New Contender Shakes Up Indonesia's Cinema Sector

Local conglomerate Lippo Group is planning to open 1,000 screens in Indonesia in the next five years, boosting the country's fledgling film industry and challenging dominant exhibitor Cinema 21.

Indonesia's long monopolized movie exhibition sector is about to get a healthy jolt of competition, as the country's influential Riady family is preparing a bold entry into the business.

According to a report in the Financial Times, the family’s Lippo group is planning to open its first cinema in February and will roll out 1,000 more screens over the next five years in a bid to break the near-monopolistic grip of Cinema 21, which has controlled 90 percent or more of Indonesian cinemas since the Suharto era.

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Despite a rising middle class, demographics that skew young and the world's fourth-largest population (250 million), Indonesia's box office was just $250 last year, largely due to inadequate exhibition infrastructure. With 700 screens, the country has just one screen for every 357,000 people. Nearby Singapore, by contrast, has one screen for every 25,000 residents.

“The industry is poised to take off,” Felix Ali Chendra, head of Lippo’s media and technology business, told the Financial Times. “A rising consuming middle class that is thirsty for entertainment, increasing urbanization and a thriving local movie industry are all positive drivers.”

Cinema 21 was founded in the 1980s by a cousin of Suharto and has been the dominant player since. The company is now owned by Indonesian tycoon Benny Suherman. Other contenders have struggled to gain a foothold in exhibition in Cinema 21's shadow.

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Blitz Megaplex, backed by local private equity company Quvat, launched in 2006 but has struggled because of 21's control of distribution and rising commercial real estate costs in Indonesian cities.

Local analysts say the Riadys have a much better chance of transforming the market, thanks to their deep pockets, political influence, and broad portfolio of commercial real estate holdings, including 40 shopping malls already open and more planned. Many of the company's Lippo malls are home to 21 cinemas. Lippo Group has said they will take over those spaces once the leases expire.

Mike Wiluan, an executive at Indonesian film company Infinite Frameworks, told the FT, “Content is being devoured at a very rapid rate in Indonesia, which shows that there is tremendous potential."

Adding just 100 new screens would be a significant boost the local movie industry, he said.