2016 EIBN Sector Report Gaming Industry
2016 EIBN Sector Report Gaming Industry
2016 EIBN Sector Report Gaming Industry
Gaming Industry
2016
This Sector Report was created by the EIBN unit at:
2016
www.eibn.org
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Table of Contents
Methodology .................................................................................................................. 4
Executive Summary ...................................................................................................... 5
1. The Indonesian Gaming Industry in the ASEAN Context ...................................... 6
1.1. Overview of the ASEAN Gaming Market .................................................................. 6
1.2. Indonesia is Great Potential for Gaming Industry ..................................................... 8
2. Recent Development ................................................................................................. 9
2.1. Console .................................................................................................................. 10
2.2. Online Games ........................................................................................................ 11
2.3. Mobile Games ........................................................................................................ 12
3. Market Structure and Business Opportunities in the Gaming Industry ............. 13
3.1. Game Developer .................................................................................................... 13
3.2. In Game Purchase ................................................................................................. 15
3.3 Payment Method ..................................................................................................... 16
3.4 Chalenges ............................................................................................................... 17
4. Conclusion ............................................................................................................... 18
Relevant Contacts ....................................................................................................... 19
References ................................................................................................................... 20
About EIBN .................................................................................................................. 23
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Methodology
This reports aims to highlight the gaming sector in Indonesia; to provide a general
overview of the market, its business potential, as well as the existing challenges.
In the preparation of this report, EIBN drew on a variety of sources and methods that
are briefly explained here. General information on the gaming sector was retrieved from
publicly available sources, including articles from local newspapers, online news portals,
as well as the Ministry of Communications and Information. However, as the gaming
sector is just establishing itself in Indonesia, data is not yet abundant.
The primary source for this report was the publically available data and output from
associations such as the Indonesian Game Association (AGI). Additional gaps in this
information were filled using various sources, detailed above. If, for any reason, the
latest official data has not yet been made available to the public, the latest data on hand
was used. This report has been developed using data available in July 2016 and any
data included is specifically mentioned in the report.
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Executive Summary
The Indonesian gaming industry has so far had high growth value and continues to develop
each year. According to Netherlands-based research group, Newzoo, Indonesia already
accounts for 18% of the mobile game market in Southeast Asia. With a compound annual
growth rate of 37.3% in the period 2013-2017, Indonesia will soon be generating USD 465
million in mobile game revenues by 2017.
The gaming industry is characterized by the shifting from PC-based games to mobile games, as
many developers and publishers are changing their strategy to accommodate the mobile
segment for a faster return on investment, as most spending is derived from mobile-based
gaming. Consumers are shifting their preferences to smartphones and tablets as their favorite
gadget on which to play games.
Aware of its huge potential, Creative Economy Agency (Bekraf), a government organization
tasked with developing Indonesia’s creative industry, has prioritized the gaming industry as one
of its sectors for development. Recently, Bekraf has been in cooperation with Telkom, the
largest Indonesian telecoms operator, to launch “Bekup”; a startup incubator to accelerate the
creation of an ecosystem of local games developers in Indonesia1.
The dynamic of the Indonesian gaming sector has enticed International game developers and
publishers to expand their businesses in the country. They are targeting Indonesia as their
market and at the same time, their production base, to export to ASEAN countries and the
International market.
Game piracy is still rampant and a serious threat for the gaming industry, especially for console
and PC game-based. In 2015, BSA (Business Software Alliance) reported that, on average,
85% of software installed on computers in Indonesia is illegal2.
Internet providers are obliged to provide better Internet bandwidth. Broadband Internet
connection is a key driver of growth in the video game industry, as it facilitates distribution of
content, engagement with customers, multiplayer gameplay and provision of crucial software
updates to improve gameplay.
1
http://www.antaranews.com/berita/565022/bekraf-gandeng-telkom-mikti-jalankan-program-bekup
2
http://globalstudy.bsa.org/2016/downloads/studies/BSA_GSS_US.pdf#page=5
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1. The Indonesian Video Gaming Industry in the ASEAN
context
1.1.Overview of the ASEAN Gaming Market
ASEAN video gaming accounts for 4% of global consumption and ASEAN represents the fastest
growing market, with annual growth of 30% and an estimated value of USD 1 billion in 2014. This
growth is forecasted to reach USD 2.2 billion by the year of 20173.
Source: Newzoo 2015 Report: Introduction to the Southeast Asian Games Market
The ASEAN video game market is mainly mobile-based. The six biggest countries for mobile
gaming are; Thailand, Malaysia, Singapore, Indonesia, the Philippines, and Vietnam. Thailand is
the top mobile gaming market in the region, generating USD 230.3 million in revenue. Indonesia
has the largest number of gamers, with over 34 million, while Singapore remains the biggest
gaming spender, with USD 189.3 spent per gamer annually.
Most game companies in ASEAN are focused on game development. However, there are some
companies working on other game activities, such as user acquisition, advertising in games,
digital marketing, mobile game application marketing, mobile networking and others.
3
Southeast Asia Game Industry Initiative, Malaysia’s Multimedia Development Corporation (MDeC), March 2015,
http://www.mscmalaysia.my/sites/default/files/pdf/booklets_brochures/GameIndustry_MDeC(FULL).pdf
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According to a study conducted by Malaysia’s Multimedia Development Corporation (MDeC),
most game companies are start-ups and small studios, with between two and ten employees.
Several global game companies such as Electronic Arts, LucasFilm, Koei, Gevo and Ubisoft in
Singapore, Codemasters in Malaysia, Square Enix and Gameloft in Indonesia, Activision,
Bioware, Bungie and Eidosin in Philippines and Gameloft in Vietnam have chosen to setup
studios to expand their business in the region, by recruiting skilled talent at lower pay rates 4.
Additionally, in order to serve the region as their global production base, regional offices are also
sometimes used for distribution in Southeast Asia.
Most game companies are focused on mobile games development, especially casual games (a
simple video game that is easy to play) as it requires less production time, at an average rate of
three to six months. These kind of games do not require many developer resources and therefore
allow companies to generate revenue faster. For instance, in Indonesia, console and PC game
development requires on average IDR 100 million (€ 7000), whereas mobile online games require
just IDR 10 million (€ 700)5. These games can also be integrated into Facebook, iTunes and
Google Play, an Android apps store to further increase revenue.
For game studios wanting to develop an IP (Intellectual property) game, development will take
from 6 to 9 months, which will be able to generate higher revenue. It usually requires an average
of 50 developers to produce an original IP game in the region.
Many game studios in the region are being subcontracted by big game studios or companies, as
a way to maintain their cash flows and generate faster revenues, whilst at the same pursuing their
ultimate goal of produce an IP game.
4
Routledge Handbook of New Media in Asia, 2016
5
Video Game around the World, 2016
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1.2. Indonesia Has Great Potential for the Gaming Industry
The Indonesian gaming market has traditionally been focused on free to play, or cheap
experiences that do not require major financial investment by players. This is due to the high price
of gaming equipment and software. Previously, many Indonesian’s would go to Internet cafés to
carry out their online activities.
Video gaming growth has been boosted by the increasing popularity of smartphone apps and
Indonesia is set to become the second largest mobile gaming market in Southeast Asia by 20176.
Smartphones also enable anyone to play games of any kind, anywhere they want, thus reducing
the need to go to internet cafes. The domination of smartphones also represents a major threat to
hand-held consoles, sales of which have reduced since 20127.
According to EuroMonitor, online and mobile games are still dominating the video games market
in Indonesia, due to the affordability of mobile gadgets such as smartphones and tablets. By
2018, smartphones will represent around 40% of all handsets in Indonesia. Cheaper mobile
internet services from mobile operators and more reliable mobile network connections are also
contributing to the robust development of mobile games, which is set to continue in the years to
come.
Indonesia has a population of over 250 million and mobile penetration has already reaching its
saturation phase, with a penetration rate of 140% of its total population. Mobile broadband
connections are improving, making Indonesia 4th in the world’s top ten 3G markets8, this is further
intensified with current 4G (fourth generation network) deployment offering faster and more
reliable connections.
6
http://jakartaglobe.beritasatu.com/business/indonesia-gears-456m-gaming-industry-2017/
7
Euromonitor International, Video Games in Indonesia 2016
8
https://mobiforge.com/research-analysis/global-mobile-statistics-2014-part-a-mobile-subscribers-handset-
market-share-mobile-operators
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2. Recent Development
In 2015, the overall sales of Indonesian retail games are IDR 8.5 trillion (€ 588 million) both for
hardware (hand-held and static consoles, gaming accessories; toys-to-life, AR/VR accessories)
and software (PC/online, mobile games and in-Game purchases), sales accounted for IDR 8.2
trillion (€ 567 million) and IDR 313 billion (€ 11 million) respectively.
10000 8512
8000
5876
6000 4361
4000
2000 282 296 313
0
2013 2014 2015
Hardware Software
The video gaming market is growth at 40-50% annually with the online and mobile games as
the biggest contributor while the sales of video games hardware are stagnant from year to year.
Indonesia is far above the average annual regional growth, estimated at 28.8%9 for the period
2013 to 2017 including console, online and mobile games10.
9
http://asia.nikkei.com/Business/Trends/Gaming-soars-in-Southeast-Asia-and-local-developers-follow
10
Euromonitor International, Video Games in Indonesia June 2016
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2.1 Consoles
All consoles in Indonesia were still importedmostly from Japan and USA with unit prices being
driven solely by the IDR vs USD exchange rate. Due to low purchasing power for many
Indonesias, the affordability of mobile gadgets (tablets and smartphones) and better platforms for
social media games such as Happy Farm and Mafia Wars , the sales of games consoles have
plummeted in recent years.
There are no local manufacturers for game console hardware in Indonesia. However, the sotware
development for this segment is widely populated by Indonesian developers. The first PS4 game
software, “Fallen Legion” was created by an Indonesian developer and has paved the way for
global expansion11.
25% 58% PT. Microsoft Indonesia. Holds second position with its
Xbox static video games console.
Nintendo. The third competitor for both companies is
Sony Microsoft Nintendo Others
Nintendo, with its hand-held video game12.
Source : Video Games in Indonesia,
EuroMonitor International June 2016
11
http://www.pharaboot.com/2016/02/game-baru-ps4-2016-pertama-dari.html
12
Euromonitor International, Video Games in Indonesia, June 2016
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Figure 8: Income per HouseHold vs Static Video Game Consoles per household
With an average annual disposable income of USD 3000 per household, Indonesia remains one
of countries with the lowest level of expenditure on video games consoles in relation to the
purchasing power of its population. In 2014, on average each Indonesian household spent just
USD 1-2 on static video game consoles13.
13
Video Games in Indonesia, EuroMonitor International June 2016
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Figure 9: Online and Mobile Games Revenues
1000 2082
0
2013 2014 2015
Unlike game hardware, gaming software is dominated by free-to-play online games, with local
companies leading the way. Lyto Datarindo Fortuna and Megaxus Infotech both recorded sales
shares of 12% in 2015. Both companies are publishing some of the most popular free-to-play
online games in the country such as Ragnarök Online, Rising Force, AyoDance, and Valve’s
Counter-Strike. Blockbuster/AAA games from popular publishers such as Ubisoft and Electronic
Arts continue to have issues with piracy, resulting in low sales in 201514.
14
Video Games in Indonesia, EuroMonitor International June 2016
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According to theNewzoo Report, 49% of gamers in Indonesia spent their money on mobile
games. Strategy games are the most popular category, with similar percentages of game
spenders and non-game spenders distributed across all of Indonesia’s top five mobile genres.
15
http://www.indonesia-investments.com/news/todays-headlines/indonesia-s-online-gaming-industry-dominated-
by-foreign-games/item6422
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http://www.indonesia-investments.com/news/todays-headlines/indonesia-s-online-gaming-industry-dominated-
by-foreign-games/item6422
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Figure 10: Market share of all video games company (console, online and mobile
platform)
Company name Game Market share 2015
In order to accelerate the development of a gaming in Indonesia, many mobile operators are
launching incubation programs. In 2013, Indonesia's largest mobile operator Telkomsel launched
a program called TemanDev17 or “Friend of Developers” to help local developers commercilize
their products both nationally and internationally. XL Axiata, the second largest mobile operator in
Indonesia launched a similar program, Gudang Aplikasi, in 2015 to challenge the dominance of
TemanDev18. In 2015, XL Axiata’s app store had no fewer than 22,000 applications available for
download.19
Meanwhile, Indosat has also jumped on the bandwagon by launching i-Aplikazone as a way to
capitalize on the gaming market potential in Indonesia. It has claimed itself as the largest Android
application store run by a telecommunication operator in Indonesia, with more than 10,000
applications created by local developers for Indosat customers20.
Foreign game companies and publishers of video games software are expected to maintain their
position in the coming years, as they are not yet expected to be significantly challenged by local
companiees. However, local game developers are expected to improve their development efforts
as they continue to be supported by the government and associations, and have the potential to
17
https://www.techinasia.com/indonesias-biggest-telco-strengthens-commitment-local-developers
18
https://www.techinasia.com/xl-axiata-launches-android-app-store
19
http://www.thejakartapost.com/news/2015/05/21/telco-operators-join-fray-app-stores-target-heavy-data-
users.html
20
https://indosatooredoo.com/en/investor-relation/about-indosat/corporate-profile/press-release/indosat-
luncurkan-i-aplikazone
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grow significantly in the coming years. Bekraf has recently lauched a program called Bekup21
(BEKRAF for Startup) in collaboration with PT. Telekomunikasi Indonesia (Telkom), an
Indonesian incumbent operator, with the aim of creating a succesful digital game company.
In 2009, Telkom launched an incubator program for start-ups, called Indigo Creative Nation.
Since 2014, Telkom has created a Digital Innovation Lounge (Dilo): a creative camp for start-
ups to share and incubate their innovative projects. Telkom provides integrated digital access
for sharing knowledge, education and meet ups. Dilo is currently available in 14 major cities in
Indonesia.
Telkom is very ambitious and wants to replicate the success of Silicon Valley incubation
programs to contribute to the Indonesian digital ecosystem. Telkom appeals to all creative start-
ups or new companies to propose their innovative ideas, growing and entering global market
with Telkom Group through its international representative offices in 10 countries.
The Indonesian Game Association (AGI) was created in 2013 with the mission to bridge all
stakeholders in the gaming industry; developers, publishers, platforms, event organization and
payment gateways. The association also aims to benchmark against other advanced gaming
events in other Asian countries, such as the Tokyo Game Show, China Joy, E3 etc. The other
principal mission is to bridge the government and all gaming industry players to find the best
solution to actual and future issues in the sector.
Recently, AGI has actively defended the gaming industry’s interest by recently supporting the
government draft of the Indonesia Game Rating System (IGRS), which regulates gaming
consumption for children under 18 years of age, according to their age level22. The law has been
in public consultation and is expected to be enacted this year.
21
http://www.antaranews.com/berita/565022/bekraf-gandeng-telkom-mikti-jalankan-program-bekup
22
http://www.duniaku.net/2016/06/06/sistem-rating-game-indonesia-diresmikan-bulan-ini/
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Meanwhile Indosat has launched a similar service through its carrier billing method, allowing all of
its subscribers to purchase digital content, including in-game purchases. The company charges
10% for every item purchased.
The second largest bank in Indonesia, Bank Mandiri, has allowed its customers to purchase
social gaming items on Facebook through E-Cash, an electronic online payment system23.
23
http://www.beritasatu.com/bank-dan-pembiayaan/329769-mandiri-gandeng-boku-garap-transaksi-game-online-
di-facebook.html
24
http://www.bi.go.id/en/ruang-media/siaran-pers/Pages/sp_166914.aspx
25
https://www.techinasia.com/5-top-payment-solutions-online-games-indonesia
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3.4 Challenges
Piracy is still a serious problem in Indonesia. Although games are becoming cheaper and more
affordable, the piracy rate is still high throughout the country, especially for computer and console
games. The government is trying to take action through law enforcement of intellectual property
rights and some video game retailers are also taking action by providing a greater variety of
original games. However, their efforts have not yet been successful at reducing the piracy rate.
As consumers cannot afford the high price of original games, they continue to resort to pirated
games. One can purchase a pirated game with less than USD 2, with the same graphics and
experiences as the original version.
For the manufacturers of video games, the issue of piracy still remains very challenging. Pirated
video games are easily found in shopping areas targeting lower to middle income consumers.
Legitimate video games are available through a limited number of retail outlets, their stocks are
relatively modest and pricing tends to be relatively expensive. These are among the major factors
that confine the sales of original video games in Indonesia.
Internet connection infrastructure also poses a crucial challenge for game development,
especially for high resolution and bandwidth game consumption, as the Indonesian gaming
industry is gradually shifting to mobile gaming.
Nevertheless, video games are also prone to threats. For example, to ensure a successful shift to
digital gaming over the forecast period, better internet connectivity is crucial. However, the
adoption rate of high-speed internet connections in urban areas has been slow compared to other
ASEAN countries, and even worse in rural areas. Computer and console gaming is also very
reliant on the IDR to USD exchange rate, with its current unstable nature set to keep prices high,
thus limiting sales growth. Mobile games will also be threatened if smartphone penetration slows
down.
Skilfull developers are in very high demand, but this demand can’t be fulfilled by local resources.
There are only a few universities offering gaming majors such as Institut Teknologi Bandung
(ITB), BINUS University, Institut Teknologi Sepuluh November/ITS (Master Degree), Universitas
Multimedia Nusantara (UMN), and Politeknik Elektronika Negeri Surabaya (PENS).26
26
http://nubigames.com/article/opini/5-perguruan-tinggi-di-indonesia-yang-memiliki-jurusan-game/
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4. Conclusion
In conclusion, the Indonesian gaming industry has strong potential for growth as Indonesia will
be experiencing an exponential growth and expansion. In 2017, the country will become the
second largest mobile gaming market in ASEAN region. Therefore, the Indonesian gaming
industry developmentwill be a mobile market-drivenwith the activities not only related to gaming
development but other game activities such as advertising in games, digital marketing, mobile
game application marketing, mobile payment platformetc.
With a huge mobile phone subscribers, the increasing adoption of smartphone and the latest
mobile broadband network Infrastructure launched by mobile operators, the gaming Industry in
Indonesia will leverage into unprecedented development in the next future.The European
gaming companies are encouraged to take advantage of the strong development of gaming
sector by entering the market as beingwitnessed by their European counterparts in Indonesia.
Moreover, it is worth to be highlighted that several challenges persisted. The issues on how to
monetize the mobile gaming market in a country where traditionally been focused on free to play
without initial investment by players, the rampant game piracies that needs to be addressed.
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Relevant Contacts
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Abbreviations
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References
Sector Reports
Euromonitor International, Video Games in Indonesia, June 2016
IDG Venture Vietnam, Indonesia Mobile Game Industry, November 2013
Routledge Handbook of New Media in Asia, 2016
Malaysia’s Multimedia Development Corporation (MDeC), Southeast Asia Game
Industry Initiative, March 2015
MIT Press, Video Game Around the World, 2016
NewZoo, Rolling into The Southeast Asian Games Market, January 2015
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Nubigames, <http://nubigames.com/article/opini/5-perguruan-tinggi-di-indonesia-yang-memiliki-
jurusan-game/>
Pharaboot, <http://www.pharaboot.com/2016/02/game-baru-ps4-2016-pertama-dari.html>
TechinAsia, <https://www.techinasia.com/5-top-payment-solutions-online-games-indonesia
TechinAsia, <https://www.techinasia.com/indonesias-biggest-telco-strengthens-commitment-
local-developers>
TechinAsia, <https://www.techinasia.com/xl-axiata-launches-android-app-store>
The Jakarta Post, <http://www.thejakartapost.com/news/2015/05/21/telco-operators-join-fray-
app-stores-target-heavy-data-users.html>
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About EIBN
The EIBN is a partnership project between five European bilateral chambers of commerce in
Indonesia (BritCham, EKONID, EuroCham, IFCCI, INA) and two counterparts in Europe
(EUROCHAMBRES, CCI Barcelona). The EIBN’s aim is to promote Indonesia and ASEAN as
high potential trade and investment destinations among companies from all EU28 member
states – especially SMEs – and support them in their endeavour to explore the full market
potential in Indonesia. The project was initiated and co-founded by the EU.
Media Partner:
Disclaimer
This publication has been produced with the financial assistance of the European Union. The
contents of this document are the sole responsibility of the EIBN and can under no
circumstances be regarded as reflecting the position of the European Union.
The figures in this report correspond to EIBN’s best estimate of value of the corresponding
variables. Although due care was taken in the preparation of this publication, EIBN makes no
warranty as to its accuracy or completeness and is not to be deemed responsible for any errors
or loss resulting from its use. Other organizations quoted herein are in no way responsible for
the content of the report or the consequences of its use.
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