Murdoch's comfort with center-left government vexes Berlusconi

ROME — There was a time, not so long ago, when Rupert Murdoch and Silvio Berlusconi acted like best buddies, dining together at Berlusconi’s Sardinian seaside estate, Villa Certosa, where in 2004 they are believed to have reached a gentleman’s agreement to operate in their media spheres with little competition.

More recently, though, the media moguls have started duking it out in earnest over Italy’s TV market, just as the recently installed center-left government, led by Romano Prodi, begins to change the rules to reshape the media landscape.

Of course, in 2004, Berlusconi was Italy’s prime minister.

Cut to two years later.

During the leadup to Italy’s April elections, Murdoch jetted to Rome and lunched with Prodi, who at the time was opposition leader.

Now that Prodi’s in power, the media law being drafted by Communications Minister Paolo Gentiloni could result in losses for Berlusconi’s Mediaset TV empire of up to E103 million ($135 million) a year in profits, according to a report by IT Media.

Conversely, Murdoch’s Sky Italia paybox may benefit from the law by earning an additional $37 million a year in profits, the report said.

The proposed legislation, which Mediaset chairman Fedele Confalonieri has called “a political vendetta,” lowers the cap on advertising for any single broadcaster and forces Mediaset and pubcaster RAI to each shed one of their three terrestrial channels.

“So what comes next — a new alliance between Murdoch and Prodi?” Berlusconi recently lashed out. “And to think that Murdoch was once a conservative.”

With the prospect of a bigger slice of the advertising pie to vie for — and also possible plans for an IPO — Sky Italia, which has close to 4 million subs, has been clamoring for changes in the board makeup and monitoring methods of Italy’s cozy ratings system, Auditel, whose main shareholders are Mediaset and RAI.

Last week Auditel began steps toward more transparency.

“To tell the truth we don’t want to see Mediaset bridled: but at the moment we are the ones being bridled, when instead there should be a real competitive system,” Sky Italia topper Tom Mockridge recently said.

Sky Italia started getting hostile with Mediaset last year when it appealed, successfully, to the European Union to halt digital terrestrial TV decoder subsidies introduced by the Berlusconi government, which Sky said made for unfair competition. The subsidy did not extend to the decoders necessary for Sky subs.

The two webs have also been sparring in the soccer rights arena where Mediaset ended Sky Italia’s monopoly of Serie A soccer by snapping up rights to several major clubs aired on its pay-per-view DTT operation, which launched in January 2005, driven by those decoder subsidies.

“Going forward, soccer could be their most intense area of competition,” says Bridie Barrett, a media analyst with ABN Amro in London.

If Italian regulators pull off their plan to overhaul the sale of TV rights for the Serie A league so that they are auctioned off collectively to the single highest bidder, as is done in the rest of Europe, instead of being sold club by club, as in Italy, the moguls’ clashes are likely to get quite a bit fiercer.

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