Indonesia’s largest media conglomerate MNC just recently signed an agreement to set up a joint venture with the Baidu-backed Chinese video streaming platform iQiyi.
MNC will hold a majority stake in the new company. MNC’s billionaire chairman Hary Tanoesoedibjo (often referred to as Hary Tanoe) says this is just the beginning of what he thinks is possible. He sees iQiyi, together with partners like MNC, become the biggest content platform across all of Asia. In China, iQiyi is already the biggest player, but in the rest of Asia, the adoption of digital content platforms has barely scratched the surface. Given Asia’s massive total population, that means room to grow.
MNC Group was established in 1989 and has diversified into a wide range of business sectors, including financial services and real estate. The partnership with iQiyi, says Tanoe, is also just one aspect of the group’s own digital transformation.
Tanoe, who says he is stepping back from the political ambitions he recently harbored to become a full time businessman again, sat down with KrASIA to explain where MNC is headed.
Kr: Recently, you have been more actively engaging the digital elements of MNC’s business. Can you tell us how the business has adapted and changed through the years?
Hary Tanoesoedibjo (HT): The digital side of our business is something that we have to focus on. We were originally a conventional business—we have four national television stations, many local TV stations. We have content production, drama, animation, talent search, and we produce 23,000 hours of content per year. We are the biggest content producer [in Indonesia]. We also have the biggest pay TV and satellite coverage [in the country]. Our pay TV has 16 channels.
However, the digital side is growing very, very fast—in advertising and subscription. We began by making a semi-digital pay TV service four years ago. We also play on YouTube, where we have three billion views per month from 40 million viewers. Because of the format, we make short content that runs for three to four minutes. We obtained a license to become a multi-channel network on YouTube, which means we can aggregate content made by other creators.
Kr: Can you tell us more about MNC Group’s collaboration with iQiyi?
HT: iQiyi is an independent OTT [over the top media service], which contains video on demand that’s not related to our TV channels.
Then have MNC Now, which is related to our pay TV content. The other OTT platform, RCTI+ is the live streaming platform for our free-to-air TV channels.
So we have entered all of these sectors. Digital advertisements now make up almost 20 percent of total ad spend in Indonesia. It might reach 30% in the next three years. It is growing very fast, so we have to go there. This is very important, otherwise we will be left behind. We want a significant portion of revenue to be from advertisements and subscribers. Revenue from ads on our TV stations accounts for 45% of all revenue in Indonesia’s conventional advertising sector. Likewise, we [want to be as dominant] in the digital space.
Kr: These OTT platforms sound like they are quite similar. Won’t there be overlap?
HT: No, they are different. MNC Now is a complimentary platform for our Pay TV, MNC Vision and MNC Play. The subscribers of MNC Vision and MNC Play can then also watch it through MNC Now. We call this concept “TV Anywhere”. The content comes from our library. We don’t buy it from Hollywood or Korea, because it’s too expensive.
The OTT RCTI+ is different, because it replaces our existing free-to-air TV content with streaming. Therefore, people can watch it more flexibly on their mobiles.
The independent OTT is the JV with iQIYI. This is another totally different model. If we had started this ourselves, it wouldn’t be strong enough. Indonesia is only a small part of Asia, so we have to collaborate. That’s why we teamed up with iQIYI, the largest player in China.
Kr: You were recently politically active, but have returned to the business world. Will this be your focus from now on?
HT: Yes, because the President Joko Widodo has won again. He is great and has a good economic plan. I believe he will be much better in his second term. I am sure Indonesia will be better in the next five years, so I will focus on business.
This migration from conventional business to the digital space must be fast and precise. We need to move fast and do it correctly. If we go fast, but are not precise, it will be ruined. The business model has to be right, with good team work—and it needs me. At least, I built the business, and the spirit is still related to me.
I think if I’m not involved, the shift will be slowed. At the moment, everything is like a race to digitization. That’s why I had to come back.
Kr: How much does MNC earn from digital ads?
HT: It’s a bit low, but it is growing. The revenue that came from digital advertisements will be around IDR 750 billion (USD 52.67 million) this year. It used to be nothing. This year, we will have gained only 10% from Indonesia’s total digital advertising market, which is worth around IDR 7 trillion to 8 trillion. My target is to reach 40% in the future.
Kr: What are other targets for your digital businesses?
HT: Next to advertizing revenue, we want to gain revenue from our digital content, because we have a vast base for content production. We want to bring this conventional content into new forms, through the digital platforms. Basically the digital content is the same as the conventional content. But on social media it will be short form, around 5-7 minutes. So we will adapt our content into short form suitable for social media. We want to be a dominant player there.
Thirdly, we also expect to be a dominant player in terms of the number of customers or subscribers. So there are three sources of revenue: advertisements, content, and subscribers. If our digital operation is established, we can expand internationally. However, we have to be strong at home [in Indonesia] first.
Kr: Regarding the JV with iQiyi, can you explain on how you will develop the business?
HT: I can’t explain any details now, but once iQiyi announced the details, we will also let you know. But, the point is we want to make it into the biggest Asian content platform.
Kr: How about your investment in Iflix. How does this fit into the overall picture? [MNC had announced a strategic partnership with Iflix in May]
HT: We are more a financial investor, we made a small Investment in Iflix, only five percent. It’s more like a strategic investment. Besides, we’ve also invested in Reddoorz, an online hotel booking startup, and in an online dating apps.
We see that they have prospects, and we are optimistic that they will grow, and that we will gain something there someday. We are always looking for investment opportunities.
Kr: Do you have a benchmark for building your digital business?
HT: Indonesia is still [immature] in its digital economy. If you look at China, there are many [benchmarks], such as Tencent, Alibaba, Baidu, JD.com. Many large tech companies, also including iQiyi. They were able to build a big ecosystem in a short time.
It’s a combination of the right business model, the right people, and fast execution. That’s why they were able to run fast. Managing the change [here in Indonesia] is not easy, because the mindset has already formed [based on what we have] established, and that is still a conventional business. That’s why I came back [to MNC] to lead the change.