Still A Long Road To Travel: Pay TV

PAY TV IN INDONESIA:
STILL A LONG ROAD TO TRAVEL

The average Indonesian watches 5.5 hours of TV a day. With a population
of 242 million people and a Free-to-Air (FTA) TV penetration rate of
56%, that equates to 745 million hours of television watched
each day. With such potential, it is no wonder that many companies
are now attempting to get into the Pay TV market. We believe
that although there is considerable potential in the
Indonesian market, investors should not expect a
return on investment consistent with that offered
by the conventional Pay TV model .
Venture Consulting has recently

undertaken a number of projects in
the rapidly changing media and
telecom market in Indonesia.
Pay TV was first launched in Indonesia in 1994 when Indovision and

First Media entered the market. However, despite this long history,
Indonesian Pay TV has a penetration rate of only 3%, one of the lowest
in Asia. Since 2011, a raft of new players such as Skynindo, Aora and
Parabola Orange TV have tried their hand, launching lower priced
packages targeted at Indonesias middle-income earners. Although
subscriber numbers have picked up lately and penetration may well
reach 10-15% in the next 5 years, we doubt that it will ever reach
60-70% based on the current model.
houses to produce local programs specifically for Pay TV, or stream

top FTA programmes on demand for a small fee. This will allow media
houses to monetise previously free content and give Pay TV operators
content that the customer values. This may well require pay TV / FTA
tie ups. Global Mediacom Tbk (GMC) is best placed to exploit this
structure as it airs 16 out of 20 of the top FTA programs, and owns
MNC Sky Vision. Another player, Malaysias TonTon, has already begun
to put catch-up TV series aired on FTA behind a pay-wall. This has
been very well received by customers.
We believe this for three reasons. Firstly, Pay TV packages are not
attractive enough to draw the mass market, even with their low pricing.
Most of the top 20 programmes in Indonesia are shown on FTA TV
rather than Pay TV. These include local versions of reality shows such as
Indonesian Idol and MasterChef, and local dramas called sinetrons. Pay
TV is left to concentrate on Hollywood blockbusters and sporting events.
If they can lower content cost, Pay TV operators will be able to package
content in lower priced sachets. For instance, one sachet could
enable the customer to view sinetrons, another for Korean dramas
and local reality shows as compared to large bundles of content. These
sachets will cater more specifically to the demands of the customer
and increase gross margins as top rated local content typically has a
gross margin of 60%, versus 30% for sports franchises.
Secondly, piracy is rife. In 2011, 1.3m households held licensed

subscriptions while a further 1.2m households subscribed to illegal
signals. This excludes other forms of piracy such as pirated DVDs and
online downloads. So almost half of all users with subscriptions had
turned to piracy for Hollywood blockbusters.
Thirdly, the economics of the business are poor. ARPU has actually
fallen as these new companies have created cheaper packages to cater
to price sensitive customers. Even then, they are seen as expensive.
At the same time, operating costs have been increasing. The costs of
Hollywood and Sports content are being driven up by competition. For
example, the content costs of MNC Sky Vision (MNCSV) increased by
48% between 1H2011 and 1H2012. To compound matters, most Pay TV
is distributed through Direct-to-Home (DTH) technology which requires
high upfront set top box subsidies that need to be offset by high monthly
payments from consumers to become economical for operators.
To achieve significant penetration rates, Indonesian Pay TV providers
need to move away from conventional Pay TV content and distribution
strategies. They need to create offerings that cater to the changing
demands of a new generation. Our research and analysis suggests
the consumer wants two things: (1) more local and regional content and
(2) the ability to view it anytime and anywhere.
MORE LOCAL AND REGIONAL CONTENT

Pay TV operators should focus on getting regional content from
Malaysia and Korea. In addition, they should work with local production
ANYTIME, ANYWHERE
Pay TV operators should tap into the growth of cheap tablets and
handsets from a range of Asian and Western vendors to reach
increasingly tech-savvy Indonesian consumers by offering content on
demand and on-the-go. This could create a new way of watching TV
in Indonesia that could grow in parallel with the more conventional
distribution model. However, delivering video over mobile networks
eats up significant amounts of network capacity so offerings need to
be carefully constructed.
In New York, AEREO is disrupting the TV industry by allowing
customers to watch live FTA television over the web, for free. Through
the use of dime-sized antennas, AEREO captures FTA broadcast
signals and transmits them to a customers tablet or smartphone.
Therefore, unlike cable companies that have to pay millions to
broadcasting companies, AEREO is able to provide top rated content to
customers on-the-go at low prices, as it does not incur content cost. In
addition to receiving content on their portable devises, customers are
able to record up to 40 hours of content and watch it on demand, all for
less than $10 per month.
With the further development of 3G/4G networks in Indonesia, Pay TV
operators need to find innovative ways to take advantage of new and
available technology to give customers their desired content whilst
they are on the go.
06

Still A Long Road To Travel: Pay TV

Uploaded by

Copyright:

Available Formats

Still A Long Road To Travel: Pay TV

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Still A Long Road To Travel: Pay TV

Uploaded by

Copyright:

Available Formats

PAY TV IN INDONESIA:

STILL A LONG ROAD TO TRAVEL

Venture Consulting has recently

Pay TV was first launched in Indonesia in 1994 when Indovision and

houses to produce local programs specifically for Pay TV, or stream

Secondly, piracy is rife. In 2011, 1.3m households held licensed

MORE LOCAL AND REGIONAL CONTENT

You might also like