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Industry Overview: Indonesia Pay TV Industry

Indonesia's pay-TV market offers enormous room for growth and is accelerating at a fast pace. Innovative pricing strategies, higher quality content and new advertising opportunities are driving this expansion. According to Pyramid Research, Indonesia's pay-TV market is characterized by household penetration (almost 3% in 2010). However, most experts are bullish and are expecting the ratio to rise to 7% by 2015. Media Partners Asia, a pay-TV industry association, expects that the potential subscriber base could grow to 16 million based on income and affordability. Some analysts predicts the market to grow at 18.3% CAGR between 2010 and 2015 on the back of an improving economy and increased market competition. If realized this would see revenues reaching $778 million by 2015, a huge growth compared with the current market worth.

There are a number of pay-TV companies now operating in Indonesia; they include the three largest operators Indovision, Telkom-owned Telkomvision and First Media, which dominate the market, and several smaller ones such as Okevision and Gainindo. The untapped potential of the industry is drawing a lot of foreign investors too. Private equity firm CVC is planning to invest $269 million in the cable TV and internet business of Indonesia's PT First Media and get a 49% stake in PT Link Net, a unit that provides high-speed internet, cable pay TV and data communication services. In 2011, Saban Capital Group, a Los Angeles-based investment firm, bought  5% of Indonesia's Media Nusantara Citra (MNC) for Rp 692.3 billion ($78.2 million). MNC Skyvision is one of the country's largest pay-TV operators, through the brand services Indovision and Top TV. 
 
The regulatory environment, relatively positive and market-friendly to date, has some risks, as political forces undertake revisions of key broadcasting legislation. But, the regulations/practices on content in pay TV are more relaxed than in Free to Air (FTA). Steps have been taken to ensure that broadcast rights are easily obtained by big cities in Indonesia where the big industry players predominantly are. Since piracy is a huge problem, there are certain plans in the pipeline which would encourage unlicensed operators to obtain licenses as legal content will be able to flourish them.
 
Indonesia's pay-TV market is taking off. Despite lagging behind its neighbors in terms of television market size, healthy competition and residual demand should see Indonesia catch up over the next few years. Operators have been expanding their offering to increase their appeal to lower-income segments of the TV market. Indonesia's topography will also push its pay TV market towards being a Direct to Home DTH) market. With a host of new distribution platforms coming online, and strong economic fundamentals, Indonesia is looking to become one of Asia's fast-growth TV success stories.
 
(Source: Insight Alpha)
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Media Nusantara Citra (MNC)