Mario Pagliaro's Newsletter, February 5, 2007:

Sky in Italy: A success built on failure

Summary:
The success of Sky in Italy is largely built on the failure of monopolists Rai and Mediaset.

When Rupert Murdoch started his satellite tv business in Italy in 2003 he never tought that five years later its success would be based on news and movie channels instead than glossy football channels.

After all, Italy abroad is widely perceived as a country good for football, food and holydays only.

And yet, this is exactly what happened.

Like every good capitalist, prior to start his business in Italy Mr Murdoch sought monopoly.

Thus, he purchased the two satellite channels broadcasting football. His managers' plan was to create a rich business based on pay-per-view channels broadcasting football at large (without forgetting, before to start broadcasting, to purchase also Israeli cryptation technology to avoid massive pirate access from Italy's folks...).

Having somehow to braodcast also a news channel, he also hired a quiet journalist from Mr Berlusconi tv empire and put him in charge to lead the news business, Sky TG24.

News, after all, were not supposed to be the main part of the business.

To the joy of Mr Murdoch, it turned out to be a completely mistaken plan.

Calcio: A gangster activity

Football in Italy was a corrupted business since the early 1990s when Maradona quit playing and the League was ruled with gangster methods until the system collapsed in summer 2006.

Besides corruption, violence was (and sadly still is) largely diffused either on the playing field and on tribunes. Unregulated business was the only rule. And "Italian" teams with 100-years story actually play games with some 11 foreigners in the field...

It is no surprise that subscriptions to the football channels of Mr Murdoch collapsed.

But not so did subscriptions to the other channels of Sky's bouquet.

Actually, the managers of News Corporation discovered that Italy's most dynamic part of society was eagerly waiting for live news; good movies without a break every 7 minutes and good documentary channels.

The result is today that more than 4 million Italian families subscribe to Sky satellite tv channels; and only a fraction of them subscribes to football.

Easy market analysis will show that these subscribers are the wealthy and culturally literate families -- i.e. the dynamic bodies of Italy's society.

Now, advertisers target exactly those families on planning their increasingly costly campaigns aiming to large returns on their investment.

And who were -- until the advent of Sky -- the rich guardian of audience in Italy?

Mr Berlusconi's Mediaset and State-owned Rai.

The failure of Rai and Mediaset

A fat duopoly splitting the entire 4 billion euro advertising "cake" spent yearly in Italy to buy tv ads. A budget that, alarmingly, Mr Murdoch has impacted far beyond the worse predictions of both Rai and Mediaset managers.

What, after all, were these tv companies offering to the information-hungry Italy's public?

Second-hand movies, plenty of trash tv and the worst news channels amongst all advanced countries.

Most journalists at Rai work a few hours per day -- and only between 10 am and 5 pm -- to produce a boring daily news patch undigested by the public. No live reporting. No analysis. No independent enquiry.

If something happened, say, at 9 pm you'd better wait the day after to learn anything -- or, indeed, switch to Sky.

Even worse at Mediaset where a few journalists work in underdimensioned offices where lack of human and technical resources are the rule; resulting in news programs broadcasting images purchased by other Tv channels; and practically no information from foreign countries.

Again, no analysis and a sad daily repetition of weather complaints and political nonsense on "communists".

A sad picture, indeed, in which the only exception is the fiction produced by Ray and by Rai's former director general (E. Bernabei) which apparently has been enough to attract most of the remaining audience of the Mediaset channels led without fantasy and under tight budget by Mr Berlusconi's son.

The success of Sky in Italy was built on such chronic ineptitudes. Mr Murdoch proved unwillingly that Italy's tv market is open to any foreign investors willing to pay attention to quality and thus meet the Italians thirst for fresh news, movies, cartoons, science and gossip channels managed according to some international standing.

Even in peripheral Sicily, for example, a small satellite tv was able to reach unexptected success in two years only.

The room of Italy's tv market is open.

Further information

The conference on strategy of Mario Pagliaro.

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