Weak ad markets hit bottom line
Italian Prime Minister Silvio Berlusconi’s giant entertainment group Mediaset saw quarterly profit plunge 26% to €68.4 million ($98.2 million) on weak economies and sluggish advertising in Italy and Spain, where it’s got a chunk of the market, and stepped-up investment in pay TV.
Total revenue was about flat at $1.6 billion.
Execs during a conference call described an international economic recovery as “weak and still uncertain.” They said the second quarter is hard to call, but the second half of the year looks brighter, and they expect 2011 earnings to top last year’s number.
Ad revenue fell 2.4% for the group’s free-to-air channels, which include leader Canale 5, Rete 4 and Italia 1.
The pay TV biz lost $26.4 million. Mediaset is investing more than $40 million in its Premium business this year as it duels with Rupert Murdoch’s satellite broadcaster Sky Italia. Both companies for now have indicated they a willingness to take a hit to profits in order to grow their business and end up top dog.
News Corp. chief operating officer Chase Carey said last week that he expects Sky Italia to pass the five million subscriber market this summer. Operating income fell to $17 million from $35 million.
Mediaset Premium had 4.2 million subs as of March 31 of which 1.9 were easy-pay – considered less reliable long term.
The channels of pubcaster RAI are also proving a tough rival to Mediaset in free to air. In an analysis of recent ratings, newspaper Italia Oggi said that in April RAI led Mediaset in most day parts except early evening and late night.
Financial analysts have been turning up the pressure on the company, which Berlusconi founded in the 1970s and is now run by his son Piersilvio.
Citigroup downgraded Mediaset from “hold” to “sell” Tuesday morning. The stock took a dip, but closed higher at the end of trading.
Italian market regulators revealed that Bnp Paribas bank had raised its stake in Mediaset to 2.086%.
Mediaset’s Spanish unit, Mediaset Espana, which holds Telecinco and Cuatro, saw first-quarter profits fall 20%.