TV stations vie for a bigger share of the advertising pie

Luas Samudera, Contributor, Jakarta

The launch of three new commercial television stations and the decision by TVRI to go commercial last year raises questions about the future of the industry. And while it still may be too soon to determine whether these new stations will survive or will simply become financial drains on the business groups supporting them, these questions deserve discussion.

Following the launch of around-the-clock news station Metro-TV in 2000, Trans-TV, TV-7 and Lativi have come onto the scene, all hoping to grab a slice of the advertising expenditure (adex) pie.

According to Indonesian Advertising Agencies Association (P3I) chairman RTS Masli, this year's gross adex is estimated to increase by 30 percent to Rp 12.6 trillion (US$126 million). Quoting research firm AC Nielsen, Masli said 60 percent of this year's adex would go to television stations.

Masli said last year's adex was Rp 9.1 trillion, with 62.5 percent, or Rp 5.82 trillion, going into the pockets of television stations.

Despite the current economic difficulties, companies continue to increase spending on advertising because they want to seize whatever opportunities are available to them.

"In these difficult times they need to communicate, and advertising remains the best way to get the message out," Masli said.

But all these figures only reflect what is happening on the surface. The reality is that there is a more surprising and intriguing story going on with the adex. According to SCTV president director Agus Mulyanto, who was speaking during a recent press conference, the annual net adex for television stations is not as glittering as it would seem. (See table).

The estimated annual total net advertising revenue for television stations, made available to the public for the first time, stood at an average of 50 percent lower than the figures released by AC Nielsen. Prior to the release of these numbers, the only figures available to the public came from AC Nielsen.

The numbers from AC Nielsen are higher than the actual net revenue because they are based on the stations' rate cards multiplied by the number of commercials they air. In reality, the stations regularly offer discounts, bonuses and special offers to advertisers.

"This year, three major stations -- SCTV, RCTI and Indosiar -- expect to grab 75 percent of the total television adex. And the rest will go to the seven other stations," Agus said, without considering the possible launch of commercial station Global-TV, which is now a sister company of RCTI and Metro-TV under Bimantara. "The competition will be tight."

Masli said, however, the opportunity was there for new stations. "There is always a chance for new television stations to grab a slice of the adex. The key word is programming because viewers are not loyal to the station but to the program."

Masli cited Famili 100, a local version of Pearson's Family Feud. The program has proved to be a ratings winner and popular with advertisers, both when it aired on ailing ANteve and now at Indosiar.

"Where there are viewers commercials will follow. It is just a simple market mechanism," he said.

It is not difficult to predict that the winner of this competition will depend on who has deeper pockets. And the situation is getting more complex because stations cannot rely entirely on their own production teams to supply their prime-time programming, forcing them to turn to production houses. But among the hundreds of local production houses, only about 10 can produce commissioned-programs for the stations, Agus said.

The combination of a growing industry and a limited number of production houses has resulted in an increasing scarcity of local programs, which has led to skyrocketing prices.

According to Agus, a television station which broadcasts 20 hours a day needs at least 7,500 to 8,000 hours of programming annually. Of that number, some 1,000 to 1,100 hours are considered prime-time programming. A one-hour prime-time drama now costs up to Rp 300 million, compared to Rp 100 million rupiah several years ago, meaning that stations must provide Rp 300 billion annually for this programming.

Considering these figures, it would appear that production houses have a rosier future than television stations.