followthemedia.com - a knowledge base for media professionals
Big Business

Berlusconi In Political Trouble So Mediaset Shares Sink, But Murdoch’s Sky Italia Has Its Problems, Too -- The Anti-Trust Authority Takes A Look

The TV battle In Italy between two titans – Prime Minister Silvia Berlusconi who is also said to be the country’s richest man – and Rupert Murdoch, said to be the world’s most influential media mogul – has heated up again.

Italian footballBerlusconi is in political trouble because of alleged sexual dalliances which the Italian psyche in the past has given a wink to, but the alleged scandals are  becoming more frequent and a real embarrassment causing a major Berlusconi coalition partner to drop out with the prime minister facing a Parliamentary vote of confidence in December which could see him out. And while all of this is going on shares in Mediaset, of which his family controls 38%, are sinking, down some 15% in the past week and his Mondadori magazine and book publishing company also is getting nailed.

Over at Sky Italia where Q3 operating profit was down 36% because, it said, of high costs related to the 2010 World Cup coverage, came the shock that the Anti-Trust Authority had started an investigation over Sky’s exclusive World Cup soccer rights. The original complaint, in May, came from, you guessed it, Mediaset.

Soccer is a big deal in Italy, of course, so Sky knew there were sensitivities which is why it allowed the RAI public broadcaster to show all Italian matches plus the closing stages of the competition, but Mediaset was left out in the cold. CEO Tom Mockridge, in reaction to the anti-trust probe, declared in a thinly veiled poke at Mediaset, “We realize that real competition may be unpopular for some operators that are used to dominating Italian television, but I want to be very clear: we won’t quit our mission, which is to constantly improve the quality and choice for Italian consumers.”

Mediaset and Sky are locked in a fierce pay TV battle. Sky is the exclusive satellite broadcaster so last year the Berlusconi-controlled Parliament hit satellite subscriptions with a 20% sales tax. No sales tax, of course, on Mediaset’s terrestrial digital platform. That caused Sky some subscriber slippage and forced it to lower prices and change its packaging -- its entry level package dropped from €39 a month to €29 a month which was close to Mediaset’s €26, but Mediaset responded with a special through the end of the year at €14.

The lower prices seems to have helped Mediaset -- it now claims to have some 3.3 million subscribers and its pay-TV platform is now at overall breakeven which means it is making money today. Sky Italia says it has 4.8 million subscribers, a 58,000 increase during the past quarter, but still well short of its 6 million target.

The Berlusconi-Murdoch business relationship had started off well enough in 2003 when Berlusconi’s government did not object to Murdoch setting up Sky. No doubt today the prime minister laments that decision but at the time he probably thought Murdoch would lose his shirt. But Murdoch understood a thing or two about pay TV via his UK Sky experience and he knew the key to success would be football crazy fans who would pay good money to watch and he held Italian club A and B satellite rights which were packaged into a €47 monthly package. It wasn’t too long before Sky Italia had near three million subscribers.

Berlusconi looked at that and basically decided what was good for Murdoch should be doubly good for him, too. Murdoch’s satellite rights didn’t preclude terrestrial digital rights although granting those rights needed some legislation. But when you’re the prime minister that’s no obstacle. Parliament passed a media law allowing the top three football teams (Berlusconi owned one of them) to sell their home games on the new terrestrial digital platform and in 2005 in complete secrecy Mediaset did its deal with the football teams, with the first Sky knowing about it coming in the morning newspaper!

Mediaset decided to go the a la carte route offering pay-for-view terrestrial digital coverage at just €3 each game via a smart card bought at newsstands. But Berlusconi still had a problem. Italians were reluctant to pay for the digital decoders. Again, no problem, really, if you’re prime minister – just have Parliament pass legislation that all terrestrial transmissions must be digital within a few years and to help meet that date the government will provide a subsidy of about 60% on the cost of decoder boxes, That subsidy back in 2005 was said to have been worth more than €100 million -- with Sky howling all the way to the EC. 

And so life went on – Mediaset did okay with its a la carte football games and Sky, that had feared major subscriber losses without football exclusivity, saw its subscriptions stay secure.  Berlusconi lost an election and things fell silent for a while. But in 2008 Berlusconi got re-elected. The battle was joined again.

Before long Berlusconi was up to tricks. VAT doubled on satellite TV subscriptions to 20% while Mediaset’s three terrestrial channels had no VAT charges.  Murdoch personally went to Rome to complain, Sky Italia took out newspaper ads telling its customers how unfair it was for the government to increase their costs in recessionary times, but the deed was done and Murdoch left town empty-handed. 

Berlusconi still wasn’t done. His Mediaset and the state-run public broadcaster Rai which Berlusconi effectively controls, too, as prime minister, announced they were launching together a digital terrestrial service based on the British Freeview service and they hoped this would cut severely into Sky’s market share. And if that wasn’t enough hardball, Mediaset and RAI canceled their carriage deals with Sky Italia, meaning Sky could no longer offer access to all of Italy’s terrestrial channels.

Murdoch couldn’t do much within Italy to hit back – Sky poached some Mediaset talent and even showed a film called Killing Silvio which Berlusconi’s spokesman said instigated “hatred against the prime minister.” But when some Berlusconi personal sex scandals hit then Murdoch was in his element and his newspapers around the world, headed not by the tabloid Sun but rather the august Times of London, made sure every lurid detail was minutely covered – even during big budget cuts the Times sent a second journalist to Italy to cover the scandals. It was getting real personal. No doubt Berlusconi is very happy that The Times is now behind a Web pay wall.

A year ago Sky Italia won a court case against Mediaset for preventing Sky buying all the ads it wanted to promote its satellite services  on a couple of Mediaset’s TV networks. A judge ruled that was anti-competitive and illegal and Mediaset acknowledged in a statement that under the ruling it cannot refuse Sky Italia ads in order to favor its own pay-TV platform, but to this day do you Sky can get those ads on Mediaset?  Of course not.

Mediaset shares are getting hit these days because the money people think that Berlusconi could well be out of office come mid-December and thus getting legislation and rules changed to benefit Mediaset in the future will end. But given all the twists and turns that have marked Berlusconi’s political career no one should really count him out until the Italian fat lady sings.


See also in ftm Knowledge

Media in Italy

The Italian media market is totally unique and very competitive. Italian consumers are quickly embracing new media and the advertising community is quickly changing. And hovering close is Italy's richest person - Silvio Berlusconi. 75 pages, includes Resources, PDF (January 2010)

Order here

Rupert Murdoch and News Corporation

News Corporation has a global, multi-media footprint. Whether on paywalls or pay-TV Rupert Murdoch has the ear of the media industry. Update includes Sky Europe ups and downs, competing with Google to Berlusconi. 144 pages PDF (July 2010)

Order here


related ftm articles:

The Mad Men Of Television
Television is really quite simple. Even with a zillion channels, people choose one program after another. Sometimes they pay for their pleasure directly and sometimes indirectly. But for people on the fringes that’s not enough.

Broadcast Rulings At The Commission
It was a big day for broadcasters at the European Commission, with two State aid decisions and one for Mr. Murdoch. The “lighter touch” is in evidence. All three decisions are “subject to conditions.”

Here’s Why Newspapers Are Essential For Democracy To Flourish
Carlo de Benedetti, the chairman of the Italian Gruppo Editoriale L’Expresso gave the Reuters Memorial Lecture at Oxford University this week and what he had to say about newspapers and democracy deserves a wider audience.


advertisement

ftm Resources

ftm Knowledge

Media in Spain - Diverse and Challenged – new

Media in Spain is steeped in tradition. yet challenged by diversity. Publishers hold great influence, broadcasters competing. New media has been slow to rise and business models for all are under stress. Rich in language and culture, Spain's media is reaching into the future and finding more than expected. 123 pages, PDF. January 2018

Order here

The Campaign Is On - Elections and Media

Elections campaigns are big media events. Candidates and issues are presented, analyzed and criticized in broadcast and print. Media is now more of a participant in elections than ever. This ftm Knowledge file reports on news coverage, advertising, endorsements and their effect on democracy at work. 84 pages. PDF (September 2017)

Order here

Fake News, Hate Speech and Propaganda

The institutional threat of fake news, hate speech and propaganda is testing the mettle of those who toil in news media. Those three related evils are not new, by any means, but taken together have put the truth and those reporting it on the back foot. Words matter. This ftm Knowledge file explores that light. 48 pages, PDF (March 2017)

Order here

More ftm Knowledge files here

Become an ftm Individual or Corporate Member to order Knowledge Files at no charge. JOIN HERE!

copyright ©2004-2010 ftm partners, unless otherwise noted Contact UsSponsor ftm