(18 May 2009 5:00 pm)

MUMBAI: A country with a large population and economy should be a dream-come-true for pay-TV businesses. But this doesn't appear to be true in the case of Indonesia where the service is far behind most terrestrial, or free-to-air, television.

While India's pay-TV market penetration rate currently stands at 65 per cent, in Taiwan it is almost 90 per cent. However in Indonesia it is just 2.5 per cent.

Sharing his views, Star Group chief executive officer Paul Aiello who was recently in Jakarta to attend a broadcasting summit says, "The government in Indonesia has been encouraging the broadcasting industry and there's good lot of involvement of government regulators, ministers, leading local media players in the country and some of the leading international media players."

Talking about Star's pay-TV business in Indonesia, Aiello states, "Star started its business in Indonesia in early 1990. Our business includes satellites and a cable channel that offers close to 40 channels such as Star World, Star Movies and National Geographic Channel."

To a question on whether he was optimistic about the Indonesian market, Aiello asserts, "We are optimistic about Indonesia's fundamentals. However, it is critical that regulators and industry players support a favourable environment. The regulators have done a good job so far.

"Honestly, I'd like to see an increase in investment. But the critical issue is for industry participants to work constructively with regulators to develop the pro-growth agenda and pro-growth strategies that are necessary. Piracy is growing and in the pay-TV industry in Indonesia. We need to address this issue immediately because if piracy grows, it would be difficult for pay-TV to grow."

About the prospects of pay-TV in Indonesia Aiello avers, "The broadcasting summit that I just attended had participants discussing the prospects for broadcasting. I think everyone looks at the basic demography of Indonesia and also looks at the economic story, consumption pattern, infrastructure development and rising income per capita. All these suggest that there is a pretty good media market."

About the growth of pay-TV in Indonesia, Aiello says, "Most pay-TV operators here have been able to grow large businesses because they provide a choice. A challenge here is rampant piracy because of which pay-TV in Indonesia has been unable to attract subscribers legitimately.

"In building pay-TV products in low-income countries, the challenge is making the price affordable. To provide value-for-money, pay-TV operators have to build good content, good services and provide choice. Large numbers of local investors are involved in the business. But I think the number of pay-TV providers will remain in the single digits over the long term."