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Murdoch, Berlusconi tension builds

Sky Italia launches campaign against tax rise

ROME — Tensions between Rupert Murdoch and Silvio Berlusconi have reached fever pitch in Italy.

News Corp.’s Sky Italia paybox is airing a barrage of spots urging millions of Italians to protest a pay TV tax hike widely seen as favoring Berlusconi’s Mediaset, while Berlusconi has blasted local newspaper editors, claiming they are in Sky Italia’s corner.

On Wednesday, Italy’s leading daily Corriere della Sera assured readers in a front page editorial it would continue to do its “job,” after Berlusconi lashed out against the editors of Corriere and La Stampa, claiming they should “find new jobs; go home,” for allegedly attacking the mogul-cum-premier unfairly over his highly contentious decision to double the pay TV tax.

“Berlusconi against Sky and newspapers,” was the banner headline in another leading newspaper, La Repubblica.

The VAT tax hike on pay TV subscriptions, from 10% to 20%, was slipped into an economic stimulus package late last week. The package still needs final approval in parliament.

“It’s a tax that hits more than one fifth of Italian households right in the middle of an economic crisis,” complained Sky Italia CEO Tom Mockridge.

Having consulted with James and Rupert Murdoch, Mockridge is now waging a media campaign, urging the paybox’s 4.6 million subscribers to send protest emails to the Berlusconi government website, which reportedly jammed after being inundated.

Deflecting conflict of interest charges, Berlusconi and his finance minister Giulio Tremonti countered that the 20% tax, which would become the highest pay TV tax in Europe, is actually being dictated by the European Union.

Sky said in a statement on Wednesday that the EU had been probing the pay TV tax because Mediaset — whose core business is free terrestrial TV — in 2007 filed a complaint claiming unfair taxation at 20% of its premium pay-per-view service on DTT. But the Sky statement claims there has been no E.U. pressure on Italy to raise the tax.

There has been no comment from E.U. officials on the tax.

Sky, which is Italy’s single satellite paybox and accounts for 87% of the country’s pay TV market, has said the cost of the hike, which would generate an estimated $630 million in tax revenue, would have to be shouldered by subscribers.

Mediaset earlier this year launched a DTT pay TV service called Premium Gallery, which would be affected by the tax hike, but much less so than Sky, since the Mediaset service is much smaller and cheaper, say analysts.

The hike could instead “see Sky lose subscribers,” according to media expert Fabrizio Perretti of Milan’s Bocconi business school.

“Mediaset has realized that the challenge is more and more about pay TV content — and that their real competitor is Sky,” he told Variety.

“The rivalry between Murdoch and Berlusconi in Italy is now set to become more and more belligerent,” Perretti predicted.

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