Lack of reading habit might hamper growth of press industry

Lack of reading habit might hamper growth of press industry

By Reiner S.

JAKARTA (JP): The price of newsprint has soared following the
sharp depreciation of the rupiah against the U.S. dollar, and
spending on advertising has plunged along with the purchasing
power of many Indonesians. But all this has failed to deter
aspirants to the press industry. Newfound press freedom and the
greater ease of obtaining the requisite government permits has
led to 651 new publishing licenses being issued, according to
Secretary General of the of the Indonesian Newspaper Publishers
Association (SPS) Leo Batubara.

But can all these new publications survive? What problems are
they facing? How will the public benefit from the greater number
of publications available in the country?

Leo Batubara, 59, sat down with The Jakarta Post recently at
his office and shared his views. The following are excerpts of
what he said:

Question: What has caused the ebullience that can now be sensed
in the press industry and where is the industry now headed?

Leo: The ebullient mood stems from the greater press freedom
under the current government. When the Minister of Information
cut red tape in the procedure for obtaining news publishing
licenses, it allowed a long-repressed yearn to establish print
news media to flourish.

In 1997, the number of news publications in the country
totaled 289. In 1998, 581 new publications were licensed, and by
Feb. 2 of this year, that number had risen to 651.

The large number of new players is also driven by the fact
that our society is pluralistic and consists of numerous
cultures, ethnic groups, religions, and people of different
social and economic status, which together offer huge market
potential.

Under the old regime, 71 percent of all press publications
were concentrated in Jakarta. Now 35 percent are located outside
Jakarta, and the majority of new licenses are being issued in
West Java, South Sulawesi and North Sumatra.

This unprecedented increase in the number of press
publications will help to strengthen the foundations of democracy
in the country.

There are also signs that publications are opening in suburban
areas, with some specialized papers even catering to specific
local communities.

That means that the newspapers are becoming more segmented.
This may lead us to a press industry structure similar to that of
the U.S., which is dominated by small local newspapers due to the
heterogeneous nature of society there. That is the opposite of
the situation in Japan, which is an homogeneous society which
does not require a large number of newspapers. The Japanese media
is dominated by a small number of newspapers with large
readerships.

In 1997, Indonesia had a population of 196 million and 77
daily newspapers, which is equivalent to 62,000 people for each
daily. But with the massive entry of new players, the industry
will come to be dominated by small papers with circulations of
between 5,000 and 10,000.

Q: What are the prospects for these new publications?

L: According to UNESCO (the United Nations Educational,
Scientific and Cultural Organization), 10 percent of a developing
country's population should be able to subscribe to newspapers.
That means that with Indonesia's population of 200 million
population, newspaper circulation should be roughly 20 million.

But there is a major problem, because sales fall well short of
this number. Why?, it may be for financial reasons, or it may as
the result of a reluctance to read among the vast majority of
Indonesians? I think it is the latter.

I've calculated that the country's per capita spending on
newspapers is Rp 5,000 per month. In comparison, average
expenditure on cigarettes is around Rp 10,000. So the purchasing
power is actually there.

The problem is the lack of a reading habit; reading newspapers
is not regarded as important.

But this is also in part attributable to the relatively
similar content and design of most of the country's newspapers.
In the past, new newspapers tended to copy the contents and
design of leading and established publications.

That was a big mistake. It meant that new entrants to the
market had little chance of succeeding.

They should instead tailor their products to meet their
customers' needs. If you want to enter the beverage industry, you
do not try to mimic Coca-Cola, you come up with something new.

The way to succeed has been demonstrated by Dahlan Ichsan, who
presided over a turn around in the fortunes of the East Java-
based Jawa Pos daily and helped it to become one of the country's
leading newspapers. Before Dahlan and his team took control of
the paper, it had a circulation of around 3,000. Dahlan arrived,
and piloted the paper to a circulation of 200,000 in just three
years, despite the fact that per capita income in East Java
remained almost unchanged throughout the same period.

Dahlan didn't just wait for the East Javanese to become
wealthier, he changed the paper's content and design to cater to
the needs of the people of the province.

For new publications under professional management, the
opportunity for success is there. Others, I'm afraid, will run
into serious trouble in just four or five months.

But another major impediment is that the local press industry
lacks the professional journalists and managers required to
publish papers tailored to their customers' needs.

Only large publishing houses have professional journalists and
managers. So when a new player is backed up by any of those
groups, I'm confident that they will be successful.

But the future of the others is a big question mark,
especially for the newcomers focusing on politics. This segment
of the market is already crowded, and once the general election
is over and political tensions subside, they may find themselves
in difficulty.

These types of papers have tended to focus on political news
and have disregarded advertisement income. That's why they have
to sell their products above production costs, which means they
are a bit too pricey. A well managed newspaper should be sold at
a price lower than production cost and the difference should be
covered by advertising revenue.

So only newspapers supported by a steady stream of advertising
revenue will survive. Running newspapers is expensive and
investors may only be able to subsidize operations for the first
two years.

Q: Is it possible for advertising revenues to support all of the
new publications?

L: National expenditure on advertising before the crisis was Rp
5.1 trillion per annum. Ninety five percent of this revenue came
from companies and institutes in Jakarta, including banks,
cigarette manufacturers, and real estate agents. Thirty seven
products dominated the adverts placed in newspapers.

That means that advertising revenues elsewhere in the country
are as yet untapped.

So if new entrants to the market tailor their newspapers to
attract advertisers in Jakarta, they will lose out to the
established publications. They should therefore search elsewhere,
and should seek to exploit the potential of classified ads, which
have thus far been neglected by the majority of newspapers here.
Classified ads are the largest source of advertising income in
U.S. newspapers.

The government's decision to grant greater autonomy to
provincial administrations should boost economic activities in
the provinces, which means that huge advertising opportunities
will arise.

Q: How great are the current demands on journalists?

L: Theoretically, with more than 600 new licenses, at least
12,000 additional journalists will needed in the industry. This
is a problem, because we already lack capable journalists. Many
new entrants have little choice but to take on inexperienced
reporters who learn on the job.

The lack of professional journalists is hampering efforts to
defend the newfound press freedom and promote greater democracy.

Another problem in promoting professionalism in journalism is
the poor terms and conditions offered to journalists. This has
served to deter many capable students from seeking work in the
press.

Before the crisis, only 30 percent of the country's news media
companies were considered to be healthy. The 18-month-long crisis
has sent many media companies into difficulty, both through
falling advertising revenue and the soaring price of imported
newsprint.

Q: Are there efforts to provide the new entrants with government
facilities?

L: The government is standing firm with its no subsidies policy.
Our recent request for tax breaks has been turned down.

But we have urged the Ministry of Trade and Industry to try to
find a way of providing us with low capacity, second-hand
printing machinery that could be modified to use lower quality
newsprint. The new players have smaller circulations, so a slower
printing press shouldn't be a problem.

We've taken the wrong path in developing our newsprint
industry because we've imported sophisticated high-speed and high
capacity printing machinery which can only be used with high
quality paper, which itself required imported paper. This has
left the industry extremely vulnerable to fluctuations in the
exchange rate.

We have to change this. Bangladesh is a good example. There
they have started to manufacture newsprint which has a high local
content. They've imported second-hand machinery from Britain and
modified them for use with locally-made paper.

Q: Are there any plans to invite foreign investors into the press
industry here?

L: Yes, the new press law is currently being debated. One hot
topic is the possibility of allowing foreign investors to enter
local media companies. We expect the new law to be approved by
the House of Representatives next month.