Iris Wee, CMO, Link Net-First Media shares her views on the Indonesian pay-TV market and future areas of innovation.

The Pay-TV Innovation Forum is a new global research programme for senior pay-TV executives, developed by NAGRA, in partnership with leading research consultancy MTM, designed to explore and catalyse innovation across the pay-TV industry, at a time of unprecedented change.

As part of the programme, we are publishing a series of interviews with leading pay-TV industry executives from around the world to explore their views, perspectives and experiences of innovation in the pay-TV industry.

In this interview, Iris shares her views on recent developments in the Indonesian pay-TV market and future areas of innovation.

What do you think makes the Indonesian pay-TV market different?

The Indonesian pay-TV industry has faced a unique set of challenges and opportunities. Historically, pay-TV penetration has been low due to high level of piracy and a very vibrant and competitive free-to-air TV market that offers high quality local content, providing little incentive to people to switch to pay-TV. The pay-TV market has been dominated by satellite operators that have primarily pursued aggressive pricing strategies, with little differentiation or innovation.

How would you describe the key developments in the Indonesian pay-TV market?

I think the market is changing. First of all, the traditional DTH satellite providers have realised the limitations of their business model and are now increasingly trying to bundle their services with fixed broadband or 4G mobile data services, usually through partnerships with telcos. In addition, they are trying to move beyond pure price competition and are looking for ways to differentiate their services. However, without being able to support two-way communication, DTH satellite operators are at a big disadvantage. Hybrid set-top boxes might seem like a reasonable next step for them, but this would require significant capital expenditure and a long-term view of the business, which are not supported by the low ARPU and high churn' nature of the DTH satellite pay-TV business.

Secondly, there has been a number of new fibre providers entering the market recently, with pay-TV and video playing a significant role in their market penetration strategies. Some of them offer pay-TV services as part of their bundle, while others have partnered with OTT players to offer on-demand entertainment bundles.

Finally, the market has seen a number of OTT service launches. It is yet to be seen whether these services are going to be a substantial threat to the traditional pay-TV model, but they have definitely been very innovative. OTT service providers recognised that a one-size-fits-all model would not work in the Asian market and adapted their propositions in terms of pricing and content. They have implemented a myriad of content localisation techniques, such as subtitling and dubbing, and are actively looking to acquire and produce local content.

Looking ahead, what will be the most exciting areas of opportunity for pay-TV service providers?

Telcos will drive innovation in pay-TV over the coming years, with broadband being key to pay-TV market penetration strategies. They will not limit themselves to offering pay-TV as a set-top box-based home entertainment service: their offerings will be agnostic of consumer premises equipment and will include OTT products targeting the on-the-go digital consumer. It is only a matter of time before we will see the proliferation of digital media players, such as Chromecast and Apple TV, and these guys will be ready for that.

For mobile telcos, OTT services will be key to monetising their mobile data services. We are already seeing a number of telco and OTT partnerships in the market and these will be ever more important. However, the penetration of these services will heavily depend on pricing and packaging strategies.

Also, if you compare mobile networks in Europe and those in emerging Asian countries, you quickly realise that our networks cannot support a great on-the-go video experience. Some OTT and TV Everywhere services already have download-to-go functionality, and anyone trying to build a successful OTT service will need to support it.

Meanwhile, DTH satellite operators are changing their strategies and moving away from competing solely on price. They are seeing rationalisation and investment in new set-top boxes, with differentiating functionalities, and putting more focus on premium customers.

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