VZCZCXRO4033
PP RUEHCHI RUEHDT RUEHHM
DE RUEHJA #2034/01 2080847
ZNR UUUUU ZZH
P 270847Z JUL 07
FM AMEMBASSY JAKARTA
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ZEN/AMCONSUL SURABAYA
UNCLAS SECTION 01 OF 02 JAKARTA 002034
SIPDIS
FROM AMCONSUL SURABAYA 0053
DEPT FOR EAP/MTS AND EB/IFD/OMA
TREASURY FOR IA-JEWELL
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SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: KIPR EFIN EINV ECON KCOR PGOV ID
SUBJECT: Eastern Indonesia - Optical Disk Factory Closures Reducing
Pirated Disk Supplies
Ref A: Jakarta 1813; Ref B: 06 Jakarta 3892
JAKARTA 00002034 001.2 OF 002
1. (SBU) SUMMARY. ConGen Surabaya informally surveyed pirated
optical disk vendors in Bali and Surabaya to assess the impact on
supplies after two Jakarta pirated disk factories were raided July 2
(Ref A). Initially we noticed minimal changes in Bali pirated disk
supplies. However, a Balinese pirated disk distributor told us that
the factory closures had affected his ability to get new pirated
disk supplies from Jakarta and his vendor customers had begun
complaining. There were noticeably fewer pirated disk vendors in
Surabaya than when last surveyed in 2006. Surabaya vendors were
taking elaborate security measures to avoid police detection,
suggesting that East Java police are following through their
promised commitment to IPR law enforcement (Ref B). END SUMMARY.
2. (SBU) Indonesian police raided two optical disk factories in
Jakarta July 2, confiscating equipment able to produce 220,000
pirated music and video disks per day (Ref. A). ConGen Surabaya
went undercover in Bali and Surabaya to assess the impact factory
closures are having on pirated disk supplies. We also took the
opportunity to review the impact of stepped-up police enforcement of
IPR protection laws in East Java announced by Provincial Police
Chief Herman Sumawiredja March 2006 (Ref. B). Sumawiredja told his
regency and city police chiefs that IPR law enforcement would be an
important factor in East Java police promotion and advancement
opportunities. East Java police cracked down on most pirated disk
vendors in the province shortly after the announcement.
Bali Disk Vendors Starting To Feel Supply Pinch
--------------------------------------------- --
3. (SBU) During a July 15 survey in Bali, we initially noticed
little difference in pirated disk vendor operations in Kuta, Legian
and Seminyak, the largest tourist shopping areas in Bali. We
visited 27 out of more than 100 pirated disk stores and stalls in
the area. There were no special security measures being taken by
store operators to avoid police detection. According to shop
owners, inventory levels range from 5-10,000 disks in small shops to
50,000 disks in a pirated disk "Super Store". Volume discounts are
common, ranging from "buy 5, get one free" to "buy 1,000, get 365
free". One Super Store manager told us that they average several
tourist customers per week buying 1,000 or more pirated disks,
generally good quality copies of unreleased films that would be
resold in their home countries. Disc prices have recently increased
43% to $1.10 and disk prices no longer include a plastic case, which
now costs an extra $.10. Several shop owners complained that local
police increases in monthly "security fees", rather than supply
shortages, forced the price increase.
4. (SBU) In one store we overheard a conversation between a Balinese
pirated disk distributor and the shop owner. The shop owner
complained that she only had 100 copies of the new 95% quality "Die
Hard 4.0" remaining in inventory and was selling 10 of the disks an
hour and needed many more. She also complained that a better
quality copy than the 30% "Harry Potter and the Order of the
Phoenix" had not yet been released. (Note: Pirated DVDs in
Indonesia are quality graded by the vendors for the benefit of
customers. A 30% quality disk would typically be recorded on a
digital camcorder in a theater and have low quality sound and
picture. A 95% copy typically comes from a preview disk sent by
movie studios to theater owners and has digital quality sound and
picture but contains periodic subtitles warning that the disk is not
for resale. End Note.) The distributor replied to his shop-owner
customer that his largest supplier from Jakarta had been closed down
by police and he was struggling to get new stocks of pirated disks.
He said that raids happened periodically and the factories typically
reopened after a few weeks, once the police are paid off. The
distributor told us that virtually all pirated disks in Bali come
from Jakarta now and the two factory closures had stopped supplies
of certain types of disks, especially television programs. He added
that Malaysian disk suppliers were unreliable, as their disks had
become too expensive and difficult to get through customs. Balinese
pirated disk suppliers are now completely dependent on Jakarta
factories for the thousands of disks per week sold on the island.
JAKARTA 00002034 002.2 OF 002
Surabaya Disk Sellers Wary of Police
------------------------------------
5. (SBU) A July 20 survey in Surabaya showed there are fewer pirated
optical disk vendors in Surabaya compared to March 2006. The number
of pirated disk sellers in Pasar Atum dropped from more than two
dozen to 11. The 11 remaining ethnic Javanese vendors are operating
under much tighter security. Storefronts show only original music
and video disks. The shops have hidden entrances to back rooms for
vetted customers to view pirated disk inventories. Stall vendors
have only catalogs of pirated disks available for viewing. Once a
customer selects disks, stall attendants retrieve them from
inventories kept separately. The new ITC Mall has seven ethnic
Chinese-owned pirated DVD shops all operating under tight security.
Mall security guards work as lookouts, alerting shop owners, who
then shutter their stores before police arrive. Tunjungan Center
formerly had several dozen ethnic Madurese disk vendors, all of
which are now closed. Galaxy Mall and Super Mall are down to one
pirated disk vendor each. The Super Mall vendor is only open from 7
to 10 in the evening, after police leave duty. Surabaya vendor disk
inventories range from 5-10,000 disks and are priced at $0.77.
Storeowners say 100% of their pirated disk supplies come from
Jakarta, but they said they have not noticed a change in supply
levels since the factory closures.
Comment
-------
6. (SBU) Our informal survey of pirated optical disk vendors points
to two primary conclusions. The raids on two pirated optical disk
factories in Jakarta are beginning to have an impact on pirated disk
supplies in Bali, a primary Indonesian pirated disk distribution
point for foreign national tourists. Continued pirated disk
factory raids and follow-up with police to ensure the factories are
not reopened will have even greater impact on pirated disk supply.
Also, local police commitment to IPR enforcement hinders illegal
disk vendors from distributing their products. The reduced numbers
of pirated disk vendors and reduced availability of pirated disks in
Surabaya is compelling evidence that East Java police are
maintaining their promised enforcement efforts. ConGen Surabaya
will press Balinese police leaders to make a similar commitment to
IPR enforcement in their province.
MCCLELLAND/HUME