Looming laws adds to Silvio’s woes

Mediaset faces sector-wide TV advertising dip

ROME — For Silvio Berlusconi and his media empire, 2006 could be a year to forget.

In the first half, Europe’s wealthiest businessman stood down as Prime Minister after losing the national election, and his professional soccer team, AC Milan, was ensnared in a match-fixing scandal. 

The second half doesn’t look much better.

Berlusconi-controlled broadcast group Mediaset is facing a sector-wide TV advertising dip, slumping ratings and weakness in its fledgling pay-per-view business. 

Now analysts are bracing for a knockout blow from the center-left government, which is crafting a tough media law that could cap Mediaset’s advertising income and, if some opposition politicians have their way, force it to transfer one of its TV channels — likely, Rete 4 — from terrestrial to satellite distribution only.

“A change in media legislation is a given,” says Bridie Barrett, a media analyst with ABN Amro in London. “We don’t know exactly what to expect: price cuts on the network, splitting up the group, an advertising cap.” 

Long assailed for holding unprecedented market dominance of Italy’s broadcast and publishing industries, then Prime Minister Berlusconi responded to his critics in 2004 with the Gasparri Law, written by his Minister of Communications, Maurizio Gasparri.

The law redefined market dominance as saying, among other things, no media company can command more than 20% of the country’s total advertising revenues.

The Gasparri Law has come under fire from the new Romano Prodi-led government and the European Commission as being weak.

For example, Mediaset, which receives two out of every three euros spent in TV advertising in Italy, is not in violation of the antitrust law, as its TV ad income remains under 20% of Italy’s entire e22 billion ($28 billion) ad pie.

Concerns Mediaset could exceed that threshold in 2006 were only alleviated in the past few weeks as Mediaset revealed its ad sales so far this year underperformed expectations.

 Minister of Communications Paolo Gentiloni appears determined to loosen some of Mediaset’s control on the Italian airwaves.

Last week, Gentiloni said the government will present to Parliament a media bill that will rewrite the Gasparri Law “re-establishing severe antitrust thresholds.”

 In addition to redefining the advertising cap, the government has said it plans to push back the analog TV switch-off from 2008 to perhaps as late as 2012.

However, the chance of including a measure that would force Mediaset to divest a free-to-air broadcast channel is seen as a long shot.

  “Mediaset could get a pass (on the divestiture proposal) if the government is not prepared to address pubcaster RAI’s dominant position,” says Prof. Michele Polo, chairman of the economics department at Bocconi U. in Milan. “I do not expect much change there.”

 The leash being fashioned by the Prodi government may not be Mediaset’s biggest concern.

Missing out on broadcast rights to the Winter Olympics and summer’s soccer World Cup, plus losing $51 million worth of advertising in the run-up to the general election in April, forced Mediaset to abandon previous guidance that full-year ad revenues would increase by 2%-3%.

The fallout from the match-fixing scandal is proving damaging too.

Mediaset sold fewer than expected pay-per-view set-top box cards at the outset of the Serie A soccer season, forcing it to cut its full-year operating profit forecast from as high as $50.7 million to $12.7 million.

 The business and political pressure is weighing on Mediaset shares, which have fallen 18% in 12 months to $10.80 last week.

During the same period, Europe’s leading media stocks, as represented by the Dow Jones Stoxx Media Index, climbed 8%.

In a recent investment note, Goldman Sachs downgraded its investment rating on Mediaset to “neutral,” citing, among other things, regulatory uncertainty, the soft ad market and an overall weaker economic outlook in 2007.

 The good news for Mediaset may be that the new media law will lack the teeth some of Berlusconi’s most ardent critics are demanding.

The bad news is the business climate may not be so forgiving.

More TV

  • A CHRISTMAS STORY LIVE!: L-R: Cast

    TV Review: 'A Christmas Story Live' on Fox

    ROME — For Silvio Berlusconi and his media empire, 2006 could be a year to forget. In the first half, Europe’s wealthiest businessman stood down as Prime Minister after losing the national election, and his professional soccer team, AC Milan, was ensnared in a match-fixing scandal.  The second half doesn’t look much better. Berlusconi-controlled broadcast […]

  • netflix-the-little-prince

    Mediawan Closes In on Acquisition of Dimitri Rassam's ON Kids & Family

    ROME — For Silvio Berlusconi and his media empire, 2006 could be a year to forget. In the first half, Europe’s wealthiest businessman stood down as Prime Minister after losing the national election, and his professional soccer team, AC Milan, was ensnared in a match-fixing scandal.  The second half doesn’t look much better. Berlusconi-controlled broadcast […]

  • Chris MatthewsTime 100 Gala, New York,

    Female Staffer Who Accused Chris Matthews of Sexual Harassment Received Severance from NBC

    ROME — For Silvio Berlusconi and his media empire, 2006 could be a year to forget. In the first half, Europe’s wealthiest businessman stood down as Prime Minister after losing the national election, and his professional soccer team, AC Milan, was ensnared in a match-fixing scandal.  The second half doesn’t look much better. Berlusconi-controlled broadcast […]

  • SATURDAY NIGHT LIVE -- Episode 1734

    'SNL': Alec Baldwin's Donald Trump Declares 'The War on Christmas Is Over' (Watch)

    ROME — For Silvio Berlusconi and his media empire, 2006 could be a year to forget. In the first half, Europe’s wealthiest businessman stood down as Prime Minister after losing the national election, and his professional soccer team, AC Milan, was ensnared in a match-fixing scandal.  The second half doesn’t look much better. Berlusconi-controlled broadcast […]

  • Rupert Murdoch

    21st Century Fox Clarifies Rupert Murdoch's 'Nonsense' Remark About Fox News Sexual Harassment

    ROME — For Silvio Berlusconi and his media empire, 2006 could be a year to forget. In the first half, Europe’s wealthiest businessman stood down as Prime Minister after losing the national election, and his professional soccer team, AC Milan, was ensnared in a match-fixing scandal.  The second half doesn’t look much better. Berlusconi-controlled broadcast […]

  • HBO Documentary President Sheila Nevins Stepping

    HBO Documentary President Sheila Nevins Stepping Down

    ROME — For Silvio Berlusconi and his media empire, 2006 could be a year to forget. In the first half, Europe’s wealthiest businessman stood down as Prime Minister after losing the national election, and his professional soccer team, AC Milan, was ensnared in a match-fixing scandal.  The second half doesn’t look much better. Berlusconi-controlled broadcast […]

  • Disney-Fox Deal Sets Up Scramble for

    Disney-Fox Deal Unleashes Flood of Free-Agent Executives, Talent

    ROME — For Silvio Berlusconi and his media empire, 2006 could be a year to forget. In the first half, Europe’s wealthiest businessman stood down as Prime Minister after losing the national election, and his professional soccer team, AC Milan, was ensnared in a match-fixing scandal.  The second half doesn’t look much better. Berlusconi-controlled broadcast […]

More From Our Brands

Access exclusive content