Steve Lillywhite on how selling music in Indonesia isn’t chicken feed


Since 2016, renowned British record producer Steve Lillywhite has been running Jagonya Music & Sport, a company that places music in Indonesia’s Kentucky Fried Chicken restaurants.

KFC Indonesia sells around 600,000 CDs a month, making it a huge player in the Indonesia music industry. Music Ally spoke to him to find out more about this unique story of chicken and music.

How did KFC end up selling CDs?

The family of my boss [Ricardo Gelael, director of PT Fast Food Indonesia] owns all the franchises of KFC in Indonesia. Indonesia is a 90% Muslim country, so there is no pork. Beef is not really part of their tradition, so chicken rules. They know chicken like the French know foie gras. KFC is eight out of 10 people’s favourite fried chicken.

KFC is a destination restaurant here. A lot of the stores have stages for music and a lot of them have kids’ playgrounds. And they have tweaked certain things to go with Indonesian culture: they serve it with rice, they serve a spicy one, as well as the original. They do a whole load of different things, but it is still KFC; it still has Colonel Sanders. Because of the music connection, it has this slight feel of music, cool and chicken.

About eight years ago, my boss’s brother [Fabian Gelael] was running the company and he decided to start bundling CDs with chicken. This was a ridiculous concept, but when you live in Indonesia you get the sense of the ridiculous here. And it really took off. People have said to me, ‘Like Starbucks?’ And I have said, ‘No it is not like Starbuck’s because the point-of-sale person takes your order and says, “Would you like a CD with that?” So it is actually suggested selling.

We have a maximum of 10 or 11 CDs at any one point to choose from. And you can either basically just buy a CD, like in a record store, or you can buy it slightly discounted and bundled with your meal. Around 98% of our CDs are bundled with chicken. It’s not like record stores are coming back, but people now have this incredible connection with KFC and music.

My boss’s brother left the company and then my boss took over both the chicken and the music side. And he realised that two-and-a-half-years ago, when he took over, that we know distribution is king. All the record stores in Indonesia, like the rest of the world, were closing down. So he was the only record store in town. But they were making not a great slice of the pie because they were just distributing record companies’ [music]. So he brought me in to make the company go directly to artists. To make it more like a record company, with its own record stores.

We sell the best music in Indonesia. We are known for the best chicken, so we like to have the best CDs. Other chicken companies, because it was so successful, have started selling CDs. But they sell about 40,000 a month across their stores. We sell close to 600,000 every month. We are the Manchester United of CD sales!

So he [Fabian] brought me in to do deals directly with artists. My team and I decide what CDs are put in the stores. This is a big thing. You can sell half a million or 600,000 CDs of your artist. It is a big chunk of change for the artists with the royalties. Everyone is trying to get me to release their CD and I have to decide what is releasable. I have to think of things for the whole family, which is great fun. I came up as a rock producer, but I am not really releasing any rock albums. All the content is local. I have just introduced DVDs, which are huge. Kids DVDs and I put old movies together and make a DVD bundle. I can have some fun with it.

I go to the artists and I offer them basically a better deal than if they are with a record label. A lot of the big artists are still signed to the big record labels and I am not just talking about Sony. They are on big labels in Indonesia that have been stalwarts of the Indonesian music scene for the last 30 or 40 years [including Musica Studio’s, Trinity Productions and Aquarius Music]. About 50% of my product is the ones that I deal with directly. And 50% is what I pass on from the major labels.

How much do CDs sell for?

About four dollars [other sources put this closer to $3.50]. It is still a very poor country. The average wage is really low. But, in fact, the music business worth here is minuscule mainly because of piracy. You can go to any street corner and buy a bootleg CD or a bootleg DVD. They cost a fifth of what I sell them for at KFC. But KFC is known for good quality and people have it in their culture to buy CDs.

I am not going to be doing this in 10 years’ time and we already have plans to [evolve]. I can talk about the streaming business in Indonesia as well, which is very interesting. That is going to be the future until I die, for sure, because I can’t see any other form of sharing music after streaming.

So the music industry in Indonesia is performing well?

Of all the countries I have been to, I can’t think of many countries that love music more than Indonesia. Here they have career artists. There are some fantastic people who are respected, they have someone who is a bit like Bruce Springsteen meets Bob Dylan [Iwan Fals], but 16-year-olds think he is really cool. They have that respect for their elders that a lot of Asian cultures do. But they have a deep musical culture as well.

I came here to do some producing. And I ended up going, ‘Hang on, there is a whole thing I can learn.’ Because I had been doing the same thing for nearly 40 years and I knew all the tricks and I know how the West is going. I need something to spark my interest.

Pretty much around the world the value [of recorded music] has shrunk for the last 10 years because CDs were dropping and streaming was a penny to the dollar. But here it [the music industry] was never big in the first place because of piracy. What is going to happen is that streaming will be cheaper than piracy. You have got 250m music lovers who will eventually get smartphones. Indonesia was the last country BlackBerry was big in. It is very exciting for the future and that is one of the reasons I am here.

In terms of streaming, Spotify has not increased its streams in a year. And no one has reached critical mass yet. There are still seven or eight streaming companies – and you know when there is that many no one has got it yet.

You know you have reached critical mass when you have two players in the game: Coke and Pepsi; McDonald’s and Burger King. For the moment here it is all up for grabs. There is a whole new telecommunications network going in next year, called the Palapa Ring, and that is going to put at least 3G around the whole country.

What does the rise of streaming mean for what you are doing with KFC? Traditionally we have seen streaming replace CD sales. Is there an argument for KFC or Jagonya doing their own streaming platform?

There is absolutely an argument and I, of course, cannot comment on that. You can obviously get the implication from what I am saying that all of this is under way. We are aware of the future and we are dealing with it.

How do people listen to music in Indonesia? Do people use YouTube a lot?

YouTube is still the biggest. There’s a lot of streaming now of local product [on YouTube]. I look at that data to [guide] what I am going to sell at KFC. Because if I see great streaming I will go, ‘Well, I can sell that.’

People spend a lot of time in their car because there is a lot of traffic. So everyone still has CDs in the car. A lot of people don’t have a smartphone – they literally have a CD player at home. This will change over as these Chinese and Indian makes of smartphone come in.

How does the image of KFC work with music?

KFC is not a lower-class food here. It is middle-class; a destination restaurant. I love it. I eat there all the time. When we sign artists, they have to agree to do a certain number of store visits, where they come and they meet the fans they sign some CDs, they stand behind the counter and serve for five minutes.

All these things are great. This gives them record sales and it gives KFC the cool image. Some of our flagship stores have a stage, so we have album launches there and sound systems in there so the artist can play an acoustic set. It is a lot of fun. It is a very clean environment, KFC here.

Have you had international artists ask you about what you do in Indonesia?

Yes, of course. They don’t quite understand. Can you break an artist [this way]? It is a bit like playing a football team with one bad player. I have to make my numbers every month and I have 10 or 11 CDs in the store. They all have to have a reason to be there. I always say to an artist, ‘You must take it from zero to five; I will take you from six to 10.’ Because I can’t afford to have someone there that no one has heard of.

International artists are big in Indonesia. Celine Dion is coming here to play a concert. We have had Ellie Goulding and we have had Bryan Adams come and play. Our sticker on the CD is always “100% Indonesian”. Now I can sort of make the rules up as I go along, but I have to sell my CDs.

This country is duet crazy – they love a duet – so I have some ideas of linking a big Western artist for duets with local stars. Having recorded some great duets, ‘Fairytale Of New York’ being probably the greatest ever, I know that you don’t have to have two people in the same room to sing a duet. So the Western artist doesn’t need to be here all the time to sing.

There is a way with technology now that I can do a duets album with a very well-known artist and it would sell like hot cakes. But I came here to help them with their music. I like to help them realise their own potential – rather than sell them Justin Bieber and the sort of stuff that the West is going for now.

Where do you see yourself and the Indonesian music industry in 10 years?

In 10 years’ time, it will certainly be streaming. All the signs [are there] in terms of the hardware and the money that is being invested here. Joox is a big player here. Apple Music, no. The funny thing here is that Indonesia has completely leapfrogged ownership of digital content.

They didn’t bother about downloads?

They did not bother. Here the #1 song on iTunes, [sales] are in the hundreds. With a population of 250m. And it never got big. So all of a sudden Indonesia is leapfrogging the downloads. It will be up to speed with the rest of the world very shortly. Which will explode their industry worth.

Unlike the West that shrunk the worth of the music industry, here, because of all the bootlegging and all the piracy, if you can offer the consumer something cheaper than a pirated version of the thing that they are looking for, why not?

How much does it cost to subscribe to a streaming service in Indonesia per month?

It is 50,000 rupiah ($3.57). That is not that much. But the way I am looking at Indonesian culture is that it is much more of a “sachet society”. Everyone lives daily. Costco would not be big here. No one would pay 50,000 for a month of streaming. So there are ways that I am looking at it to offer it more for a smaller amount of time. It even comes back to the language. They have no tenses really, so everything is sort of happening now.

If you are selling 600,000 CDs a month at roughly $4, so that is $2.4m. In 10 years, you think the streaming business will be way past that; so will it be worth a lot more than that $2.4m?
Yes, of course. Streaming will take over.

Looking at the IFPI figures for 2016, mobile personalisation was still bringing in a lot of money in Indonesia – $21m in 2016 – which was more than streaming did that year, according to their figures.

It is RBT [ringback tones] here. It is huge. Or it was huge. This whole idea that you could buy 30 seconds of a song, so when someone rings you, that is what they hear. Which is something that we have never had in the West. That was huge. And it still is pretty big.

People don’t mind spending, although it is less now because people don’t use the telephone. WhatsApp is absolutely huge here – everyone uses it. So obviously the RBT is not such a big thing. I am not involved in that, but I would think it is rapidly decreasing because there is sort of no point.

WhatsApp is really big, but what about other social media?

Facebook is big, but WhatsApp is the messaging platform of choice. A few people use Line, a few people use WeChat, Facebook Messenger a little bit. But WhatsApp is my favourite. I use it for everything.

So why is Indonesia important for the music industry?

It is the fourth-largest populated country in the world, it is a democracy, the only place left on the planet where Muslims and Christians seem to live side by side in perfect harmony, as the song used to go. And it is a nice form of liberal. Everyone loves everyone else because they are Indonesian and they respect each other’s god. I believe that in the music industry it is going to be big.

Do they speak much English there?

I am having local lessons. But the local language, they literally don’t have a word for ‘him or ‘her’, it is always ‘them’ or ‘he’. They have sort of tenses but it is all within the context.

As I live in a multi-cultural city, Jakarta, most people can say ‘Hello Mister!’ And they don’t mind trying, but as you know in Europe, if you try to speak at least a little to begin with they will help

Why do you think we don’t hear much about Indonesia? It is a vast country? It is just because it gets along OK?

It was enjoying double-digit economic growth. It is not so much now and the rupiah is dropping against the dollar, so they have to prop that up somehow. But in general I think it is quite stable.

There is a general election coming up next year and it would probably be good for stability for the incumbent [president Joko Widodo] to get re-elected as he has a policy of separation of church and state.

Hopefully the incumbent will stay. He is a cool dude who likes Metallica. It is a young vibrant country; they are so young. The only problem is that they all smoke.

Written by: Ben Cardew