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.