’s GDP is broadly on a par with the estimated combined GDP of ‘computer software & services’ and ‘R&D’ and is roughly double the estimated combined value of ‘market & art goods’, ‘interactive games’ and ‘performing arts’. This contribution was, however, somewhat smaller than those of, for example, design and music.

Video retail: 15; 0% Video rental: 95; 1% Television services: 5,246; 69% Total: 7,675 billion rupiah

n Meanwhile, film and television’s direct share of economy employment was

1 Throughout this report measures of GDP reflect GDP at ‘basic prices’ (also known as gross value added or GVA), rather than the ‘market price’ measure usually given ‘headline’ status in official statistics. (See ‘Detailed methodology’ at the end of this report.)

OXFORD ECONOMICS

0.18% while it generated 0.11% of total tax revenues.

2

The economic contribution of the film and television industries in Indonesia

Key findings Table 1.1: Comparison of industry GDP (billions of Rupiah)

n In addition, spending by individuals employed either in these sectors or in the

2010 GDP (estimated) billions of Rupiah

% of total GDP

Design

24,664

0.39

Music

20,205

0.32

Film and television industries

7,675

0.12

Computer software and R&D

7,491

0.12

Market and art goods, interactive games, performing arts

3,587

0.06

Industry

associated supply chains is estimated to have generated a further 8,195 billion Rupiah of GDP through the so-called ‘induced’ route. That would have been sufficient to support another 141,200 jobs and to have yielded an additional 932 billion Rupiah in tax receipts. n Taking the direct, indirect and induced contributions together2, we estimate that

the film and television industry’s total economic contribution to GDP in 2010 was 27,074 billion Rupiah of GDP (0.43% of economy-wide GDP). In addition, it supported 491,800 jobs overall (0.45% of national employment). And it generated total tax revenues of 2,818 billion Rupiah (0.39% of total revenues). Figure 1.1: Total contribution to Indonesian GDP, tax and employment, 2010 Contribution

1 For sectors other than film and television, the values are based on 2008 data, produced as part of the Commerce Department’s “Industri Kreatif” project, grossed up in proportion to the estimated increase in film and TV GDP and adjusted from market prices to basic prices (see section 6.6).

Induced

… and lend more significant support to that economy through multiplier effects, making the total contribution larger

Indirect

n The film and TV industries also produce ‘indirect’ and ‘induced’ effects across

Tax Revenue (Total = 2,818 billion Rupiah)

the entire Indonesian economy. As a result of purchases by the film and television sectors from other industries within the country, and of further transactions throughout various supply chains, we estimate that these sectors made an additional ‘indirect’ GDP contribution of 11,204 billion Rupiah in 2010, thereby supporting a further 158,900 jobs and generating an extra 1,101 billion Rupiah of tax revenues.

Direct 932

1,101

785

7,675 11,204 8,195

191,800

GDP Contribution (Total = 27,074 billion Rupiah)

158,900 141,200

“Taking into account ‘multiplier’ effects, in 2010 the Indonesian film and television industries generated some 27,074 billion Rupiah of GDP for their home country…

Employment (Total = 491,800)

“…which was sufficient to support 491,800 jobs and provide 2,818 billion Rupiah in taxes.” 2 Some of the totals may not appear to sum exactly due to the impact of rounding. (Jobs

are rounded to the nearest 100 and money values to the nearest 1 billion Rupiah.)

3

OXFORD ECONOMICS

The economic contribution of the film and television industries in Indonesia

How we arrived at these figures

Industry productivity has faced recent challenges…

n In 2010, the industry made a modest recovery with growth of 3.0% in real GDP

and 6.4% in employment. (Whole economy GDP grew by 6.4% and employment by 3.2%).

n Each person employed in the film and television sector in 2010 generated, on

average, 40.0 million Rupiah of GDP – below the economy-wide average of 58.0 million and a little short of the average for non-financial services as a whole of 43.3 million.

Chart 1.3: Film and TV – real GDP and employment 2006-10 Index, 2006 = 100

n However, that partly reflects the fact that sector employment continued to

140

grow in 2009 and 2010, despite a contraction in GDP. In 2008, productivity had been clearly above the non-financial services average. The apparent fall-off in productivity may simply be a temporary issue and it should be noted that in some countries there is a tendency for employment to only respond to changes in GDP with a considerable lag.

Real GDP 120

130.1

Employment

122.3 116.2

100

113.6

107.2 106.7

110.5

107.3

100.0 100.0

80

…but the sector is expanding again having suffered in the downturn

60

n The direct contribution to GDP increased by 16.2% in real terms between 2006

and 2008, with employment growing by 13.6%. By comparison, whole economy GDP grew by 14.5%, and employment by 7.4%, over that period.

40

n Estimates based on unofficial data suggest that the direct contribution to GDP

20

subsequently fell by 7.7% in real terms in 2009, although employment still grew by 7.7%. By contrast, the economy as a whole escaped recession with real GDP growing by 2.6% and employment by 2.3%.

0

2006

2007

2008

2009

2010

Table 1.2: Comparison of industry GDP (billions of Rupiah) Metric

Gross Output (bns Rupiah)

GDP (bns Rupiah)

Employment (’000s jobs)

Earnings (bns Rupiah)

Tax (bns Rupiah)

Type of impact

Direct

Total

Direct

Total

Direct

Total

Direct

Total

Direct

Total

Film Production & Distribution

7,992

19,022

1,922

7,135

22.2

102.8

1,294

3,047

197

743

Film Exhibition

2,785

6,629

379

2,195

5.2

33.3

47

658

39

229

Mass Video Manufacture

140

333

19

110

0.2

1.6

3

33

2

12

Video Retail

108

256

15

85

0.4

1.5

5

29

1

9

Video Rental

696

1,657

95

549

1.3

8.3

12

164

10

57

Television Services

18,024

42,898

5,246

17,001

162.5

344.3

1,944

5,898

537

1,769

Total

29,745

70,795

7,675

27,074

191.8

491.8

3,305

9,829

785

2,818

OXFORD ECONOMICS

4

The economic contribution of the film and television industries in Indonesia

How we arrived at these figures

There is room for improvement in export earnings … n Export earnings are estimated by both official and unofficial sources to be

negligible (one consequence of which is that we do not include a separate chapter analysing this aspect of the sector’s performance in this report). n Looking ahead, however, improved international competitiveness and export

promotion are identified as key strategic aims for the film industry in the government-backed ‘Industri Kreatif’ study.

… and in film-induced tourism n Also, there is little data and information concerned with film-induced tourism

(either international or domestic), suggesting that this too is likely to be of little significance at the present time – though this does not of course rule out the possibility of growth in this area in future. (As a consequence, no separate chapter could be included in this report on this topic.)

5

OXFORD ECONOMICS

The economic contribution of the film and television industries in Indonesia

How we arrived at these figures

2  How we arrived at these figures These estimates therefore cover:

Oxford Economics was commissioned by the Motion Picture Association (MPA) to assess the economic contribution of the film and television industries in Indonesia.

n Indirect contributions, which relate to the output and jobs supported in

Indonesian-based supply chains, due to purchases by Indonesian film and TV companies of goods and services from other firms located in the country, purchases by those suppliers in turn, and so on throughout the chains.

The starting point for our estimates was provided by data from the Departemen Perdagangan (Commerce Department), from its ‘Industri Kreatif Indonesia’ project. But as the latest figures for the sub-sector level required are for 2008, we also used data from the private company PT Dataindo Inti Swakarska (DIS) in order to estimate developments through to 2010. DIS findings were also used to refine and broaden our estimates for 2006-08. (Details are set out in the final chapter of this report.)

n Induced contributions, i.e. the Indonesian output and jobs supported by workers

in the film and TV industries – and other employees throughout the supply chains – spending the earnings ultimately derived from film and TV activities.

2.1  Direct economic contributions

Figure 2.1: The channels of economic impact

The GDP, employment and tax contribution due to the activities of businesses in the film and television industries themselves are referred to as the direct contributions. GDP and employment data are derived from Industri Kreatif figures for the ‘television and radio’ and ‘film, video and photography’ sub-sectors, with adjustments made to exclude radio and photography and to go from the market price to the basic price GDP measure. DIS data is then used to arrive at estimates for gross output and to assess the contribution of sub-sectors within the wider ‘film’ (including video) industry. Our tax estimates rely on combining estimated industry income with knowledge of the country’s tax system and tax-to-GDP ratios found for broader sectors of the Indonesian economy.

Induced Impact

Output and employment due to the activities of firms in the film and television industries.

Output and employment due to the spending of wage income derived directly or indirectly from activity in the film and TV industries. Sectors benefiting could include other recreational services as well asretailing, food manufacturing, agricultural and clothes manufacturing.

Indirect Impact Output and employment due to purchases by film and TV businesses from other firms – e.g. providers of market research, electronic machinery, electric power – and purchases by these firms in turn.

2.2  Additional economic contributions To assess the total economic contribution of these sectors we also take into account further channels of impact. The effect of two key channels can be quantified by combining our estimates of direct contributions with indirect output ‘multipliers’ published in an Industri Kreatif report, and an induced output ‘multiplier’ implied by national accounts data. GDP-to-output, jobs-to-GDP and tax-to-GDP ratios for broader sectors of the Indonesian economy are then used to arrive at our final numbers.

OXFORD ECONOMICS

Direct Impact

6

Wage income of workers in the film and TV sectors and in supplier industries

The economic contribution of the film and television industries in Indonesia

Film industry

3  Film industry 3.1  Film production and distribution

In this chapter we assess the economic contribution of the film sector and its subsectors. After a brief descriptive overview of the industry, we look at the measured contribution to GDP, taxes and employment of each of its sub-sectors, the most important of which are film production and film exhibition.

By ‘film production’ we mean the physical process of producing a film, i.e. the filming of scenes at a studio and the editing and revision of the final content. Key supplier sectors include fashion and make-up, hi-tech equipment manufacturing and the utilities sector. The ‘distribution’ activities also included here relate to the launching and sustaining of films in the market place, but exclude the mass manufacture, retail and rental of videos which we have examined separately. Key supplier sectors in the case of film distribution include business services (particularly advertising and PR) and transport services.

According to the government-backed Industri Kreatif project3, film and video industry ‘strengths’ include the number of producers, directors and animated film workers, an improvement, in recent years, in the ability of domestic films to compete with imported films, helped by the Indonesian language and culture, and adequate processing and copying technologies.

We estimate that in 2010 film production and distribution was worth some 1,922 billion Rupiah in GDP, directly supporting 22,200 jobs and generating 197 billion Rupiah in tax revenue. Taking into account indirect and induced effects these figures rise to 7,135 billion Rupiah in GDP, supporting 102,800 jobs and raising 743 billion Rupiah in tax receipts. (Unfortunately data are not available to allow us to estimate the contributions of ‘production’ and ‘distribution’ separately.)

However, that report cited more industry weaknesses and threats, including the low number of screenwriters, low appreciation of film on the part of the public, the competitiveness of weaker producers and operators, the high cost of cinema operation, and the concentration of cinemas in the Greater Jakarta area amongst many other things.

“An improved ability of domestic films to compete with imports – helped by the Indonesian language and culture – is cited as an industry ‘strength’ in a government-backed report.”

The film production and distribution sector therefore accounts for 25% of the overall direct GDP of the combined film and television sector, and for 12% of employment. Its productivity is therefore above the average for the overall sector.

To address these issues and enable the sector to contribute to the hoped-for stepup in the economic role of Indonesia’s creative industries more generally, a policy strategy has been set out aiming to: increase the attractiveness of the industry to workers, investors, producers and distributors; strengthen the industrial structure and improve the technologies used; and step up the industry’s rate of innovation with a view to raising the presence of Indonesian films in overseas markets. The associated policy plan includes an aim for Indonesia to host a World Film Festival amongst many other things. 3 Departemen Perdagangan (Commerce Department), ‘Rencana Pengembangan – 14 Subsektor Kreatif 2009-15’, 2008, page 221.

7

OXFORD ECONOMICS

The economic contribution of the film and television industries in Indonesia

Film industry

Chart 3.1: Economic contribution of film production & distribution, 2010

Chart 3.2: Economic contribution of film exhibition, 2010

Rupiah bns

Rupiah bns

’000s jobs

8,000

120

6,000 5,000

2,250

Direct

7,000 2,202

Induced

37.9

100.0

1,750

80

42.7

1,000

40

0

1,922

GDP (LHS)

250

22.2

Tax (LHS)

Employment (RHS)

13.2

25 20 15

1,049

14.9

10

500

20

250 296 197

Induced

750

2,000 1,000

30

Indirect

767

1,250

3,010

3,000

Direct

1,500

60

4,000

35

2,000

100

Indirect

’000s jobs

0

0

379

87 103 39

GDP (LHS)

5 5.2

Tax (LHS)

Employment (RHS)

0

3.2  Film exhibition

3.3  Home entertainment

By ‘film exhibition’ we mean the process of screening films to the public, at indoor and outdoor cinemas and through public video exhibition. Aside from film production supplier sectors include food and beverage wholesalers, maintenance services and utilities – most notably suppliers of electric power.

For the purposes of this report ‘home entertainment’ comprises mass manufacture of videos, video retail and video rental. As Chart 3.3 suggests, even the combined contribution of these sectors is modest compared with public film exhibition via cinemas and other outlets, with video rental contributing more than video retail.

We estimate that the direct GDP of film exhibition was 379 billion Rupiah in 2010, supporting some 5,200 jobs. Moreover, this activity helped to generate 39 billion Rupiah in tax revenue. Taking into account indirect and induced effects these figures rise to 2,195 billion Rupiah in GDP, supporting 33,300 jobs and raising 229 billion Rupiah in tax receipts.

We estimate that the video manufacturing, video rental and video retail sectors combined directly contributed 128 billion Rupiah to Indonesian GDP in 2010, supporting some 1,900 jobs and generating 13 billion Rupiah in tax revenues. (Separate estimates for each of the sub-sectors are included in Table 1.2 in Chapter 1.) These sectors therefore accounted for 1.7% of the total direct GDP of the combined film and television industry in Indonesia, and for broadly 1.0% of employment.

The exhibition sector therefore accounts for 5% of the overall direct GDP of the combined film and television sector, and for 3% of employment. Its productivity is therefore above the average for the overall sector.

OXFORD ECONOMICS

8

The economic contribution of the film and television industries in Indonesia

Film industry

3.4  Trends over time

Taking into account indirect and induced impacts, these sectors’ total contribution to GDP was 744 billion Rupiah, supporting 11,400 jobs and generating 78 billion Rupiah in tax revenues. Their share of the wider film and TV industry’s total contribution to Indonesian GDP and employment is, therefore, clearly higher than their share of the direct contribution, at 2.7% and 2.3% respectively, on the basis of our methodology as set out in Chapter 6. This reflects the fact that their procurement from other sectors is comparatively high relative to their GDP. And as explained in Chapter 6, if the total contribution of these sub-sectors were calculated in isolation (rather than as part of the wider ‘film and television sector’), then the measured total contributions would be higher still due to the potential impact of their activities on ‘film production’ output.

In terms of recent trends we estimate that real direct GDP in the film production and distribution sector increased by 27.1% between 2006 and 2008, before falling by 7.5% in 2009 and increasing by 5.7% in 2010. Employment rose by 14.2% between 2006 and 2008, fell by 2.6% in 2009 and increased by 5.4% in 2010. For the film exhibition sector meanwhile we estimate that real direct GDP fell by 8.1% between 2006 and 2008, and by a further 7.9% in 2009, before increasing by 4.2% in 2010. Employment nevertheless grew by 13.7% between 2006 and 2008, and by a further 8.6% in 2009 and 4.0% in 2010. For the film sector as a whole, this meant that GDP increased by 17.5% between 2006 and 2008, fell by 7.6% in 2009 and rose by 5.4% in 2010. Employment increased by 13.3% over the two years to 2008, fell by 0.3% in 2009 and rose by 6.5% in 2010.

Chart 3.3: Economic contribution of home entertainment Rupiah bns

’000s jobs

800

12

700 600

Induced

Index, 2006 = 100

10

Indirect

260

140

4.5

Real GDP

8

500

120 100

356

5.0

0

117.5 107.7 106.6

113.3

108.6

113.0

114.5

118.6

100.0 100.0

4 80

200 100

Employment

6

400 300

Chart 3.4: Film industry real GDP and employment (2006-10)

Direct

128

GDP (LHS)

2

30 35 13

60

1.9

Tax (LHS)

Employment (RHS)

0

40 20

“The GDP of the film production and distribution sector increased by 27% in inflation-adjusted terms between 2006 and 2008, but suffered in the subsequent economic downturn.”

0

9

2006

2007

2008

2009

2010

OXFORD ECONOMICS

The economic contribution of the film and television industries in Indonesia

Television industry

4  Television industry more local operations. Specific policy actions identified include the setting up of education and training institutions and continuing with preparations for the transition to digital technology.

In this chapter we examine the Indonesian television industry, which is significantly larger than the film industry in terms of GDP and employment. After a brief introductory overview we set out the key metrics for the sector as a whole, though data do not permit any detailed breakdowns of the TV industry.

4.1  Television industry

The number of private TV stations in Indonesia has increased significantly over the past decade or so, while the government has continued to own and run one broadcaster (TVRI). Traditional free-to-air broadcasting remains dominant, with advertising revenues playing a vital role, but pay-TV is becoming more important, as are new technologies such as transmission over the internet.

We estimate that the direct GDP of the television sector was worth 5,246 billion Rupiah in 2010, directly supporting 162,500 jobs and generating 537 billion Rupiah in tax revenue. Taking into account indirect and induced effects these figures rise to 17,001 billion Rupiah in GDP, sufficient to account for 344,300 jobs and yield 1,769 billion Rupiah in tax receipts.

As well as film production key supplier industries include manufacture of electric and electronic equipment, maintenance of equipment and advertising and market research services.

The television sector therefore accounts for 68% of the direct GDP of the combined ‘film and television’ industry, and for 85% of direct employment. Its productivity is, therefore, lower than that of the film industry. At 32.3 million Rupiah per employee in 2010, that is now below the average for the non-financial services sector as a whole, of 43.3 million, having been broadly on a par with that broader sector’s performance as recently as 2008.

The government-backed Industri Kreatif Indonesia project4 suggests that the television industry has a number of ‘strengths’, including the flow of graduate entrants into the sector, the growing number of stations, diversity of content provided, geographical reach and standards of professionalism. Compared with the film sector, the authors’ assessment points to a better balance between ‘strengths’ and ‘weaknesses’, but several weaknesses are nevertheless identified. These include management and other specific skills, the concentration of activity and talent in Jakarta, the fact that – due to the available technology – postproduction work is largely undertaken abroad, the existence of several regulatory and licensing issues, and the difficulties that local operations have in attracting finance.

“The television sector’s strengths, as identified in an official report, include the growing number of stations and the diversity of content provided.”

To address these issues the Commerce Department has set out a policy strategy, with the key aims of: strengthening regulatory structures; strengthening skills and infrastructure; and further broadening the range of activities undertaken to include 4 Departemen Perdagangan (Commerce Department), ‘Rencana Pengembangan – 14 Subsektor Kreatif 2009-15’, 2008, page 424.

OXFORD ECONOMICS

10

The economic contribution of the film and television industries in Indonesia

Television industry

4.2  Trends over time

Chart 4.1: Economic contribution of television activities, 2010 Rupiah bns

’000s jobs

18,000

350 Direct

16,000 14,000

Indirect

4,966

85.5

Induced 96.3

10,000

162.5

4,000

0

GDP (LHS)

Index, 2006 = 100

200 150

6,000

2,000

Chart 4.2: Television industry real GDP and employment (2006-10) 140

6,789

5,246

300 250

12,000

8,000

In terms of recent trends, real direct GDP is estimated to have increased by 15.6% between 2006 and 2008, before falling (on the basis of unofficial estimates) by 7.7% in 2009 and increasing by 2.0% in 2010. Employment rose by 13.7% between 2006 and 2008, and by a further 9.3% in 2009 and 6.6% in 2010.

556 667 537

Tax (LHS)

Employment (RHS)

Real GDP 120

100

132.4

Employment

124.2 115.6 113.7

50

100

0

80

106.9 106.7

108.8

106.7

100.0 100.0

60 40

“The GDP of the television sector increased by 16% in real terms between 2006 and 2008, and is recovering from the setback of 2009.”

20 0

11

2006

2007

2008

2009

2010

OXFORD ECONOMICS

The economic contribution of the film and television industries in Indonesia

Conclusion

5 Conclusion Looking ahead, it is likely that the film and TV industries will continue to grow, along with broad-based growth in the Indonesian economy. Based on preliminary DIS projections we estimate that the direct value of the film and TV industries could have reached 8,265 billion rupiah in 2011. However these projections are based on preliminary data and do not appear to have allowed for the impact of the film import tax dispute which affected the distribution of films in Indonesia, particularly in multiplexes. This dispute has now been resolved, so it is likely that growth will be back on track in 2012 and beyond.

This report has provided a detailed overview of the film and television sectors in Indonesia, systematically quantifying the economic impact of various sub-sectors of the industry. These estimates indicate that film and television make a material contribution to economic activity in Indonesia, directly contributing 7,675 billion Rupiah of GDP, in turn supporting 191,800 jobs and generating 785 billion Rupiah of tax revenues. The sector therefore accounts for 0.12% of total Indonesian GDP, 0.18% of total jobs across the economy and 0.11% of the country’s total tax take.

For the medium-term, there are sound reasons to believe that the industry will grow at least in line with GDP, and quite possibly more quickly. At present, Indonesia has little more than 600 modern screens, to service a total population of some 240 million. The country is, therefore, highly ‘under screened’, meaning that there is plenty of potential for growth in that area. There is also clear scope to push up the volume of film exports – which is a key government aim for the sector – given their negligible value in recent years.

Allowing for “multiplier” effects and taking the direct, indirect and induced contributions together, we can say that the industry’s total economic contribution in 2010 was 27,074 billion Rupiah of GDP. Associated with this activity, the sector’s total contribution to employment was some 491,800 jobs and its total contribution to tax revenues was 2,818 billion Rupiah. On this basis the sector contributed 0.43% of total GDP in the country, 0.45% of all jobs and 0.39% of overall tax revenues. The industry’s direct contribution to GDP grew by 7.2% in 2007 and a further 8.4% in 2008, before falling 7.7% in 2009. This output subsequently recovered by 3.0% in 2010. Direct employment in the industry grew in each of those four years, by 6.7%, 6.5%, 7.7% and 6.4% respectively. As a result the industry’s total contribution to GDP rose by 6.9% in 2007 and 6.5% in 2008, before falling by 5.7% in 2009 and recovering by 3.1% in 2010. Associated with this, the sector’s total contribution to employment rose by 5.5% in 2007 and 3.0% in 2008, edged down by 0.5% in 2009 and increased by 2.8% in 2010.

OXFORD ECONOMICS

12

The economic contribution of the film and television industries in Indonesia

Detailed methodology

6  Detailed methodology n We then adjusted from the ‘market price’ GDP measure of net output to the

6.1  Quantifying the direct contribution

‘basic price’ GDP (or ‘GVA’) measure – to reflect the values received by producers rather than those paid by purchasers – by netting off taxes on products and adding back subsidies. The GDP data available for the Indonesian economy and its sub-sectors are at market prices, so Oxford Economics estimated an adjustment factor based on those figures together with tax and subsidy data found in the official public finance statistics7.

The starting point for our quantification of the direct contribution is the detailed subsector GDP and employment statistics published by the Departemen Perdagangan (Commerce Department) as part of its Industri Kreatif project5. The latest of these official figures available, at the detailed sub-sector level required, relate to 2008, so our first step was to establish the position in that year. To get to the GDP and employment measures required we made the following adjustments to the Industri Kreatif data:

This allowed us to produce separate estimates for GDP and employment in the ‘television’ and ‘film’ categories for the years 2006-08.

n GDP and employment for the television sector were arrived at by reducing the

We then undertook the following further steps with regard to GDP and employment for those years:

Industri Kreatif data for ‘television and radio’, in the light of detailed company employment figures found in reports on the industry by private company PT Dataindo Inti Swakarska (DIS)6.

n Based our estimates for the exhibition and video rental sectors on data in the

DIS ‘cinema’ report (which covered both).

n GDP and employment figures for the film industry and its sub-sectors were

n Estimated the size of the video retail sector, helped by previous findings

found by adjusting the Industri Kreatif data for ‘film, video and photography’ by a modest amount, to eliminate the (still) photography element. DIS data on ‘film and video production and distribution’ and ‘cinema’ (including video rental) imply that the contribution of photography to the wider sector can only be small.

concerned with end-user expenditure on retail relative to that on cinema and video rental. n Estimated the value of mass manufacture of videos on the basis of the implied

demand for videos for retail and rental. n The residual value within the ‘film’ category was then taken to be ‘film production

and distribution’. n Estimates for GDP in 2009 and 2010 were then made, based on sector growth

5 Departemen Perdagangan (Commerce Department), ‘Studi Industri Kreatif Indonesia 2009 Update’ and related data tables found via the project website (http://www.indonesiakreatif.net/), for example nominal GDP: http://www.indonesiakreatif.net/cms/wp-content/uploads/2009/10/Tabel-1.3.pdf.

rates implicit in the DIS reports, with an inflation-adjusted GDP series also estimated for 2006-10 by combining the Industri Kreativ and DIS datasets. We believe the DIS series to be the most suitable of the data series available for this purpose.

6 In total refinements and updates to our estimates took into account data and projections reported in five DIS studies: ‘Production and Distribution of Films and Videos (Private) in Indonesia’ (November 2010); ‘Production and Distribution of Films and Videos (Government) in Indonesia’ (June 2011); ‘Cinema Facilities (Private) in Indonesia’ (January 2011); ‘Radio and Television Facilities (Private) in Indonesia’ (January 2011); and ‘Radio and Television Facilities (Government) in Indonesia’ (June 2011). We believe these to be the best of the data sources available to use in order to adjust and update the official data sources to arrive at the estimates required.

7 Source: Biro Pusat Statistik (Central Bureau of Statistics) and Departemen Keuagan (Ministry of Finance), via Haver Analytics.

13

OXFORD ECONOMICS

The economic contribution of the film and television industries in Indonesia

Detailed methodology video) to be the same as that published for ‘film, video and photography’. After an adjustment to avoid ‘double counting’ (see section 6.3 below), the two multipliers were weighted together in accordance to the sub-sectors’ gross output to arrive at a Type I multiplier for ‘film and television’ combined.

From there we constructed: n Measures of gross output8 by sub-sector, mainly based on turnover-to-GDP

ratios found in DIS industry reports. n Measures of employee earnings by sub-sector, mainly based on wage-to-GDP

Next we used a 33-sector Indonesian input-output table from 2005 (the latest year available), sourced from the OECD, in order to estimate Type I and Type II multipliers for the ‘other community, social and personal services’ sector. (We took that sector to be most representative of the film and television sector in terms of its supply chain links with other industries, even though strictly speaking parts of the film and television grouping would be classified to other, rather broad sectors in the 33-sector matrix, such as ‘post and telecommunications’, ‘retail’ and ‘paper, printing and publishing’.)

ratios found in DIS reports. n Measures of tax payments by sub-sector, by assuming that the ratio of (personal

and corporate) income tax to GDP was in line with that for the non-oil economy overall, with the ratios of VAT to GDP and miscellaneous duties to GDP in line with the average for the wider economy. This approach allowed – albeit on a ‘broad brush’ basis – for the fact that VAT applies to some but not all film and TV activities, for the levying of import duties in some cases, and for the industry’s likely exposure to some duties such as those on property and property transfers.

We then multiplied our locally-sourced Type I multiplier estimate by the ratio of Type II-to-Type I multipliers derived from the OECD table, to arrive at the Type II multiplier to be used for the film and television sector as a whole. This multiplier was applied to the gross output of the combined sector to arrive at the total economic contribution in terms of gross output. This multiplier and its derivation are shown in the table below.

6.2  Modelling the total economic contribution An output ‘multiplier’ measures the relationship between an initial shock to the gross output of a sector and the final outcome across the whole of the economy, taking into account knock-on impacts for other industries’ activity. This study uses ‘Type II’ multipliers. Type II multipliers allow for both ‘indirect’ supply chain effects, i.e. the contribution due to the film and TV industries making purchases from other sectors, and ‘induced’ effects which arise from workers spending the resulting wage income on goods and services. (Studies which only allow for the indirect or supply chain effects use what are known as Type I multipliers. Type II multipliers will be larger than Type I multipliers.)

It should be noted here that a multiplier calculated for any of the individual subsectors within the combined grouping, if considered in isolation, would typically be higher than the multiplier for the group as a whole, as it would include the (often significant) impact on other sub-sectors within the group. Consequently the estimated multiplier impact for the combined industry – used in this study to avoid ‘double counting’ and thus to avoid overstating the overall contribution – cannot be seen as the ‘sum’ of the potential impacts of the individual sub-sectors alone.

To arrive at the Type II multiplier for Indonesia, however, we first derived an estimate of the Type I multiplier, based on separate multipliers published in one of the official Industri Kreatif reports9. The multiplier for the ’television’ sector was taken to be the same as that published for ‘television and radio’, and that for ‘film’ (including

One implication of this is that any allocation between the sub-sectors of the indirect and induced output contributions of the combined industry would be arbitrary to some extent. In this case we have therefore decided simply to allocate these contributions between the sub-sectors in proportion to their share of direct output.

8 Gross output is essentially equal to the value of sales or turnover of all firms in a given sector (though adjusted for changes in stocks of goods and work in progress in some cases). GDP is equal to gross output net of goods and services bought in from other sectors and of transactions between firms within the sector. 9 Departemen Perdagangan (Commerce Department), ‘Studi Industri Kreatif Indonesia 2009 Update’, table 4-14.

OXFORD ECONOMICS

14

The economic contribution of the film and television industries in Indonesia

Detailed methodology

6.3  Adjustments for leakage and double counting

n The fact that if employees currently working for the film and TV industries were

not employed in a given year then they would still spend some money. In western countries such spending would typically be supported by social benefits, but in Indonesia’s case the main support would be provided by the accumulated savings of individuals and their families. The result is that a Type II multiplier derived from the ‘raw’ input-output table would overstate the impact on the wider economy of a shock to the output of a particular sector. We therefore adjusted the ‘induced’ contribution downwards to allow for this factor.

In estimating the output multiplier, we took care to allow for four further factors: n Double counting of sub-sector contributions. To arrive at the Type I multiplier for

the combined ‘film and television’ sector – which would indicate the contribution of a shock to the output of this sector as a whole on the remainder of the economy – we adjusted the multiplier for television downwards in order to net off that sub-sector’s estimated impact on and via the film production sector. That adjustment was based on our estimate of the share of the television industry’s spending on goods and services going to the film industry (40%), which was informed by data on industry cost structures in the relevant DIS sector reports.

n The impact of taxes on products, which can drive a wedge between total

spending on a sector’s output and the amount actually received by the producers of that output, and thus the amount that they can pass on in turn. However, our calculation as set out above will have taken that into account automatically, without the need for any further adjustment.

Table 6.1: Derivation of the output multiplier From Industri Kreatif study: Type I multiplier for ‘film, video and photography’

2.23

6.4  Estimating GDP, earnings and employment

Type I multiplier for ‘television and radio’

1.97

The gross output totals derived from the above modelling were converted into estimates for GDP using ratios of GDP to gross output across the wider economy and sectors of it (from the OECD input-output table), taking care in each case to adjust the ‘market price’ GDP data downwards slightly onto an estimated ‘basic price’ basis.

Oxford Economics assumptions and estimates Type I multiplier for ‘film’ (including video)

2.23

Type I multiplier for ‘television’ – in isolation

1.97

Type I multiplier for ‘television’ – adjusted to exclude estimated impact on and via ‘film

1.83

In the case of the indirect effect, we used the output-to-GDP ratio for the economy excluding extraction and agriculture, calculated as 2.21. This reflected the fact that suppliers to the film and television sectors are spread broadly across the economy with the exception of those two sectors (e.g. equipment manufacturing, transport services, property services, utilities, market research and other business services, etc).

Derived from the Indonesian input-output tables: Type I multiplier for ‘community, personal and social services’

1.60

Type II multiplier for ‘community, personal and social services’ – raw, but allowing for import ‘leakage’

2.15

Type II multiplier for ‘community, personal and social services’ – adjusted for spending out of saving

2.08

For the induced effect, we used the output-to-GDP ratio calculated for the economy as a whole – 1.99 – reflecting the fact that the benefits of household spending would be spread right across the economy. While our approach means that the same output multipliers are shown to apply to all of the individual sub-sectors, the implicit GDP multipliers vary as shown in the table below. Thus, the ratio for cinema is relatively high, reflecting that sub-sector’s own comparatively high output-to-GDP ratio and the consequent expectation that its procurement of goods and services would ultimately benefit other sectors’ GDP to a greater extent than the average.

Final Ocford Economics estimate: Type II multiplier for ‘film and television’ combined

3.38

n ‘Leakage’ from domestic demand due to imports. However this is already allowed

for in the Industri Kreatif Type I multipliers and in the input-output tables used to derive our Type II multiplier, so no specific additional adjustment was required. 15

OXFORD ECONOMICS

The economic contribution of the film and television industries in Indonesia

Detailed methodology

6.5  Modelling tax revenues

(In each case, however, the GDP multiplier shown here is likely to be lower than the GDP multiplier that would apply if the sub-sector were studied in isolation, reflecting the elimination of the impact of transactions between different parts of the broader ‘film and television’ industry. Also, as with gross output the allocation of the total GDP contribution between sub-sectors can be regarded as arbitrary to some degree.)

Type I multiplier

Type II multiplier

Type I multiplier

Type II multiplier

Cinema and home entertainment sub-sectors

1.83

2.38

3.77

5.72

Taxes assessed included income tax, corporation tax, value added tax (VAT) and excise duties. For tax contributions, we assumed that income taxes were in line with the ratio of non-oil income tax revenues to non-oil GDP in the case of indirect contributions, and in line with the ratio of total income tax revenues to total GDP in the case of induced contributions, with the VAT contribution in both cases being in line with the economy-wide VAT-to-GDP ratio. For duties and other miscellaneous taxes, we assumed that the total-revenue-to-total-GDP ratio would apply in the case of the induced contribution, but applied a lower ratio in the case of the indirect contribution, reflecting a view that firms in the film and TV industry’s supply chains would be less affected than the average by excise duties, while being equally exposed to minor taxes such as on property and property transfers.

Film production and distribution

1.83

2.38

3.57

3.57

6.6  GDP measure

Television services

1.83

2.38

2.29

3.19

Total

1.83

2.38

2.46

3.45

Table 6.2: Implicit GDP multipliers by sub-sector Gross Output

GDP

GDP can either be measured at basic prices or at market prices. The estimates produced in this report are measured using GDP at basic prices, which excludes taxes less subsidies on products (taxes on products include VAT and excise duties). Gross Value Added (GVA) is another term for GDP at basic prices.

It can also be seen that the implicit GDP multiplier for the sector as a whole is greater than the multiplier for gross output. This reflects the fact that GDP accounts for a smaller proportion of sector output than across the economy as a whole, or put another way that procurement of goods and services from other businesses – thus benefiting other firms’ GDP – is proportionately higher than the national average.

While VAT is excluded from GDP at basic prices, the VAT generated by the film and television industries is estimated in the main body of this report and included as a part of the industry’s tax contribution. GDP at market prices is the “headline measure” of GDP used in Indonesia and most other countries. GDP at market prices includes taxes less subsidies on products.

Indirect and induced employment contributions are then estimated on the basis of employment-to-GDP ratios found to hold across the non-mining non-farm economy and whole economy respectively, in each year, based on official data10. Employee earnings are based on the employee compensation-to-GDP ratios found to hold across those two definitions of the wider economy, although in this case two fixed ratios have had to be used, taken from the OECD national accounts input-output table which relates to 2005.

10  Source: Biro Pusat Statistik (Central Bureau of Statistics), via Haver Analytics.

OXFORD ECONOMICS

16

Corporate Headquarters Oxford Abbey House 121 St Aldates Oxford OX1 1HB UK Tel: +44 1865 268900 London Broadwall House 21 Broadwall London SE1 9PL UK Tel: +44 207 803 1400 Belfast Lagan House Sackville Street Lisburn BT27 4AB UK Tel: +44 28 9266 0669 New York 817 Broadway, 4th Floor New York NY 10003 USA Phone: +1 646 786 1863 Philadelphia 303 West Lancaster Avenue Suite 1B Wayne, PA 19087 USA Tel: +1 610 995 9600 Paris 9 rue Huysmans 75006 Paris France Tel: +33 6 79 900 846

www.oxfordeconomics.com

Singapore Singapore Land Tower, 37th Floor 50 Raffles Place, Singapore 048623 Tel: +65 6829 7068