Competition heating up in TV industry

Luas Samudera, Contributor, Jakarta

The Indonesian television industry will remember the year 2001 as one of the most crucial in its history, while preparing to face what could be the toughest competition ever next year.

This year saw several new players rushing to get their signals on air, several changes in the ownership of major networks, and state television station TVRI broke its 20-year ban by running commercials and going head-to-head with commercial stations.

The advent of several new stations this year, including four nationwide terrestrials, makes Indonesia one of the most competitive, free-television markets in the world. A representative of a Hollywood major distributor, who declined to be named, said that the advertising expenditure, the staple food of the industry, could not sustain it.

"It's difficult to sustain a healthy market under the current political and economic conditions," he said.

Four of the new stations -- Trans TV, TV7, LaTV and Global TV -- were given an Oct. 25 deadline to hit the air. Technical difficulties, however, forced them to start trial broadcasts later than that.

In contrast with their spirited plans earlier this year, a combination of a depreciated rupiah against the greenback and political uncertainty made four stations revise their plans to air for 20 hours per day from their launch date.

Making a surprise move, one of the country's largest media groups, Jawa Pos, started up a station named JTV in East Java's capital, Surabaya. It targeted people in East Java only. Its sister, Riau TV, has broadcast to local inhabitants in Riau province, near Singapore.

Another company, Ar Rahman Media, launched a free Islamic satellite TV station -- Ar Rahman -- which focused on education. About 80 percent of the 227 million-strong Indonesian population is Muslim. This station has targeted groups of Muslims in Islamic boarding schools throughout the country.

The fall of former president Soeharto in 1997 also brought down several businessmen who were close to him. This year it was Peter Gontha's turn. Once an Indonesian media mogul, Gontha had to face the fact that his Datakom Asia (DA) group could no longer support his existence in the industry, leaving behind only a couple of unpopular content providers for cable television, such as Quick channel and legislature-dedicated Swara.

DA, which controls ailing satellite platform Indovision and terrestrial stations, as well as a pay-TV platform, among other media outfits, has been taken over by media-hungry PT Bhakti Investama, under the command of Hary Tanoesoedibjo.

Bhakti was reported to have paid DA's debt of up to US$30 million. This included an estimated $20 million to News Corp's Hong Kong-based STAR TV for program supply and management fees in the late 1990s. DA and STAR TV had a 10-year platform management deal that went awry over unpaid bills and strategy disagreement.

Former president Soeharto's son Bambang Trihatmodjo of the Bimantara business group was closely involved in the startup of DA.

Bimantara owns 69.8 percent of the shares of second-ranked commercial station RCTI, which Gontha helped establish in 1989. Gontha's ties with RCTI were cut in 1998 in sweeping boardroom changes.

DA subsidiaries include PT Matahari Lintas Cakrawala, which controls the country's first DTH platform, Indovision, pay-TV outfit PT Indonusa Telemedia and PT Media Citra Indostar, which operates an S-band Cakrawarta satellite. DA also has a minority shareholding in cable television Kabelvision.

DA was also reported to have lost its shares in third-ranked SCTV to Bhakti Investama. An unconfirmed report said the funds from Bhakti were used to pay back bond holders, who had subscribed $260 million in overseas bonds in 1997. Most of the revenue from the bonds was used to pay for Datakom's Cakrawarta satellite.

Meanwhile, this year seemed to be a fruitful one for Bhakti. Although losing its grip on SCTV at the end of this year, Bhakti's CEO Hary Tanoesoedibjo was appointed as head of RCTI's board of commissioners, representing shareholders.

The departure of Bhakti saw another investors' entry to commercial station SCTV. An IT firm, Elang Mahkota Teknologi (EMTEK), whose shareholders are close associates of Australia's advertising Singleton group, has secured its position. EMTEK has its founders, Eddy and Fofo Suriaatmadja, as members of SCTV commissioners' board.

Australian daily The Age reported that Mark Carnegie, chairman of the Singleton group, had teamed up with John Wylie and the Singleton group, and injected $37.5 million for a one-third ownership of an entity which, in turn, is 73 percent of SCTV. The network is valued at $125 million for that sum.

Other ownership changes also happened in front-runner Indosiar. Shortly after going public in March this year by selling 15 percent of its shares, the government, through the Indonesia Bank Restructuring Agency (IBRA) sold another 49 percent of its shares to PT TDM Aset Manajemen.

The current major shareholder, PT TDM, was set up in August 2001. Many suspect that the Salim group, former sole owner of Indosiar, was behind this firm, which has been eying most of the Salim group's assets that are currently in IBRA's hands.

This year was also marked by the bold step of state television station TVRI to separate from commercial stations. Shortly after its status changed from a foundation under the now-defunct information ministry to a state firm under the finance ministry, TVRI cut its ties with commercial stations, to go on its own.

Aside from an insufficient government subsidy, TVRI used to find support from commercial stations, which set aside 12.5 percent of their gross revenues. However, since the economic crisis in 1997, the commercial stations were reluctant to meet the requirement. Now the debt levels of all five commercial stations have reached $33.8 million in total.

It is fascinating to see how the industry will develop next year. The existence of more players certainly guarantees tighter competition, and a station or two will fall victim sooner or later. An account of the Indonesian television industry for next year is likely to be quite different from this year's.