Fewer ads, failing pay TV and huge overheads hit Italo group

ROME — Silvio Berlusconi’s Italo commercial broadcast group Mediaset posted a 73.5% drop in first-half net profit to €43.1 million ($53 million) on Tuesday, as advertising in Italy and Spain, where it also operates, continues to dry up while its pay TV side struggles.

Ad sales fell 11.2% to $1.4 billion amid bleak consumer confidence. Meanwhile subscriber revenue at paybox Mediaset Premium dropped to $320 million from $325 million in the same period last year. Eight years after its start-up it has yet to break even, indicating that it may never fly.

Mediaset Premium is suffering from stepped-up competition from Rupert Murdoch’s Sky Italia, which has been beefing up its lineup with content such as Formula 1 auto racing and extensive Olympic coverage on 13 channels, one in 3D.

In the digital terrestrial free-TV arena, smaller players are eroding Mediaset’s market. Analysts say Mediaset needs a bold new digital strategy combined with radical cost cuts.

It has already announced plans to shave $307.5 million in costs over three years and industryites had expected that Mediaset would boost that to $492 million.

But it made no mention of further cuts on Tuesday.

With results slightly exceeding analysts’ negative expectations, Mediaset shares closed down 0.35% at $1.70. They have dropped 56% this year.

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