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Indonesia in View Summary

Country Overview

Indonesia is the most populous country in Southeast Asia, with a population of 266.8 million as of the end of 2018, forming 68 million households. The premium video industry has undergone a significant transformation over the past four years, shifting from a direct-to-home (DTH) TV-dominated market with limited fixed broadband access to one primarily driven by IPTV and online video services.

FTA TV Market

Indonesia has a well-developed free-to-air (FTA) TV sector, featuring one state-owned station and over 210 private FTA TV stations. The ten largest private national stations broadcast via unencrypted satellite C-band and capture 97.5% of the FTA audience share. These stations absorb 90% of the ad spend, despite the presence of over 200 TV stations. Four major media groups control nine out of the ten large private FTA stations.

Traditional Pay TV

The pay TV market in Indonesia is highly competitive, with 385 licenses issued by the government (17 DTH, 366 cable, 2 terrestrial). Total traditional pay TV subscribers are estimated at 10.5–12.5 million, with 6.5 million on national platforms and the rest on licensed local cable operators (LCOs). Since 2014, the share of cable TV/IPTV subscribers among pay TV users has increased five-fold, from 13% to 51%, while DTH subscriptions are expected to decline further as consumers prefer bundled services including fast broadband.

Currently, DTH platforms operate on 34 transponders across nine satellites, with a reduction in transponder usage due to the closure of smaller DTH platforms and cost-cutting measures.

Online Video Industry

The online video industry in Indonesia is growing rapidly, driven by improved broadband availability and falling data costs. However, it remains in its early stages, with the largest players attracting 2–5 million active monthly users. Global platforms like Netflix have faced entry barriers, including Telkom Indonesia's blockage. Instead, local and Asian players are emerging, focusing on Indonesian and Asian content, live sports, and Bollywood/Hollywood films.

Advertising Trends

Indonesia is the largest advertising market in Southeast Asia, valued at US$2.8 billion in 2018, and is expected to grow at 13.6% CAGR to reach US$4.1 billion by 2022. Historically, FTA TV has been the primary channel for ad spend, but online advertising is gaining traction. FTA TV is projected to lose 18% of its ad share by 2023, while online advertising is expected to grow at 24% CAGR. Offline ad segments, such as print and radio, are also expected to see a 11% drop in ad share due to the shift to online.

Internet and Mobile Trends

Indonesia is the 5th largest internet country in 2017 with 143 million users (55% penetration). Over 84% of users connect via mobile devices, and mobile penetration has stabilized at 70–72%. The mobile sector is saturated, with 346 million SIM cards in use. ARPU is among the lowest in Southeast Asia at US$2.3/month, and data usage has doubled annually since 2016, reaching 3.5 GB/month in 2018, and is expected to grow to 15.5 GB/month by 2022. Mobile traffic is projected to rise to 69% of total internet traffic by 2022.

Content Landscape

Football rights are a key driver in Indonesia's video market, with most leagues broadcasting on FTA and full packages on pay TV. Recent entrants like PT Mola TV and PT Futbal Momentum Asia have acquired significant rights, including the English Premier League and World Cup 2018. Beyond sports, OCC platforms are investing in local content, including original series, films, and exclusive rights to Indonesian blockbusters, to differentiate themselves.

Challenges in the Industry

Piracy

Piracy is a major challenge for both traditional pay TV and online content (OCC) platforms. It is estimated that 6–12 million watch unauthorized content on cable TV, and 15 million consume illegal content online. The use of illicit streaming devices (ISDs) is common, with 29% of online consumers using them. This has led to 17% of these users canceling legal pay TV subscriptions.

Cable vs. Mobile Piracy

While online piracy has increased with better broadband, cable piracy remains a significant threat to DTH operators in rural areas where broadband is limited. Many consumers in these regions are unaware of the illegality of their subscriptions and are simply focused on cost.

Regulatory Environment

Traditional pay TV is heavily regulated, especially in terms of content, while OCC is not legally recognized and therefore not regulated. The Broadcasting Law only covers DTH, cable, and terrestrial services, leaving OCC and IPTV outside of regulatory oversight. The Ministry of Communication and Information Technology (Kominfo) and the Indonesian Broadcasting Commission (KPI) jointly oversee broadcasting and telecommunication, with KPI focusing on content regulation.

Regulatory Gaps

KPI's current stance on foreign advertisements is relaxed compared to its previous approach, which required replacing foreign ads with local ones. The government is working on revising the Broadcasting Law to include IPTV and OCC, but the draft has stalled in the House of Representatives (DPR) and is unlikely to be passed before October 2019.

Conclusion

Indonesia's video industry is evolving rapidly, with a shift from traditional DTH and cable TV to online and IPTV services. While the FTA TV market remains dominant in terms of audience share and advertising, the online video sector is gaining momentum. However, the industry faces significant challenges, including piracy, content acquisition costs, and regulatory gaps, which hinder growth and sustainability. The future of the industry depends on the government's ability to implement effective regulations and address piracy effectively.