Market Insight

Mediaset attacks Sky on its own turf by taking pay TV service to satellite

June 11, 2015  | Subscribers Only

Ted Hall Ted Hall Director – Research and Analysis, Service Providers & Platforms

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Italian broadcaster and pay TV operator Mediaset has unveiled an expansion strategy for its Mediaset Premium subscription TV business, revealing that it will begin offering the service – until now restricted to DTT – via satellite. The move represents a renewed challenge to market leader Sky Italia’s long-time dominance.

Mediaset’s satellite offering is set to debut in Q1 2016, after the company launches a new hybrid decoder – capable of receiving satellite and terrestrial signals, as well as OTT-video streams – in January. It will feature an expanded content line-up, including UEFA Champions League football, and movies and TV series from Hollywood studios Warner Bros. and NBC Universal. Mediaset may also gain access to additional content from Vivendi, the operator said – the French media group already has a content-sharing agreement in place with Mediaset Premium minority shareholder, Spanish telco Telefonica.

Announcing the new strategy, chief executive Pier Silvio Berlusconi also took the opportunity to deny speculation that Mediaset was planning to sell its pay TV arm, which was valued at €900 million when it was spun off in November 2014.

Our analysis

Finding itself at something of a crossroads in its pay TV strategy, Mediaset faced a choice of either maintaining its aggressive challenge to Sky or going down a more cooperative route that might have seen it partner with its arch rival – its decision to go head-to-head with the market leader via DTH demonstrates its continued commitment to the former.

Making Mediaset Premium profitable has never been a top priority for the historically loss-making company and the move to satellite does not change this. Berlusconi conceded this when laying out the new strategy, explaining that boosting subscribers – from 1.77 million to two million – was the main short- to medium-term goal, not achieving profitability. Thus Mediaset Premium will continue to fulfil its main purpose, serving primarily as a strategic tool for slowing Sky’s growth momentum.

Wider distribution beyond the limited pay-DTT offering is certainly necessary, particularly with Mediaset looking to showcase its new Champions League football rights, with a new exclusive, three-year rights deal kicking in in August. In addition to satellite, distribution via other platforms is also a possibility. Mediaset said that it was in talks with both Telecom Italia – which began selling the full Sky TV offering via its fibre network in April – and Vodafone over potential partnerships.

While the expansion of Mediaset Premium certainly makes the offering more competitive, the level of impact it will have on Sky and the wider TV market is unlikely to be dramatic. Aside from its partnership with Telecom Italia, Sky has been shoring up its market-leading position by continuing to innovate its core DTH offering, as well as targeting new market segments with its lower-cost, more-flexible standalone OTT-video alternative, Sky Online. The strategy has seen the operator reverse subscriber declines, with total customers increasing in the last two quarters to end 1Q15 at 4.75 million.

Competing with Sky on the OTT front has not proved significantly fruitful for Mediaset, with the quality of its underwhelming Infinity SVoD service paling in comparison to the comprehensive Sky Online offering  another factor likely to have prompted the expansion to satellite.

Though it will undercut Sky – by 20%-30%, Mediaset said – as it has traditionally done with its pay DTT service, poaching large numbers of its rival’s customers will be a tall order, as will convincing non-pay TV customers to sign up to full subscription services, with the economy still in a fragile state and disposable income limited for many. Add to the competitive mix the impending launch in Italy of Netflix – which will join recent arrival Wuaki as a new OTT threat in October – and Mediaset will have to fight hard to achieve its subscriber growth targets.

Mediaset Sky Italia
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