Berlusconi makes life tough at Sky Italia

ROME — Like a head of state, Rupert Murdoch recently jetted to Rome for two days of meetings with Italian politicos, sandwiched around a press conference the mogul held to tubthump MySky, a new decoder-recorder for his Sky Italia satellite paybox.

Two years and four months after its launch, Sky Italia has 3.4 million subscribers, proving to naysayers that Italians are willing to pay for TV in significant numbers.

Italy’s only paybox is expected to be in the black next year. Yet snags unforeseen at its outset could stunt growth and profitability.

In Rome, Murdoch affably gave opposition leader Romano Prodi the lowdown on global media developments. But he had a bone to pick with prime minister and fellow media mogul Silvio Berlusconi — ostensibly his old friend — whose Mediaset broadcasting group benefits from government incentives to encourage viewers to switch to digital terrestrial transmission (DTT).

“We are in conflict with the government’s anti-competitive policy,” says Sky Italia’s director of communications Tullio Camiglieri, a former Mediaset exec who is News Corp.’s liaison with Italy’s Byzantine political world.

However, Murdoch told Italian reporters that Sky would not take sides in next April’s national elections, which see Berlusconi trailing in opinion polls.

Indeed, unlike Fox News in the U.S., Sky Italia’s news channel TG-24 makes neutrality a major selling point.

“In Italy, all the newscasts that predated Sky were perceived as having a political bent,” says Sky TG-24 topper Emilio Carelli, a former newsman at Mediaset where “being an independent journalist sometimes meant paying the consequences,” he recalls.

“From day one, we saw offering something totally independent, with no political ties, as our winning proposition.”

In January, Mediaset took on Sky Italia for soccer rights — the major driver for pay TV and the sport that made Murdoch’s BSkyB satcaster such a success in the U.K.

Executive VP Piersilvio Berlusconi, the prime minister’s son, launched a unique scheme to sell pay-per-view soccer matches to Italians equipped with a subsidized DTT decoder, using a prepaid Mediaset card that charges E5 ($5.80 dollars) a pop. PPV movies are being sold the same way.

The Mediaset Premium cards are selling well — netting $64 million for Mediaset in the past three months — just as DTT decoders have proliferated, reaching 3 million of Italy’s 22 million TV homes.

But the main problem for Sky Italia, according to analysts, is not so much the impact on its subscriber base, but rather the ballooning effect this will have on the cost of soccer rights, for which Sky shells out $467 million a year.

In 2003, when European Union antitrust regulators gave News Corp. the go-ahead to merge previous payboxes Telepiu and Stream into single player Sky Italia, they stipulated it could buy soccer rights only two years at a time, and only for satellite.

No such restrictions apply to Mediaset, which recently snapped up DTT rights to top leagues Serie A and Serie B soccer thru 2007, plus options for several subsequent seasons. These purchases, however, are being probed by Italy’s antitrust authority.

“When Sky competes for soccer, it can only buy a piece of the cake. Yet others can buy all of the cake. That’s because Sky is big and the others are supposed to be small,” explains analyst Augusto Preta, chief of Rome’s Italmedia Consulting. “But if the small fish is Mediaset, then you’ve got to laugh,” Preta says.

“The Mediaset premium cards appeal to a segment of the population that would not buy Sky anyway,” claims Emiliano Calemzuk, head of Fox Intl. Channels Italy, who also maintains that soccer is no longer the country’s main pay TV driver.

Fox Channel’s Rome-based Italo outpost produces seven stations, two of which — Fox Life and Fox Crime — were spawned in Italy and tested here before bowing in other territories.

Calemzuk would not reveal actual figures, but he says more than 35% of his budget goes for Italo productions that provide a cultural counterpoint to Hollywood’s “Desperate Housewives,” “Lost,” “Grey’s Anatomy,” “Deadwood,” “CSI” and “Will & Grace,” and are commissioned by Sky from smaller, more cutting-edge Italo indie producers.

Among Sky’s homegrown hits is “Reparto maternita” (Maternity Ward), a docu-soap about tales of real-life moms-to-be shot with vidcameras in Rome’s San Camillo hospital. Innovative skein will also bow on Fox’s Eastern European channels next month.

“Pay TV is giving us the unique opportunity to work on original concepts, and that is the reason we are happy to work with Sky, even though it is less remunerative,” says the skein’s producer Giorgio Gori, topper of Milan’s Magnolia.

Sky also has won kudos for throwing the moribund docu sector a lifeline.

“They are the only broadcasters with a real interest in what we do, and they have put their money where their mouth is,” says Alessandro Signetto, head of Italo documakers body Doc/It, who often rails against pubcaster RAI’s disinterest in docus.

Italy’s film community, dogged by a deep funding crisis, is less enthused about Sky Italia.

“They buy little and pay poorly,” laments a distrib who says he did better business with Telepiu.

Last year, Sky Italia pledged to invest a paltry $53.6 million to acquire Italian movies over two years.

Since then, Italo pics have gotten better play amid Hollywood-heavy offerings beamed by Sky Italia’s nine movie channels. Still, not one of these stations is dedicated to Italian cinema.

Fox this summer announced it would launch a local film production unit with Sky Italia, which could become an important alternate source of coin for pubcaster RAI’s RAI Cinema and for Berlusconi’s Medusa, the country’s two main film financers.

However, the start date of the production unit and details of its slate remain under wraps.

“We are all waiting to see what kind of movies they will choose to make and who they will be working with,” says a prominent Italo producer.

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