V I D E O • A G E Se p t e m b e r/ Oc t o b e r 2 0 0 9 62 Rupert Murdoch’s Sky Italia satellite TV monopoly in the country with a threeprong attack: increasing the sales tax on Sky Italia’s subscriptions (from 10 percent to 20 percent. Mediaset Premium opted to pay the sales tax difference itself ), de-facto pulling out all of Mediaset’s and RAI’s TV channels from Sky and competing with its own “Made in Italy” satellite platform that is, from the start, a money-losing proposition. Plus, reduction by law of Sky Italia’s advertising minutes and not granting the satellite platform rights to Medusa’s (Mediaset) and RaiCinema’s popular movies. The competition between Italy, Inc. and Murdoch is such that RAI refused the 50 million euro per year (for a period of seven years) that Sky Italia offered for RaiSat premium channels. So far, Murdoch has been fighting back by using all of his press power to attack Silvio Berlusconi, who controls Mediaset and, who, as Italy’s Prime Minister, rules over state-owned RAI. However, he has other options: First, he might bring competition to the digital terrestrial (DTT) level by potentially acquiring (but not before 2011) frequencies like those of the three TV networks that Telecom Italia has reportedly decided to sell through Merryl Lynch for an estimated 800 million euro (US$ 1.1 billion). These would give Murdoch some 21 digital terrestrial channels. By renting space from third parties, he could even reach 40 DTT channels, enough to compete with both Mediaset and RAI on their own turf. In the short term, Murdoch could buy Tivú Sat decoders to give away for free to his Sky Italia subscribers so that they can continuously receive RAI and Mediaset TV channels. Second, he might lower Sky’s basic subscription fee and increase the number of basic channels. This could also be seen as a strategic maneuver, since, with its 4.8 million subscribers, Sky Italia has quickly reached maturity with slow growth and increasing churn (with peaks of 15 percent). Such a move would present strong competition for Italy, Inc.’s Tivú Sat and an incentive for reducing its churn. Third, Murdoch could really revolutionize the Italian TV sector and turn the whole enchilada upside down by substituting Sky’s satellite decoders with IPTV set-top boxes. Italy, Inc. doesn’t put any faith in the IPTV technology because of spotty broadband coverage, but with a combination of low-bit open IPTV settop boxes and a good mix of broadband services (DSL, Wi-Fi and cable), Murdoch could end up dominating the Italian TV market. In this respect, an accord with a telecom company (a scenario encouraged by the Italian Telecommunication Authority) to expand broadband coverage and benefit from the data part of the triple-play that IPTV offers is easily envisionable for Murdoch. In this respect, the concern of Italy, Inc. is understandable. Traditionally, Murdoch plays by his own rules, politically, socially and economically. The rapid growth of Sky Italia surprised even his allies in the country and surely scared off his Italian business competitors and politicians alike. It should be noted that, in 2008, after just a few short years, Sky Italia became the third TV operator in Italy in terms of annual revenues, with RAI reaching 2,723 million euro (license-fee and advertising), Sky Italia 2,640 million euro (subscription fee, premium charges and advertising) and Mediaset 2,531 million euro (advertising and some premium charges). Big Brother Over the course of its 15-year history, Endemol (the name derived from the surnames of its two founders, Joop van den Ende and John de Mol) evolved through three major events: The creation of the successful Big Brotherreality show format in 1999, the sale to Spain’s Telefonica for an astonishing 5.5 billion euro (US$ 7.5 billion) in an all share deal in 2000, and its 2007 sale by Telefonica for 2.63 billion euro to EDAM Acquisition Holding I, a consortium comprised of Mediacinco, GS Capital and Cyrte Fund (each owning 33.3 percent). This 2007 acquisition was of the 75 percent owned by Telefonica. In 2005, Telefonica placed 25 percent of Endemol on the stock market (over 31 million shares). At that time, Endemol was valued at only 1.6 billion euro (a paper loss of 4.3 billion in less than five years) with the floating stock traded at 12.8 euro. Subsequently, the consortium launched a tender offer for the remaining 25 percent. Perhaps it was this drastic devaluation that persuaded Telefonica to sell Endemol. It had several suitors, including Televisa, Haim Saban, risk capital companies T.H. Lee and Apax Partners, and Stephane Courbit, head of Endemol France (with Bernard Arnault and De Agostini Group). Endemol France was run as a separate entity and reportedly accounted for 25 percent of Endemol’s value. However, Endemol France was not included in the 2005 IPO because of a dispute between Courbit and the parent company. Now Courbit is out of Endemol and the brand name is still owned by the parent company. For the consortium, the whole Endemol operation ended up costing 3.4 billion euro (paying 24.64 euro a share for the floating stock) and was financed with 1.4 billion euro in cash and two billion euro in loans with each partner investing 466 million euro, plus 155 million euro each for development. Based in Holland, Endemol has 80 companies in 26 countries and generates up to 80 percent of its sales from unscripted programs. Under Telefonica, Endemol’s revenues increased steadily, reaching 900 million euro in 2005; 1,117.4 million euro in 2006 and 1,256.3 million euro in 2007. Under new ownership, revenues climbed to 1,301 million euro in 2008 with an EBITDA of 221 million euro. Based in Spain, Mediacinco Cartera is owned by Mediaset (25 percent) and Gestavision Telecinco (75 percent). Gestavision Telecinco, which operates Spain’s commercial network, Telecinco, is 51 percent owned by Mediaset. Since Mediaset’s share of Endemol was acquired through its Mediacinco holding, there has been no impact on Mediaset balance sheet. GS Capital Partners is part of Goldman Sachs, while the Cyrte Fund is owned by John de Mol. Founder de Mol doesn’t have an executive role. He has had a joint production venture with Endemol through Talpa TV, the company he launched after leaving Endemol in 2003. In effect, with two “silent” or investing partners, Mediaset is the de facto leading partner. Furthermore, through its various TV networks, including Telecinco in Spain, Mediaset serves as Endemol’s main client with an investment in the order of 150 million euro per year. Mediaset’s main Endemol show is Big Brother( Il Grande Fratello). However, Endemol also serves Mediaset’s competitors in Italy (RAI broadcasts Affari Tuoi , the Italian version of Deal or No Deal ), with RAI investing about 30 million euro per year. Those two shows were also aired in Spain, with Gran Hermanoand ¡Allá tú! on Telecinco and One vs. 100 ( Uno Contra 100) on A3. Currently, in Spain, Endemol has Big Brotheron Telecinco, Floor Filler( Fama a Bailar) on Cuatro, Strictly Dancing ( Mira Quien Baila) on TVE1, and others, for a total of seven shows. In Italy, between Mediaset and RAI, Endemol currently has five shows on air. With Endemol under the consortium’s ownership, the group’s top management is now: Ynon Kreiz, chairman and CEO (former Fox Kids Europe chief ). Marco Bassetti, president (founder of Aran in Rome, Italy, and acquired by Endemol in 1997). Tom Toumazis, Chief Commercial Officer (former executive vp and managing director of Disney ABC-ESPN Television EMEA and Canada). Jan Peter Kersten, CFO (he has been with Endemol since the year 2000). Paul Römer, Chief Creative Officer. Editor's note: An official statement from Sky Italia may be found on page 8. (Continued from Page 60) Pier Silvio Berlusconi RTI Pier Silvio Berlusconi is also the president of RTI SpA, the broadcasting arm of Mediaset Group. It controls FTA channels Canale 5, Italia 1 and Rete 4, as well as several niche digital free TV channels. The company also provides pay-per-view services and a digital terrestrial subscription pay-TV platform, Mediaset Premium. RTI oversees all aspects of Mediaset’s TV business –– including broadcast signal infrastructure and TV technical facilities –– through its subsidiaries Videotime and Elettronica Industriale. RTI directly manages inhouse television production, the acquisition of film and drama rights and Mediaset Distribution, RTI’s international program sales division. International sales and acquisitions are under Guido Barbieri (pictured below), the Rights and Drama Division general manager. With a catalogue of more than 500 titles, Mediaset Distribution has become one of the leading distribution companies of Italian TV programs and scripted formats. By the end of 2009, Mediaset Distribution will begin international distribution of a new linear channel offering the best of Mediaset programming to the 60 million Italians living around the world, after airing on its mainstreamTV channels.
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