Indonesia's TV stations struggle for survival

Indonesia's TV stations struggle for survival

Luas Samudera, Contributor, Jakarta

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.