Recent developments
There has been much talk about the vast potential of the Indonesian pay-TV market. According to reports, since 2007, the total number of official pay-TV providers in the country has more than doubled. Total pay-TV subscribers has also increased tremendously – from 900,000 subscribers in 2009 to an estimated 2.3 million in 2012, according to Media Partners Asia (MPA). Additionally, MPA’s report, Asia Pacific Pay-TV & Broadband Markets 2012, suggests that Indonesia accounts for the largest proportion of pay-TV growth in Southeast Asia, contributing 5% to net additions.
Numerous pay channels have also launched in Indonesia in the last two years. Here are some highlights:
• Multi Channels Asia introduced Outdoor Channel HD
• BBC Lifestyle debuted on Nexmedia, a newly launched digital pay-TV service by the EMTEK group in 2011
• Hong Kong’s Tiger Gate Entertainment introduced KIX and Thrill on MNC’s Indovision and Okevision Pay-TV platforms, as well as Aora, a pay-TV platform by PT Karyamegah Adijaya and TelkomVision in the same year
• Sony Pictures Television introduced ONE, a dedicated South Korean drama channel, on Groovia TV
• Bloomberg Television is set to launch in early 2013
• Global children’s channel KidsCo launched on a fourth platform on satellite operator Centrin TV
• In June 2012, Celestial Classic Movies launched on Indovision and Okevision
• Cartoon Network HD launched on national cable platform First Media
• HBO Asia launched HBO Hits HD on First Media’s pay-TV platform in June 2011, delivering HD content 24 hours a day
On the technology front, NDS (now part of Cisco) technology enabled Indovision to migrate more than one million subscribers from MPEG-2 to MPEG-4 settop boxes last April. Also, the Lippo Group signed a multiple-transponder capacity deal with SKY Perfect JSAT Corporation, the operator of the recently launched JCSAT-13 telecommunication satellite, in line with its plans to provide a direct-to-home (DTH) satellite TV broadcast service across Indonesia.
According to independent research and consultancy company BuddeComm’s research, the government’s programme for conversion from analogue to digital has also been initiated; simulcast of analogue and digital television has commenced and complete migration to digital television will take place by 2016.
Untapped potential
Despite these developments, Indonesia still has one of the lowest multichannel penetration rates in Asia. According to MPA, as of 2012, the country has a pay-TV penetration of 4.8%. In comparison, other Southeast Asian countries like Thailand, Malaysia and Vietnam have estimated penetration rates of 12.9%, 50.8% and 16% respectively. Vietnam, which has a smaller population, has achieved around 3 million subscriptions, which is almost double that of Indonesia’s.
Furthermore, the Association of Indonesian Multimedia Providers (APMI) estimated that there is anywhere between 680 to 2,500 illegal Pay-TV operators scalping the industry as of end-2011, with a total subscriber reach of two million households, almost double the legal subscription rate. Still, this unofficial figure does point to an increased demand for pay-TV content.
U.S. based Pyramid Research predicted in its report Indonesia: Mobile Services Set to Satisfy National Thirst for Broadband Connectivity, that pay-TV penetration will double between 2010 and 2015. “Home to the fourth largest population in the world, Indonesia is also characterised by relatively low penetration levels across most services, which will enable further growth in the fixed, mobile, broadband and pay-TV markets during the next five years,” said Leslie Arathoon, Director at Pyramid Research.
David Audy, President Director of GlobalTV, part of MNC Media Group, the largest broadcaster in Indonesia that also owns three of the top ten free-to-air (FTA) channels in the country, agrees with the projection. “There is only 4.8% pay-TV penetration in Indonesia. With such a low penetration, Indonesia actually has a lot of growth potential,” says Audy. He estimates that pay-TV penetration is expected to reach 18.8% in the next seven years, close to eight million subscribers.
Cause for concern
Audy says one of the reasons for the slow development of cable television in Indonesia is because of its inadequate underground infrastructure and geographical restrictions – the country is made up of more than 17,000 islands and over 70% of the entire territory is water. Poor internet infrastructure (whether broadband or wireless) and low internet penetration rates are also preventing the advancement of IPTV in Indonesia.
Another cause for the low pay-TV penetration, according to Elvizar KH, President Director of TelkomVision, a private satellite and cable broadcaster in Indonesia, is that the majority of the viewing public perceives pay-TV as expensive and suitable only for the middle and upper class markets. But he added that there is also the perception that FTA programming is becoming increasingly monotonous in theme and selection, while pay-TV subscriptions allow a greater variety of programmes.
Cam Walker, Territory Head for Indonesia, FOX International Channels (FIC), says the slow take up rate of pay-TV in the country is also due to terrestrial networks still garnering a high level of viewership.
Audy echoes this sentiment. “Historically, we have very good quality content on FTA. So people say ‘I can watch good quality content for free. I can watch Barclays Premiere League for free, I can watch the World Cup for free. So why should I subscribe to pay-TV?’ So because of that, people were reluctant to sign up for pay-TV.”
Widespread piracy of satellite signals is another reason for the low penetration rate in the country and FIC Indonesia is certainly concerned by this. “We’ve heard varied numbers going anywhere from one million to even over three million. So without question, the ‘provincial operators’, as they are known locally, have grown to significant numbers. Some say they’re larger than the actual legitimate subscribers today,” says Walker.
An overview of the Indonesian TV industry
Indonesia is one of the region’s most competitive television markets. Today, there are 14 networks and nearly two dozen local channels vying for a potential TV audience of some 164 million individuals or 35 million households – based on estimates by Badan Pusat Statistik that some 69 percent of Indonesian households own television. This may seem vast, but it is highly concentrated. AC Nielsen estimates that more than 40 percent of the audience share is commanded by Media Nusantara Citra (MNC), which RCTI, Global TV, MNCTV and SINDOtv
fall under. The Trans Group (home of TransTV and TV7) follows with a 22 percent share, then Surya Citra Media/ EMTEK with 16 percent and the Viva Group with 10 percent.
Most of these channels are free-to-air (FTA); the pay-TV segment is considerably smaller, but growing fast. The market is estimated to have grown by some five percent in 2011, with surveys indicating growth projections of anywhere between three to eight percent in 2015.
In terms of ownership, 2011 saw a consolidation amongst Indonesia’s biggest operators, leading to a decrease of competition in the market. Privatisation and blasé regulation led to four media conglomerates controlling 13 networks over the past five years (the 14th is TVRI, which is state-owned).
EMTEK purchased the Indosiar channel in May 2011, triggering an investigation by the Indonesian Broadcasting Corporation, which declared the acquisition illegal, citing a law from 2002 that disallows a company from holding more than one broadcasting licence. The acquisition was eventually cleared, with political ties paving the way.
Changing times
But Walker believes this is starting to change. “As first time users begin to have access to multichannel services, we start to see the viewership move away from terrestrial networks where they’re looking for digital options of viewership and onto pay. We just need to continue to harness that and build our brands.”
Walker adds that the way around pirates is not to work against them but to try and find a way to work together with the “provincial operators”, and help them become legitimate legalised operations.
Indeed, the pay-TV scene is primed for success. Indonesia’s middle class, expected to hit 140 million in 2014, will become the largest in Southeast Asia. Walker says this is the time to be investing in Indonesia because 1.4 million pay-TV subscribers are expected to be added in the next two years. In fact, FIC Indonesia is already looking into expanding its team of 11 to more than 30 over the next 12 months. The broadcaster will be launching four dedicated channels for Indonesia, first of which will be an all-Indonesian channel with the best of Indonesian entertainment – from film to general entertainment.
But local content remains king, as Audy purported at the recent Asia Television Forum pre-market conference. He said that the top rated programmes in Indonesia have always been local drama series and localised talent formats such as Indonesian Idol. Acquired foreign content, he says, have traditionally not done as well due to cultural and language barriers.
Alex Lambeek, CEO of Aora, who spoke at the CASBAA Convention 2012, agrees. Lambeek says that local content is an important key to cracking the market. International content also need to be dubbed and subtitled.
Walker shares this opinion. “The first step is to make that channel look and feel more Indonesian. So we start with the interstitials, the promos, bugs, the IDs and the graphics, the voiceover, the language options; we’re not going to go into the market and say, ‘Hey, this is a new channel!’ It’s a process, an evolution.”
Another condition necessary for the pay market to grow, says Walker, is an attractive price point for consumers. He pointed out that with more competition coming into the market, there will be more services being offered at various price points. In the last two years, there have been at least six new entrants who have offered very competitive rates that the market has never seen before.
Adi Kusma, President Director, Biznet Networks, believes that for the pay-TV market to grow, the country will also need to focus on building a fibre infrastructure. Nothing is ever straightforward; potential customers were reluctant to subscribe unless the offer included pay-TV. Most Indonesians have never experienced broadband services with most going straight to mobile.
Audy also notes that while mobile penetration rates are very high, the platform remains difficult to monetise – MNC’s very own research survey showed that mobile advertising formed only 0.1% of advertising budgets. So content, as Kusma prints out, is the sweetener to get prospects off the fence.
If the necessary economic, social, physical and geographical conditions are present, then the sky could very well be the limit for Indonesian pay-TV. The change already seems to have taken place. According to Walker, it took Indonesia 12 years to reach 600,000 pay subscribers since pay-TV’s introduction in 1994 but subscription rate has nearly doubled in the last two years alone.
For now, Audy says there is still a long way to go before pay-TV will become a way of life in Indonesia. “I think the culture will stay this way for quite a while. None of the pay-TV operators in Indonesia can use sporting licences to drive subscriber growth because in Indonesia this is politically and socially incorrect. You will have a lot of people shouting at you!”
