Southeast Asia may be a beacon of growth for media owners and advertisers alike, but Indonesia, its largest economy, is in a league of its own.
A new report from Media Partners Asia (MPA) called Indonesia’s Television Industry – The Next Five Years, shows combined TV advertising and subscription revenues galloping along at an 18% five-year compound annual growth rate (CAGR) from 2011 to 2016, leaving other Southeast Asian TV markets in the dust.
The ad market as a whole meanwhile is expanding at a 15% CAGR, according to analysts from MPA, publisher of Asia Media Journal, making Indonesia the fastest moving of Asia-Pacific’s top 15 ad markets.
MNC in the vanguard
Leading the charge is media conglomerate MNC Group, enjoying a dream start to 2012 with two of its terrestrial channels topping the ratings much of February and March.
MNC’s usual top-tier rivals such as SCTV and TransTV seem to have lost some of their mojo, but this time it’s not MNC’s traditional lead channel RCTI with the biggest audience share but RCTI’s younger sibling, MNCTV.
A former mid-tier channel that ranked fifth in audience share last year, MNCTV is enjoying a repositioning and the fruits of a new partnership with production house MD Entertainment, which used to turn out hits for RCTI’s archrival, SCTV.
Having tasted success for MNCTV, MNC Group management want to keep it that way, upping the stakes for rivals such as Emtek, which owns SCTV, and Para Group, which owns Trans.
Emtek added another national channel to its portfolio after taking over Indosiar last year, but the company, a free cash machine run as a tight ship, will have to loosen its margins, the industry’s highest, to compete.
Para Group has also enjoyed greater momentum with its former mid-tier channel Trans 7 of late, partly because the channel inherited some successful formats and shows that TransTV shed in a bid to stay fresh.
With RCTI set to launch a localized version of international reality format X Factor, more expensive to make on a per-hour basis than drama, the costs of providing winning content is rising, with major players, also including Bakrie Group-backed Viva with two national channels of its own, ramping up spend on content and production.
Ratings success however will turn these costs into a sound investment. Free-to-air TV, seen by advertisers as a cost effective way to build brands and drive sales, should benefit most from Indonesia’s consumption-led boom, on track to become a US$2.5 billion revenue engine by 2016, compared with US$0.8 billion for pay-TV.
However, while a limited number of broadcast licences is a barrier to new entrants, competition in pay-TV has become fiercer, with a staggering 130 licenses in play.
Half a million Indonesian households signed up for a pay-TV service for the first time last year, the highest rate of industry growth since the late 90s, a testament to the benefits of competition in a market where just 5% of TV homes are pay-TV subscribers, forecast to rise to 14% by 2016.
Most of the new customers however, are still opting for market leader MNC through a DTH offering called Sky Vision, reaping the rewards of a sustained multi-year investment in content and infrastructure.
MNC’s success is based on a classic business model of subsidizing the set-top box to encourage subscriber loyalty, but Sky Vision’s clear lead leaves little room for rivals to follow suit.
Recent entrants are trying out alternative strategies instead, either cheaper mass market DTH services with more basic packs or premium cable offerings bundled with broadband.
Content remains key, as ever, with many players expressing an interest in co-production ventures with the likes of Disney, HBO, News Corp and Viacom – opening a door for international companies to capitalize more directly in Indonesian growth too.
For Indonesia’s rising middle class, the golden age of TV could be just about to begin.
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