A favorable court ruling, a stronger month for advertising and a strategic renewal in 2015 should help boost prospects for leading Indonesian TV-focused media group, Media Nusantara Citra (MNC).
Through December 18 close, MNC's share price was up 13% since December 2, gaining 5% since December 16.
According to MNC group president & CEO Hary Tanoesoedibjo: “Advertising growth is better in the closing months of 2014 than it was in Q3, but it’s far from optimal. However, the new ruling on MNCTV, our national launch of Sindo TV, which we will aggressively expand in 2015 as our fourth network, plus our investment in new content IP and digital networks, creates a path for a bigger future."
The Indonesian National Board of Arbitration (Bani) December 12 ruled against Siti Hardiyanti "Tutut” Rukmana (the daughter of former President Soeharto) in the ownership dispute of free-to-air (FTA) TV broadcaster MNCTV. Bani ruled in favor of PT Berkah, which had 75% ownership of the asset, which was subsequently sold to MNC Group.
The Arbitration Board has also ordered Tutut to pay Rp510 billion (~US$50 million) to Berkah.
According to Hary Tanoesoedibjo: "Based on this ruling, the legitimacy of MNC's acquisition of CTPI (now MNCTV) from Berkah in 2006 is in no doubt. MNC’s ownership of MNCTV is 100% clear. We believe this ruling supersedes previous court rulings, because the investment agreement states that Bani was the proper channel for dispute resolution.”
Tutut’s legal team is looking to nix the ruling arbitration, citing that the Supreme Court earlier declined Berkah’s judicial review.
MNCTV contributes more than 20% to MNC group revenues and profit.
Sindo TV has now officially joined as MNC Group’s fourth free TV network after RCTI, Global TV and MNCTV.
Sindo TV has a national broadcasting license and is heavily focused on news and, secondarily, infotainment and sports. Over the medium term, MNC expects margins off the news business to be fairly healthy. The company is targeting US$20-30 million in ad sales from Sindo TV next year.
FTA ad demand has been generally slower than expected in 2014, and industry analysts Media Partners Asia (MPA) now expect overall advertising growth (led by TV) to have actually dipped below 10% (to around 7-8%).
MPA is still guiding for 12% growth in 2015, driven by a stronger second half.
According to Hary, Q4 2014 has generally tracked better for MNC, especially in December to-date. He is guiding for MNC to grow overall ad revenues by 10% next year (led by FTA TV), and is cautiously optimistic about ad demand.
Weaker disposable incomes certainly adversely impacted key advertising categories such as FMCG and retail during much of 2014. While an improvement is expected next year, especially after Q2 2015, a weak local currency remains a big concern.
MNC is investing to build up content IP with a library that now boasts 140,000 hours (65% non-news).
“We are really pushing animation and game shows, and we will use it for both our FTA and pay channels,” says Hary.
Sister company MSky, with 2.7 million pay-TV subs, has 19 of its own channels, leveraging the MNC Group library. Three to four new channels are expected next year.
Production costs for some of the self-produced pay channels are fairly economical, running as low as US$60,000 per month (per channel). The goal is maximizing ad sales potential, using return-path data and analytics as well as working with Nielsen to include pay-TV viewership into its national measurement panel.
MNC will also look to more aggressively license and sell its IP outside Indonesia.
MNC is slowly but surely moving into the digital space with plans for over-the-top (OTT) video and IPTV services.
As highlighted by MPA in its analysis of online video in Asia Pacific, players such as YouTube and Facebook are taking the lion's share (i.e. ~80%) of online video advertising in markets like Indonesia, a fact that Hary finds "very concerning… even though the base has been low. Mainstream advertisers are also turning to digital, slowly… it’s been factored more into the budget.
“We need to build our own platforms and really scale up fast both for free and pay-TV,” he adds.
“Digital piracy is also a big issue and there will be more copyright enforcement in the future.”
OTT, IPTV and VOD services, leveraging local and Hollywood content, will start making their debut in 1H 2015 through both MNC and MSky.
Significantly, Global Mediacom will have built out its fiber network to 1 million homes passed by June 2015, as it looks to grow its Play Media service, leveraging a bundle of high-speed internet, IPTV and OTT with content from MSky.
Ultimately, both MSky and Play Media will sit under a new company called Sky Vision Networks, a proxy for strong national video and broadband distribution.
As a leading independent consulting and research provider focused on Asia media & telecoms, MPA offers a range of customized services to help drive business development, strategy & planning, M&A, new products & services and research. Based in Hong Kong, Singapore and India, MPA teams offer in-depth research reports across key industry sectors, customized consulting services, industry events to spread knowledge and unlock partnerships, and publications that provide insights into media & telecoms.
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