INDONESIA: Indonesia's TV stations struggle for survival

The Bali bomb blast in October last year, which killed over 200 people, mostly foreigners, devastated the country's tourism industry, yet the news had little effect on the television industry

The Jakarta Post
Monday, December 29, 2003

By Luas Samudera

The Bali bomb blast in October last year, which killed over 200 people, mostly foreigners, devastated the country's tourism industry, yet the news had little effect on the television industry.

Although this year's advertising revenue is still expected to increase supported by a stronger currency against the greenback, industry players are worried about the legislative and presidential election next year, the first time in the country's political history that a president will be elected directly by the people.

Observers say business players will tend to wait until the general election, scheduled for April 2004, to throw in more investment, including money slated for advertising.

While this year's advertising expenditure is predicted to rise, many believe the increase will not be as high as 2002, which saw an increase of 37 percent.

But still, life is not as easy as it used to be. With the introduction of several new commercial stations, competition has never been so tough. Stations are spending more money on acquiring both local and imported programs to attract viewers.

In the first nine months of 2003, two publicly listed firms, Indosiar television and SCTV's parent holding company SCM, reported a more than 50 percent drop in profit.

Indosiar's profit dropped from Rp 278.1 billion (US$32.71 million) in 2002 to Rp 152.3 billion ($17.91 million) this year due to the rising costs of both local and imported programs.

Likewise, SCM suffered a 51.35 percent drop in its net profit from Rp 143.81 billion ($16.8 million) to Rp 69.97 billion ($8.23 million).

Imported programs such as news from Middle East-based television, Al Jazeera and Al Arabiya, created a boost for several stations shortly after the invasion of coalition forces led by the U.S. and the UK in Iraq.

But this year's trend among commercial stations are reality shows. Although mostly filling the fringe time, they help the station to gain significant viewership shares.

Most importantly, they have very low production costs, which is what every station needs at this time.

Currently each station produces its own format or acquires foreign formats and produces them locally. To face the difficult financial situation, most players are seeking injections of extra capital.

SCTV issued bonds worth Rp 425 billion ($51.8 million) on the Surabaya Stock Exchange at the end of June 2003. While Indosiar plans to go private by delisting from the Jakarta Stock Exchange, in order to add its foreign shares and to boost its liquidity.

Under the new Broadcast Law, foreign investment in broadcast firms is limited to a maximum 20 percent which is already exceeded in Indosiar. The Indonesian Banking Restructuring Agency (IBRA) plans to sell the remaining shares of IBRA's Holdiko, some 8.26 percent of the total Indosiar's shares.

In a similar move, Indonesia's first commercial station RCTI issued medium term notes worth up to Rp 700 billion ($82.3 million) to finance broadcast related businesses.

Bimantara group, major share owners of RCTI and Global TV, has become the majority shareholders of TPI following an agreement to take over TPI's outstanding debt to satellite operator Indosat.

TPI issued convertible bonds five years ago worth Rp 150 billion ($17.6 million) to Indosat, equal to more than 40 percent shares.

Meanwhile, state-run TVRI claimed to be on the brink of bankruptcy, earlier this year.

The station, which has 395 transmitters and 23 regional stations throughout the country, needs an annual Rp 1.3 trillion ($144 million) to function normally, but the state budget only provided Rp 150 billion ($16 million) in 2002, almost half of which is allocated for the payroll of its 6,800 employees.

To make matters worse, from January this year, the state has not allocated any budget for the station. The government then changed its status from a public service company to a limited liability company and injected Rp 250 billion ($27.7 million) to help the new entity. The government also appointed a new board of directors.

However, those who still see a future in the industry are launching or planning to launch new stations.

To add to the current Islamic satellite TV Ar Rahman, Bandung-based Manajemen Qolbu launched Islamic satellite TV, MQTV, in October. It is beamed through Palapa C-2 bird, MQTV eyes mainly Indonesians who own a Rp 3.7 million satellite dish pointed toward the bird.

It is also accessible in other countries in Southeast Asia and beyond such as Hong Kong, Taiwan, Australia, New Zealand, Bangladesh, Pakistan, part of India and the Middle East.

The publisher of Republika daily, listed PT Abdi Bangsa, also plans to launch its own commercial station next year. PT Abdi Bangsa president director Erick Thohir said the firm has gained a license to run a commercial station which is expected to hit the air next year.

Indonesia's local free satellite television launched its maiden broadcast in September 2003 with an initial investment earmarked at $1.5 million.

PT Pacific Televisi Anugrah, with the help of a subsidiary of Malaysia's electronic media firm Formis Sdn. Bhd in setting up the station both technically and in programming, catering to viewers in North Sulawesi and Jakarta.

One of the most anticipated names in the industry this year are the 27 prospective members of the country's first Indonesian Broadcast Commission (KPI), the equivalent of the American FCC. As stated in the new Broadcast Law, passed on Dec. 28 last year, members of the KPI must be installed on Dec. 28 this year.

The supposedly independent KPI will set broadcast guidelines, provide broadcast permits, oversee implementation of broadcast regulations and dispense sanctions for the Indonesian broadcast industry.

The 27 names have been submitted by President Megawati Soekarnoputri to the House, which later will conduct a fit and proper test and reduce the number of candidates to nine. Among those names are Bimo Nugroho of media NGO ISAI, lecturers Sinansari Ecip, Victor Menayang and Ade Armando, and former ANteve president director Anton Nangoy.

In the area of pay TV, other than a dispute between Indonesia's satellite operator PT Mediacitra Indostar, which operates the Cakrawarta-1 satellite, and wireless Internet providers PT Global Pratamasis in Jakarta and PT Mitranet in East Java's capital Surabaya over frequency interference, there is little to report.

A Jakarta-based company, PT Sarana Insan Muda Selaras, offers a multi-media cable service in Yogyakarta under the name Jogja-medianet.

Indonesian satellite operator Satelindo has signed a deal to lease its Palapa C2 transponder to Muracam TV of Japan to beam programs from several foreign TV stations to viewers in Japan.

The deal was signed by Muracam TV CEO Osamu Murakami and Satelindo director Djoko Prajitno. Prajitno said Palapa C2 was selected because of its widespread footprint in Asia, Australia and New Zealand.