Market Insight

Sky Italia and Mediaset sign content-sharing agreement

April 04, 2018

Matteo Marchello Matteo Marchello Senior Research Analyst – Channels, Programming, IHS Markit

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Sky Italia and Mediaset have reached an agreement which could prove pivotal for the future of the Italian television landscape. The agreement will become effective from 1 June and it represents the first step of a pacification process between the two main competitors in the Italian pay TV market.

Sky has agreed to add nine channels provided by Mediaset to its cinema offer: five specifically dedicated to movies (Cinema, Cinema +24, Energy, Emotion and Comedy) and four mainly dedicated to TV series (Premium Action. Crime, Joi and Stories). All nine channels will be available to subscribers of Sky's Cinema and Famiglia packages. Sky has also announced that the prices of these two packages will remain the same.

Under the terms of this agreement, Mediaset Premium will broadcast on its digital terrestrial (DTT) frequencies a still undisclosed selection of channels from Fox and Sky that are currently distributed only on the satellite platform. On top of this, a brand-new channel dedicated sports whose TV rights are in Sky’s current portfolio will be available on the DTT platform. Sky has also agreed to acquire Mediaset's technical and customer support and commercial activities if Mediaset decides to sell this area in a 60-day window between November and December this year.

Our analysis

This agreement is a fundamental step for the evolution of the Italian television landscape as it will lessen competition between the two most important pay TV operators in the country, which was intense in the past – peaking in 2015 when Mediaset decided to remove its three free-to-air channels (Canale 5, Rete 4 and Italia 1) from the satellite package supplied by Sky.

This deal between the two biggest pay TV operators in the country (Sky and Mediaset Premium had respectively almost five and three million subscribers at the end of 2017, according to IHS Markit TV Media Intelligence) is important as the two operators are likely to share their exclusive content too. Mediaset Premium has output deals with Warner Bros and NBC Universal, while Sky has agreements with HBO and Showtime, although it is still unclear if Sky will make these programmes available via Mediaset Premium.

This agreement certainly signals more engagement in the pay TV service on the part of Mediaset. Vivendi agreed to acquire 100% of Mediaset Premium as part of a wider alliance with the Italian company unveiled in April 2016. but later sought to renegotiate the agreement, sparking a continuing legal dispute. Vivendi alleged that Mediaset's business plan projecting break-even for Mediaset Premium in 2018 was over-optimistic.

This deal also makes further co-operation between the two operators for the acquisition of TV football rights a possibility too. The allocation of football rights for Serie A is still pending. Mediapro has bought the rights, but it will not be allowed to have any editorial role, as the Competition Authority has recently clarified. This means that the Catalan company is allowed to have an intermediary role only. Mediaset Premium, which had the rights for the previous cycle of games in the domestic league, did not bid in the call for tender in May and January, forcing the Lega to explore alternative possibilities. The current deal with Sky hints to the possibility of Mediaset Premium and Sky sitting together at the table with Mediapro to find an agreement on the Serie A games that would provide the intermediary with a return on the investments made at the end of January and would allow the both of the operators to keep on broadcasting the Seire A as it has happened for the last few years.   

The agreement between Sky and Mediaset comes a few months after a channel-sharing deal between Sky and BT in the UK. While very different in detail, in both cases a Sky platform has reached an accomomodation with a rival in the pay TV market which is likely to defuse head-on competition for rights, if not necessarily for customers. This is another sign of how dynamics in European pay TV markets are changing as they mature and consumers explore cheaper alternatives online.    

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