Indonesia watching foreign TV ownership

By Bill Guerin

JAKARTA - Hot on the heels of media mogul Rupert Murdoch's acquisition of a strategic stake in a low-ranked Indonesian television station owned by the family of the country's chief economics minister, Jakarta has moved to restate the foreign ownership cap in media at a maximum of 20%.

Communications and Information Minister Sofyan Djalil was quoted as saying, "We will now check the ownership of local TV stations to ensure that foreign ownership does not exceed 20% at the stations ... this is to guarantee our media is not influenced by foreigners."

The deal gives the News Corp subsidiary, STAR TV (Murdoch's China Business Big Picture Asian broadcaster based in Hong Kong), the permitted 20% of the Cakrawala Andalas Televisi television network , ANTV and a foothold in Southeast Asia's largest economy, which is also one of the region's fastest-growing markets. The country has 11 national free-to-air broadcasters (television transmitted without charge for the delivery of the signal to the viewer), including the state-owned network, TVRI, and literally dozens of provincial broadcasters.

"This is proof that Indonesia is a good place to invest in and speaking frankly it means that dollars are coming in," said Anindya Bakrie, president of ANTV, and son of Indonesian Coordinating Minister for the Economy Aburizal Bakrie.

Significantly, Djalil said broadcasters already indirectly controlled by foreign investors would be required gradually to divest their foreign-owned stakes to local companies. A draft of the broadcasting bill finally passed by parliament in 2002 had allowed for up to 49% foreign ownership, but the relevant clause in the final bill restricts outsiders to a 20% share.

Money to be made
However, opportunity is there. In November 2000, Australia's millionaire adman, John Singleton, teamed up with the banker, Mark Carnegie, to pump in $37 million in convertible loans to buy a stake in Indonesia's third biggest network, SCTV, in a joint venture with companies linked to relatives of former president Suharto.

The deal, though breaching an investment ban in a sector that was then closed altogether to foreign investment, delivered a jackpot less than a year later, with the punters doubling their money when the company was floated on the Jakarta stock exchange. The pair still owns about 40% of SCTV, but Singleton's publicly listed company, STW, recently sold its stake because Australian investors were reportedly nervous about the holding.

The group had not actually sold any shares, Bakrie said. "New shares will be issued and all the funds raised will flow to ANTV." The company has been profitable for the past three years, he said, declining to disclose figures. Since the end of 2004 when it was saddled with $150 million debt, a restructuring based on a debt-for-equity swap agreement with no fewer than 203 creditors has left the company debt-free.

Spokeswoman Jannie Poon downplayed concerns that the partnership might result in a quantum leap in foreign program content or a loss of jobs for locals. "We are excited to be investing in Indonesia," Poon said at a joint news conference with Bakrie. "We are confident this partnership will be fruitful and productive. We see ANTV to be a promising company."

In an effort to head off controversy, ANTV has pledged to improve the quality of news broadcasts and secure its independence. It has already poached one of Indonesia's most-respected news directors from a rival station, and executives said that control over programming, particularly news content, would remain in Indonesian hands.

Advertising prospects
The tie-up with STAR was intended to "take the business to a different level" and would lead to an ongoing investment program by both parties, Bakrie said. For "different-level" read "more attractive to advertisers".

STAR pioneered satellite television in the region and now reaches out to more than 400 million people across Asia, India and the Middle East. Its pay-television services are already available on cable and satellite in Indonesia relayed by Indovision (now owned by ethnic-Chinese tycoon Liem Sioe Liong's Salim Group) and Kabelvision (owned by the Lippo conglomerate founded by ethnic-Chinese tycoon James Riady).

But the satellite channels command very little advertising revenue in Indonesia. Unsurprisingly, STAR is said to have been scouting around for some months looking for opportunities to buy a free-to-air network in Indonesia.

In the first seven months of this year, ANTV raked in Rp896 billion (US$89 million) in advertising revenue, according to an AGB Nielsen estimate. Local television advertising grew by almost 30% last year to $1.4 billion, some 69% of all advertising revenue.

A mixed bag for viewers
The investment will enable ANTV to "realize its objectives of developing its local Indonesian programming and production into a world class broadcasting standard".

Indonesian television today is a mosaic of Latin-American and US soaps and sitcoms, low-budget Chinese kung fu-style action movies, variations of Western TV game shows such as Who Wants to be a Millionaire, reruns of foreign movies, some of them very ancient, and of course Indonesian-produced programs.

There is little local culture to be seen on any of the channels except state-owned TVRI. On the contrary, most sinetrons (mini-series) are set against lush backdrops of fabulous Hollywood-style houses and the characters are either screaming at one another or beating one another up.

Unfettered violence is a recurrent theme in most programs, with the supernatural a close second in the theme stakes, followed by comedy. Published research shows that mini-series continue to be the best crowd-pullers but reality shows are a fast growing trend, and the Indonesian version of Donald Trump's The Apprentice, the first such spin-off in Asia, premiered this month on Indosiar.

The Trump substitute figure is home-grown entrepreneur and charismatic celebrity, Peter Gontha, once a major media mogul himself. Gontha founded PT Media Citra Indostar in the mid-1990s to develop his Indovision direct-to-home (DTH) platform against the main competitor, PT Broadband Multimedia, owner of Kabelvision.

Datakom Asia was controlled by Suharto's eldest son Bambang Trihatmodjo, Gontha and Anthony Salim and was Indonesia's first integrated multimedia holding company, with a monopoly on pay-TV operations.

In 1997 a newly formed holding company sold $260 million worth of US bonds in New York (billionaire George Soros bought $10 million worth) and used the money to buy and launch the Cakrawartha-1 ("News Weapon" in Bahasa Indonesia) satellite in November 1997 (at a total cost of $173 million) and to pay for on-ground facilities and marketing.

Indovision had at first used C-band capacity on a Palapa C satellite to deliver its services to subscribers, thus giving it a huge potential audience for its new digital pay-TV packages for which STAR TV was its major programming supplier.

But the company's decision in 1998 to move the transmissions to Cakrawartha-1, which was then the only S-band satellite operating over Asia led to an almighty row with STAR TV, which perceived Indonesia's troubled economy at that time to be a hostile environment for rebuilding a potential subscriber base from scratch on the new S-band satellite platform. The downside is that subscribers must purchase, as is the case today, a decoding system that cannot receive any of the many other satellite TV services available in the region. Both sides entered the agreement in 1995 and had about 28,000 subscribers when it was terminated.

Major players
Murdoch and Bakrie face formidable competition in bidding to drag ANTV up the ratings ladder. ANTV's audience share has slowly inched up to 5% over the last three years. The latest weekly survey by AGB Nielsen shows it positioned as only the eighth most popular compared with the market leader, RCTI, with its audience share of more than 20%.

National television audiences have grown significantly. Over the past 10 years, the number of television-owning households in five major cities has grown by 232% to 59 million households (231 million viewers) - a massive market by any standards.

Five new TV stations - Trans TV, Lativi, Metro TV, TV7 and Global TV - were born in the last three years, adding to the existing six: TVRI, Televisi Pendidikan Indonesia (TPI), Rajawali Citra Televisi Indonesia (RCTI), Surya Citra Televisi Indonesia (SCTV), ANTV and Indosiar.

SCTV was the second private TV station to be set up in Indonesia, and in April 2002 the holding company, Surya Citra Media (SCM), acquired the outstanding 26.85% of SCTV from Gontha's Datakom Asia and now fully owns SCTV, which is one of the top three national private television stations in the country. It controlled about 16.6% audience share in 2004.

The publicly listed media and telecommunications company, PT Bimantara Citra Tbk, is the sole owner of PT Media Nusantara Citra, which controls a 100% stake in RCTI, a 70 % stake in Global TV and a major share in TPI.

Some of the other new TV stations are an extension of other major Indonesian media empires, such as Kompas group, which established TV 7, and the Media Indonesia group, which established Metro TV. But other stations - Lativi, Trans TV, Global TV - are owned by well-heeled, influential public figures who were not previously connected to the media business

Bill Guerin, a Jakarta correspondent for Asia Times Online since 2000, has worked in Indonesia for 20 years as a journalist. He has been published by the BBC on East Timor and specializes in business/economic and political analysis in Indonesia.