Competition heating up in TV industry

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.