MNC’s David Audy

In Indonesia’s sprawling free-TV landscape—where there are 11 free-to-air stations competing for the time and spending power of 260-million plus people—Media Nusantara Citra (MNC) is by far the leading player. Southeast Asia’s largest media company, MNC operates four terrestrial networks, including RCTI, MNCTV and GlobalTV, for which it produces 15,000 hours of content a year. It also operates pay-TV services under the Indovision, OkeVision and TopTV brands, commanding a 74-percent share of that small, but growing, sector. And since 2013, MNC Play has been giving Indonesians a quad-play package delivering telephony, broadband, cable and online catch-up TV. Overseeing those businesses is David Fernando Audy, the president director of MNC Media. He tells TV Asia about the growth prospects and challenges in one of the region’s largest countries.

TV ASIA: Tell me about MNC Play. What are the prospects for that platform given the challenge of bringing broadband access to large sections of the country?
AUDY: Today, the pay-TV segment is dominated by satellite DTH because of geographic challenges. Satellite is the best platform to reach the whole country. But in the future, broadband will play a key role, especially in the big cities. So this is one of the reasons why we launched Play Media. It’s one of the only pure fiber to the home services delivering high-speed internet. But that is not the key selling point. The key selling point is that people love the catch-up TV features. Of course, these features are not new in the United States or in Europe, but in Indonesia this is new. And we are the only company that can deliver seven days of catch-up TV. The best thing is it’s in the cloud. Unlike our competitor, which can only go two days back, and only for ten channels, for us, it’s seven days, 134 channels, and it’s all in the cloud. It’s amazing. People love this.

TV ASIA: Indonesia has the lowest TV ad rate card in the region at just $5,000 for a 30-second spot. How do you get those prices up in a market as crowded as Indonesia is?
AUDY: Negotiations. The number of clients is growing. Not only in the number of companies but SKUs as well. Everybody is launching more products. FMCG [fast-moving consumer goods] players that used to be small have become medium sized. They are all local and they advertise a lot. Going forward, we have to negotiate [higher prices]. But in our business, relationships are very important and it’s a double-edged sword. Sometimes relationships can protect you, but we cannot just go to our clients and say, I want to double the price. They will be offended. We have to do it without disrupting the great relationships that we have. And we have to make our clients understand that we also need to grow. Our clients are growing, 10 to 20 percent every year. But they are not giving us rate card increases of 10 or 20 percent! So we have to negotiate, nicely.

TV ASIA: What are the macroeconomic trends in Indonesia at present?
AUDY: We are the biggest player in Indonesia, and about 45 percent of the FMCG and consumer ads go to us. So we are pretty affected by what’s going on with the economy. 2015 was not a very good year for the industry. There was a lot of instability. The China devaluation triggered a surge in the U.S. dollar appreciating against emerging market currencies, and then there was the commodities crash. This affected the bargaining power of Indonesians and inflation. And business sentiment: people were worried, companies started cutting budgets. But the good news is that in 2016 things started to improve. I believe the industry grew by 4 percent, compared with minus 7 the year before. 2016 was the recovery year. Going forward, I think things look much better. We have commodities improving, the U.S. dollar stabilizing, emerging market currencies, especially the Indonesian rupiah and the Malaysian ringgit, may be flat or appreciate. And business sentiment, the most important thing, is improving significantly.

TV ASIA: Tell me about your recent $250 million capital expenditure on new facilities.
AUDY: Before, we had multiple studios scattered all over the city [of Jakarta]. If you’ve been to Jakarta, you know the traffic is very bad. It’ll take two hours for a 10-kilometer trip! So that created a lot of headaches for us. That is why we wanted to be stationed in one location. So we built these four buildings over 10 hectares of land. It comes with 48 studios, the latest state-of-the-art equipment. In terms of the on-screen quality, it will help us to maintain our superior position for the next few years. For example, when we did The Voice, the on-screen quality was much, much better than The Voice in any other country. The studio is amazing. And it delivered an average 21-percent audience share for season two. Season one was not done by MNC, it was done by a competitor. They averaged a 6.7-percent share. So clearly on-screen quality has done something to the ratings. And we’re all in the same location. Internal coordination and communication is the most important thing because we are a 24-hour operation. If we can be in one location, that saves not only costs but time as well.

TV ASIA: How are you monetizing the MNC library outside of your own platforms?
AUDY: We have deals with iflix and HOOQ and various other OTT platforms. The deals are currently still small. I’m talking to iflix about doing a bigger deal with local content. We’re not targeting other countries for program distribution, but we can talk to them if they’re interested. The biggest value will be [on OTT] in Indonesia. Our strategy is that we want to maximize the value of the library. If we have this content library sitting there, it can produce revenue for us if we utilize it.

TV ASIA: How do you keep your four channels from cannibalizing each other?
AUDY: RCTI only does drama; if they want to do non-drama, they need approval from the holding company. GlobalTV does movies. If they want to do drama, they have to ask our approval. Usually, they will not move out of their genres, unless there is a significant drop in ratings and they need to think of something else. Then we will sit together with the business units and think, Are movies no longer favored? Should we do Korean movies or Indian movies? Usually, we work together with them.

TV ASIA: Eleven free-to-air channels is a lot for any one market. Why do you think there are so many?
AUDY: It’s 11 owned by four groups. The government in the past gave a lot of licenses. I hope they don’t do what they did in Thailand if they roll out to digital terrestrial. In Thailand, it went from 3 to 60 channels. That was a disaster. If they want to kill the industry, that would be the easiest way to do it. But I think the current government understands. Ten years ago people probably didn’t realize [how best to manage DTT expansion], that’s why the case of Thailand or Italy happens. Now people have a good idea of what’s going to happen.

TV ASIA: How is your pay-TV business performing?
AUDY: Pay TV, like free to air, was tough in 2015. It was negative growth, single-digit percentage. It was still negative in 2016. It should recover in 2017. During economic crises, pay TV gets hit the most and recovers the last. Free to air is a staple, clearly related to staple consumer products, so it recovers first. But our pay TV has gone from 50,000 subscribers to 2.5 million in the last ten years. Every year we grew by double digits. So of course, just like a stock price, you cannot go up every year. Sometimes there will be one or two years where there is a dip in the growth. But we have to look at the long-term story.

TV ASIA: How is the piracy situation in Indonesia?
AUDY: It’s really bad. Actually, there are regulations. If you pirate, you can go to jail, you can get fined. But the problem is the enforcement. This is not the priority of the government. Indonesia is still a poor country. The government is more focused on making sure people have food in their stomach. Going forward, as the country becomes more prosperous, the government will be more committed to combating piracy. In the meantime, we try to do our part. If we know there is piracy, we report it to the police, we make sure they are penalized. But we can only do so much. If someone is pirating, we will make big news about it so everyone knows that if they do something wrong [they will be prosecuted].

TV ASIA: What are your goals for MNC in the next year to 18 months?
AUDY: Maintain the performance and maximize the revenue. It’s as simple as that. Everything is already in place, the investment CapEx cycle is complete, the ratings are high. We just have to convert the low rate cards into a more profitable business.