Indonesia’s TV Industry: A Sinking Ship?

The chairman of the Indonesian TV association says the industry is facing tight competition in a heavily regulated environment

By Gilang Ardana
Monday, August 22, 2016

With current technology allowing people to stream almost anything on their smart devices, free-to-air (FTA) television faces heavy challenges to maintain its existence. Indonesia has gone from just one government-owned TV network for much of the Soeharto era to having one of the largest broadcast industries in the world.

The Indonesian Television Broadcasting Association (ATVSI) represents the interests of all 10 terrestrial broadcasters. The assocation has been very active voicing its concerns over the clarity of regulations and fair competition in the TV sector.

AmCham Indonesia met with Ishadi Soetope Kartosapoetro, the chairman of ATVSI, to discuss the current situation of Indonesian TV. Ishadi is one of the most respected figures in the local TV.  He is commissioner of Trans TV and prior to that he worked for Indonesian Education Television (TPI) and headed national TV station TVRI. He shared the association’s views on tough competition in the national TV industry and concerns over broadcasting regulations.

AmCham Indonesia: Can you tell us about ATVSI?

Ishadi Soetope Kartosapoetro: ATVSI is Indonesia’s TV Association. Our main activity is uniting all ATVSI members, because in practice private TV companies nowadays have a high level of competition. There is nowhere in the world that has bigger competition than Indonesia – we have so many TV stations, with unclear regulations.

The second is to defend our common interests to Indonesia’s Broadcasting Commission (KPI). Indonesia’s regulations on broadcasting are very complicated and heavily politicized. We negotiate and talk with the DPR [House of Representatives], Kominfo [the Ministry of Communications and Informatics], and the KPI to understand more about Indonesia’s TV Industry.

What is your view on the current state of the TV Industry here?

Our industry [FTA TV] uses publicly-owned frequencies , thus frequencies are limited. Even though by location Indonesia is very lucky – because we are located in the Equator where satellites work best in the area – but The International Telecommunications Union (ITU) has assigned our share of the frequencies so that other countries may also obtain frequencies. Because all transmissions use publicly-owned frequencies,  we have to pay if we want to use them.

The publicly-owned paradigm has resulted in a problem: everything must be supervised and controlled. Cable TV is not being supervised and controlled because it does not use frequencies. Because they use cables, their frequency capacity is much bigger and they can have access to thousands of channels. On the other hand, free-to-air is limited. Jakarta, for example, has 14 channels.

At the current time, there is new technology – digital technology. Smart devices – smart TV, smart phones – where people can watch TV on their devices,  yet they are unregulated. This is the situation in our country where free-to-air businesses are heavily regulated, while cable and digital are unregulated.

How heavily regulated is the industry?

It is dangerous is that our  broadcasting regulations control in a very detailed way. We have regulations on Perseroan Terbatas [Limited Liability Companies] as well as regulations on business competition.

TV stations can be divided into three categories: national, network and local. National TV stations are only in Jakarta, whereas regional ones are called local TV stations. The regulation stipulates that if we are national TV we also have to provide for local TV stations. If that happened, all of the private TV stations would go down. We would not be able to cover the costs in each of the regions we cover in Indonesia.

We do have growth in advertisements, but it has been stagnant at around 5 percent in the last few years. Furthermore, online advertisements have reduced TV advertisement to as much as 4 percent. They are slowly leaving TV as a platform.

Looking at the TV landscape in Indonesia, no one wants to invest in TV stations. To make it more complicated, there is regulation that requires TV stations to be evaluated by the KPI every 10 years, and if they are found to have infringed the regulations, their permit can be taken away. We should bear in mind that people would not want to invest $1 billion in a 10 year only company. Most of their investment will only reap a profit after 15 years.

You mentioned high competition among FTAs, can you explore more?

First things first, I think FTA TV in Indonesia has taken a wrong turn since its inception. With limited frequencies, we should  limit the number of channels. However, what we see in Indonesia is the opposite.  Take the US for example, it has only has around two to five free-to-air TV channels while here in Indonesia, we have 10 TV channels.

Since the beginning, Indonesia had five TV channels in the [end of the] Soeharto era. It was difficult already for them to compete with one another as the market was very limited. Advertisements are only centered in big cities in Indonesia, smaller cities have none of them. The small cities have no economic capacity to buy the products being advertised.  After the reformation era, it did not change, in fact we added five more, making the competition even tougher.

From the business perspective, we have to see how big is the market capacity to provide a thriving environment for TV. The TV industry lives from its advertisements, making the market limited.

In reality now, out of the 10 TV channels, only six are making a profit. I say six because two of them are news channels. The advantage of news channels is that their costs are very low – they only had to pay around Rp500,000 – Rp1,000,000 for an interviewee. Meanwhile, for artists, we pay up to  Rp80 million per talent for each appearance. If we count for a month – how much can he get? TV stations cannot only hire one artist for a show, they have to hire quite a number of them. Whilst others may claim we have high revenue, but if the revenue is 10 billion and the cost is 11 billion, is that profitable?

With such a complicated environment, how are TV stations able to survive?

Businesses have small and large profit – but it is still profit. Despite smaller profit each year, they will still survive. They also try to change the content to cheaper versions – ANTV has gotten their formula: Indian TV dramas. However, according to the national law, the maximum for foreign content is at most 20 percent out of the 24-hour slot.

Those who survive are those who are capable of being dominant – the rest suffer. Even ANTV, despite its rise in popularity, those watching their channels are lower middle income and below. The advertising companies do not want to pay for their commercials to be broadcast on ANTV because the audience is upper middle income and above.

There is growing concern over the declining quality of Indonesian TV programs. How do you respond to that?

Those who are complaining about the quality of TV shows, in fact, do not know or have never fully watched the shows. They say that [the concern] is based on public opinion, but YKS [Yuk Keep Smile - an Indonesian variety show], for example, during its peak could have as many as 50 percent of the Indonesian audience. Is that not the public? So who are they representing?

We should understand that 60 percent of Indonesian viewers are either elementary school graduates, or have not graduated. Those people are the ones watching TV. They do not have the money to go out to shops, overseas, or watch a Bon Jovi concert. Of course, they will watch the TV, where dramas are the ones selling dreams to them.

Another unobserved development is the increasing trend where youth are no longer watching TV. They have access to the Internet, watching streaming sites available on their devices. If they claim that the free-to-air channels are only dumbing down society, what about the unregulated ones on the phone? The minister of information stated that there are 15,000 pornographic applications and they are unregulated. In fact, free-to-air ones now are the most polite of all because we are being regulated and filtered.

If there is reform, what fundamental aspects should be changed?

For us it is simple, business has its own nature. Out of the 10 TV stations now, we can see the five who are surviving. Let us see later down the years, there will be three left – it is a selection process on its own. No matter how much they try to reduce costs, it will result in them not hiring the ‘big’ artists, and then what? No one wants to watch their channel. It is a market mechanism on its own.

So then, above all, we need to understand that TV is an industry. Everyone involved in regulating the industry should not see us as the enemy. If they continue to do so, the industry will be finished.

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