Satellite Operator Eyes Bonanza in Growth of Pay TV Nationwide in Indonesia

Satellite Operator Eyes Bonanza in Growth of Pay TV Nationwide

By Jakarta Globe on 8:03 am September 10, 2013.
The launch of BigTV, a satellite television provider, on Monday in Jakarta. (JG Photo/Yudhi Sukma Wijaya)

Indonesia’s burgeoning middle class and high penetration of television ownership has pay TV operators relishing a piece of what one report identifies as among the most lucrative growth markets in Asia for subscription television. BigTV, the latest player in the game, was officially launched on Monday with the stated aim of signing up three million customers over the next five years — or just as many as the country’s entire pay TV subscriber base at present.“The number of households in Indonesia with a television set is around 40 million,” Felix Ali Chandra, the chief executive of BigTV, said at a press conference at the launch in Jakarta.

“Of that figure, around 22 million can potentially afford to subscribe to a pay TV network. Ideally I would like to target eight to 10 million subscribers, but for our first five years our target is three million.

“The pay TV market in Indonesia is extremely promising, and we’re here to help open up that market,” he added.

Big potential

There are an estimated three million Indonesian households currently subscribed to a pay TV service, with the figure expected to swell to up to five million by the end of the year, according to the Cable and Satellite Broadcasting Association of Asia. In 2011, there were just 1.8 million subscribers.

MNC Sky Vision, which operates the Indovision, Top TV and Okevision services, currently dominates the market, reporting that it had 2.01 million subscribers by the end of June, up 43 percent from the same period last year.

Rival First Media also recorded strong growth with a 52 percent increase in the number of subscribers to 291,000 households by the end of 2012, from 191,000 households a year earlier.

New players include Telkomvision, controlled by Telekomunikasi Indonesia; Orange TV, which is affiliated with the Sinar Mas Group; Aora TV, and Nexmedia, among others.

Rudy Tanoesoedibjo, the chief director of MNC Sky Vision, said in June that with pay TV penetration still just a fraction of the total television-owning population, he was confident of strong growth in the market, with 7.7 million subscribers by 2020.

Rara Wilis, the chief marketing officer of Aora TV, said the biggest potential for growth was in regions beyond Java, often out of reach of terrestrial television coverage but open to satellite television signals.

She said these regions already accounted for half of all pay TV subscribers, and the proportion was increasing.

Big TV and First Media are both owned by the Lippo Group, which also owns the Jakarta Globe. But whereas First Media is targeted at urban subscribers through its cable pay TV and Internet services, Big TV is looking to reach far-flung corners of the country through satellite.

“You could say Jakarta is already a very crowded market, which is why our focus will be on using satellite technology to reach other regions,” said Widijastoro Nugroho, BigTV’s chief operating officer.

Big obstacle

While the market potential is clear, the long-term picture is a little fuzzier.

Revenue from the pay TV sector in Asia is expected to boom over the next five years, according to a Digital TV Asia Pacific report issued in April.

The report noted that pay TV revenues were expected to more than triple in Indonesia between 2012 and 2018, the biggest increase of any country in the region.

However, PricewaterhouseCoopers reported in March that the Indonesian pay TV market had shown the slowest growth in Asia, expanding by just 2 percent per year, or significantly lower than other countries in the region.

Industry executives have identified signal theft and piracy as a major obstacle to the expansion of the pay TV market. The Indonesian Cable TV Association says there are around 2,500 operators throughout the country illegally rebroadcasting pay TV channels.

Marcel Fenez, head of the entertainment and media group at PWC and chairman of CASBAA, a trade body, previously said the high rate of piracy threatened pay TV operators’ revenue and discouraged innovation and development in the sector.

Handiomono, the legal chief of the Indonesian Multimedia Operators Association (APMI), said that with monthly pay TV subscriptions being offered for around Rp 300,000 ($27) and pirated ones for a tenth of that price, it was obvious what the consumer would opt for.

“People will tend to go for the service that costs Rp 30,000,” he said.

He said the effect of the piracy, not just in Indonesia but in Asia as a whole, was evident in the low revenue generated from pay TV subscriptions.

While the Asian region has 47 percent of global pay TV subscribers, it accounts for just 9.5 percent of total revenue from the sector. The United States, by contrast, has 20 percent of subscribers and generates 58 percent of revenue.

Handiomono said the APMI was continuously trying to identify illegal operators throughout the country and reporting them to the police.

Arya Mahendra Sinulinga, the APMI secretary general and corporate secretary of the MNC Group, the parent company of MNC Sky Vision, said the ongoing law enforcement efforts were bearing fruit.

He said that while many illegal operators had been shut down, others were working with pay TV operators to offer legitimate rebroadcasts of their premium content.