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The Globe and Mail

Media wars: Berlusconi's loss is Murdoch's gain

News Corp chairman and CEO Rupert Murdoch


Silvio Berlusconi's media empire faces a painful adjustment to a new Italy. A stuttering domestic economy bodes ill for the advertising that's the lifeblood of his television company, Mediaset. And his main private competitor, Rupert Murdoch's Sky Italia, should benefit now that Italy's lawmaker-in-chief isn't a direct commercial rival.

Mr. Berlusconi owns 39 per cent of Mediaset. As prime minister, he also effectively controlled state-backed rival Rai and held sway over the regulatory backdrop. But Mediaset is in trouble now: Its shares have halved this year. As a mostly free-to-air broadcaster, it depends on advertising for more than 80 per cent of domestic revenues. That's always vulnerable in a weak economy; Brussels reckons Italy may grow just 0.1 per cent next year.

Moreover, Sky may be able to take market share from Mediaset, which has more than 60 per cent of all television advertising. That's perhaps partly due to the Italian firm's desirable viewer profile, and advertising limits placed on Rai. But some companies may also have felt it prudent to overweight the premier's company in their ad budgets.

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Sky is probably stuck with some of the other obstacles Mr. Berlusconi's government threw in its path, such as tax increases on pay-TV. But it might have a stronger hand now in other battles, for instance over an odd-looking "beauty contest" for digital-terrestrial frequencies. The satellite firm would love to look more like its bigger brother, Britain's BSkyB, which boasts twice as many subscribers and much fatter margins.

Sadly for Italy, deeper sectoral change may be some time coming. The country's new technocrat leaders are focused on financial crisis rather than media plurality – even if they are led by Mario Monti, once one of Europe's most combative competition tsars.

Real reform would de-politicize Rai and strengthen regulators. An elected, modernizing government could ultimately part-privatize Rai or compel Mr. Berlusconi to sell one of his three big networks – although a similar divestment order in the 1990s came to nothing. A major selloff from either broadcaster could interest other foreign players who've so far lacked Mr. Murdoch's taste for a scrap, such as Germany's Bertelsmann or ProSieben. For now, though, one mogul's loss looks mostly like another's gain.

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