A Window Opportunity in Indonesia Gaming Market for Chinese Developers

A Window Opportunity in Indonesia Gaming Market for Chinese Developers

InCorp Editorial Team

Table of Content

Video and internet games have gained massive attention across the globe as people are refraining from playing traditional sports due to Covid -19 restrictions. Thus, boosting the mobile video games industry from USD 61.3 billion in 2019 to USD 98 billion in 2020. China is a major country that has significantly contributed to the global gaming industry.

China’s online gaming business is exploding in popularity; firms from all over have been buying Chinese company stocks or sponsoring elite eSports gamers. As a result, the online game market in China was estimated at USD 58 billion in 2020 and is anticipated to reach approx. US$86 billion by 2027.

However, some of China’s mobile game creators’ most considerable download numbers came from Indonesia, thousands of kilometers away from their country.

Over 270 million people live on Asia’s biggest archipelago, where Made in China games are the top three sellers. After it had been downloaded over 100 million times by January last year, “Mobile Legends: Bang Bang” is still number one on Apple’s iOS App Store. However, the game in China has not yet been released.

Such insights convey that setting up a gaming company in Indonesia might be a viable alternative for Chinese game makers as the Chinese Government tightens its regulations on the gaming industry.

Why Chinese Developers Should Turn Their Focus on Indonesia Gaming Market

Stricter Gaming Policy at Home

In 2000, the Chinese State Council passed a measure to control video game content in the country. As a result, underage players were limited in the time they may spend playing online games in internet cafés and arcades as part of a government initiative to combat what was perceived as a gaming epidemic.

Furthermore, from March 2018 to April 2019, there was a significant revision of the regulations and licensing of digital games in China, including:

  • Stricter game content regulations
  • A limited number of games are to be approved each year
  • Imposed anti-addiction systems as a mobile game’s standard
  • Mini-Games and HTML 5 games must have a license
  • Publishers must self-regulate before submitting games
  • Prioritizing games that promote the traditional culture and history
  • Loot boxes must be heavily regulated
  • Chinese developers can submit foreign IP as a domestic title

Recently, Chinese authorities also imposed strict limits on the time young people can spend playing online games. For example, people under 18 can only play games from 8-9 PM on Fridays, Saturdays, Sundays, and public holidays.

As a result of these tighter regulations, many new Chinese gaming firms have changed their strategy to focus on the Indonesia gaming market and leverage its potential.

Understanding Indonesia Gaming Market and its Key Drivers

Indonesia’s gaming market is ranked 17th in the world, and first in Southeast Asia, with an estimated USD 1.1 billion in sales in January 2019. According to the Indonesian Gaming Association (AGI), the local gaming sector is growing at 37% annually, more significant than other Southeast Asian nations.

Limelight Networks’ report states that Indonesians spent roughly 8.54 hours/week playing video games, slightly above the global average of 8.45 hours/week. However, this number places Indonesia fourth below China, Vietnam, and India.

A Window Opportunity in Indonesia Gaming Market for Chinese Developers

A Window Opportunity in Indonesia Gaming Market for Chinese Developers

The following factors have contributed to the positive performance of the Indonesia gaming market in the past several years:

Indonesia’s Growing Smartphone and Internet Users

An estimated 89.2% of Indonesians will own a smartphone by 2025. The proportion of smartphone users in rural regions has also risen from 47.3% in 2015 to approximately 55% in 2019, while already dominant in urban areas. In January 2021, Indonesia had a total of 202.6 million Internet users. Between 2020 and 2021, the number of internet users in Indonesia rose by 27 million (+16%).

Hence, it is pretty evident that online mobile gaming will continue to dominate the Indonesia gaming market due to the increasing number of smartphones and internet users.

A Growing Opportunity from eSport Industry

Indonesia mainly drives Southeast Asia’s esports sector. In 2021, Southeast Asia will have 274.5 million gamers, with Indonesia accounting for 43% of this total. Indonesia’s eSports industry generated a total of USD 2.08 billion. Moreover, Indonesian gamers conduct in-game transactions one to three times a month, presenting an ideal opportunity for eSports to collaborate with financial institutions for greater returns.

Government Support

The Indonesian Government reassures that eSports will benefit the country’s economy and athletes’ performance. Therefore, in addition to teaching, the Government is beginning to establish rules to promote the development of eSports, including licensing and other requirements.

The Government also supports E-sports events and competitions. Therefore, it has been decided that the ministry will continue to educate the public and create an awareness of e-sports, which have comparable values and principles to traditional sports.

Challenges in Indonesia Gaming Market: Opportunities for Foreign Investors

Telkom, Indonesia’s state-owned enterprise, reports that domestic gaming only controls a 0.4% market share in the country. Due to a shortage of investment and a scarcity of game developers, the number of local gaming firms is stagnant.

To solve this problem, the Indonesian Government acknowledges video game creation as one of the promising sectors to attract foreign investment. It was then listed in the latest Positive Investment List to combat the lack of investment in the gaming sector.

A Window Opportunity in Indonesia Gaming Market for Chinese Developers

Several incentives will be available to investors tapping into the Indonesia gaming market:

  • Foreign businesses qualifying for the priority group receive tax breaks and other benefits.
  • Corporate income tax rates for capital-intensive enterprises exceeding IDR 500 billion are cut by 100% for up to 20 years.
  • Under Indonesia’s tax holiday policy, investments of IDR 100 billion to IDR 500 billion would be eligible for a 50% discount in corporate income tax under Peraturan Menteri Keuangan No 130/2020.

Tapping The Opportunity in Indonesia Gaming Market with InCorp Indonesia

Business setup services offered by InCorp Indonesia (formerly Cekindo) include incorporation of a new company, legal consulting, and bookkeeping.

Foreign investors are assisted in getting business permits by our experts before company formation, and our experts properly follow up their due diligence and market research. HR, tax, and accounting are just a few of our vast services once the company is operational.

Tjhia Edy Tarlesno

Legal & Compliance Manager at InCorp Indonesia

Edy Tarlesno holds various certifications and a respectable degree to be an expert on internal and external legal compliance in Indonesia. His experience starts from bankruptcy and insolvency, leading to a prominent social foundation consultancy in Indonesia.

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