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Shift away from free-to-air TV advertising in Indonesia won’t be dramatic but is inevitable says Emtek COO

Hartono:

Hartono: ‘We can’t relax’

The shift of advertising dollars away from free-to-air television to emerging platforms in Indonesia will be slower than some are expecting and the development of the archipelago’s media market will echoe America’s, with the big TV networks staying strong, the boss of media giant Emtek has predicted.

Talking to Mumbrella after presenting at the Asia Pacific Media Forum in Bali, Sutanto Hartono, COO of Emtek, which owns three free-to-air TV stations, said that by 2020 traditional TV ad spend “will remain dominant” but added that the company “can’t be in denial” that the shift towards new channels will happen eventually.

“Come 2020, we believe FTA will remain dominant. That’s the good news. But we can’t relax, and we can’t be in denial that it [the shift] will never happen. It will,” he said, pointing to Emtek’s moves to diversify its business porfolio beyond traditional TV.

The publically traded firm owns FTA stations SCTV, Indosiar and O-Channel, pay-TV business Nexmedia, production companies including Screenplay Produksi, digital assets such as PropertyGuru, and recently invested in OTT service Iflix.

Hartono warned that making digital pay was an issue, but the company would be leveraging its relationships with TV advertisers to grow digital revenue.

“If you start up a completely new digital platform, you will have to subsidise the business, because you will be burning through a lot of money before the monetisation of that asset covers your costs,” he said, adding that his company had the infrastructure, talent and content to play in the digital arena.

“We anticipate that this is coming [the transition away from free-to-air TV advertising] but we believe that the speed of transition isn’t going to be as dramatic as people are saying,” he said.

Television advertising has proved resilient in Indonesia, with two thirds of total spend still going on free to air TV. Digital has grown from virtually nothing in 2007 to just under 9% share in 2015. But traditional television has been barely affected by its rise, with share dropping slightly from 67% to 65% over that eight-year period.

Asked how quickly the shift away from traditional television is likely to happen in a domestic consumer market increasingly led by digital and mobile, Hartono said this was “an impossible question to answer” but suggested that Indonesia would follow US media market trends.

“Clearly many online companies [in the US] are doing quite well. But interestingly at the same time the four TV networks are doing relatively well,” he said. “It’s not like the newspaper business, which is collapsing.”

Digital may not eat into television’s market share because of the entry of small to medium-sized businesses – which contribute to around 60% of the country’s GDP – into the advertising market, Hartono suggested.

“Importantly, we believe that if the digital space really picks up, it won’t be a case of pure cannibalisation from the same pot [of advertising spend]. We’ll see SMBs, which previously have found advertising too expensive, entering the market, which will expand the total ad ex,” he said.

During his presenation, Hartono highlighted the obstacles that stand in the way of digital growth, for instance the lack of a standard measurement system enjoyed by television advertisers. Measurement was an issue also highlighted by the Indonesia boss of WPP, Ranjana Singh, during a session on the mobile opportunity for marketers in the world’s fourth most populous country.

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