Astro's Indonesia gambit

After months of jockeying, Malaysian satellite TV giant Astro finally rolled out its pay-TV service in Indonesia earlier this year. So far, results have been encouraging. But can the company's deep pockets really grow pay-TV's tiny slice of the massive Indonesian ad pie?

1)As Asia's third most populous nation after China and India, Indonesia's appeal is well-documented. Terrestrial TV dominates the country's adex to the tune of 70 per cent, according to Nielsen Media Research's most recent figures. Pay-TV adspend, however, is estimated at between US$1 million to $2 million, a tiny proportion of less than 0.1 per cent. Only 1.4 per cent of Indonesia's 30 million TV households subscribe to pay-TV, representing a penetration rate of approximately four per cent of households that can actually receive pay-TV. Pay-TV subscription revenues are estimated at around $7 million to 8 million.

2)Astro is aiming to bring its service to three million Indonesian households by 2010. This amounts to around 10 per cent of the country's 30 million-plus TV households. Backing its aspirations is a war chest estimated at $1 billion, and a joint-venture with Lippo subsidiary PT Broadband Media, which operates cable TV operator Kabelvision.

3)At present, the country's pay-TV market counts six players. Kabelvision accounts for approximately 208,000 subscribers, almost half of the total subscriber base. Indovision is the next largest with around 170,000 customers. While Kabelvision's growth aspirations are limited by its cable network, Indovision with its direct-to-home (DTH) satellite service, is not.

4)A key factor that has stunted pay-TV growth is the dominance, and proliferation, of free-to-air channels in the country. There are currently 11 national television networks, including state-owned network TVRI. On the back of tremendous audience growth — more than 200 per cent over the past 10 years — free-to-air adex has surged in recent years, although some observers put this down to media inflation.

5)Terrestrial TV stations offer an attractive mix of local drama and overseas hits — something that cable has yet to effectively compete with. Astro has come out of the gate swinging, offering several local channels, thanks to its in-house production Nous and strong content alliances. Indovision, meanwhile, is testing a local channel of its own.

6)Pricing is the next hurdle facing pay-TV's development. Prior to Astro's launch, subscription packages averaged $20 per month, and viewers also had to fork out a hefty sum for the decoder box — pricing that could only attract the very affluent. Astro's debut has changed matters somewhat. As per its successful Malaysian strategy, the company is subsidising boxes, forcing Indovision to follow suit. Subscription packages, likewise, have dropped to about $17 per month, also bringing greater flexibility in terms of channel options.
However, as many observers note, unless the cost of subscriptions can be limited to less than $10 per month, pay-TV will never make substantial inroads into the mass market.

7)The third critical challenge for pay-TV is Indonesia's sheer geographic diversity. Free-to-air penetrates 90 per cent of the archipelago's islands, but pay-TV's offering pales in comparison. While Kabelvision's cable network is costly and complicated to roll out, Indovision and Astro have a definite advantage due to their usage of satellite — but even these networks must be particularly strong if they are to cover the whole country.

8) To date, Astro is reportedly claiming 25,000 new subscriptions during its brief sojourn in the Indonesian market. The numbers represent a solid start, indeed, particularly after the company had to reduce its share in the joint-venture because of foreign ownership caps introduced by the Indonesian Government. The company's marketing communications have focused heavily on its brand, while Indovision is fighting hard on the retail front — driving subscriptions at major supermarket stores in the country for example. The gloves, it seems, are well and truly off in the battle to conquer Indonesia's untapped pay-TV potential.