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Vivendi’s takeover of Mediaset would be a takeover of Italy’s entire media sector

by Marco Mele

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French conglomerate Vivendi's attempted hostile takeover of Mediaset is much more than a move to expand in commercial broadcasting or television production outside its borders. Given the peculiar structure of the Italian media sector, it equates to an attempted takeover of an entire industry, of a piece of the nation itself. Because Mediaset isn't just your run-of-the mill TV company.

It's a group that at the end of 2015 had an undisputed share of about one-third (32.23%) of Italy's television market. It has an even bigger stake (56%) in national television advertising, with more than €2 billion in gross revenue, according to Nielsen estimates.

What private television group in Europe, with one-third of the audience, commands two-thirds of television advertising?

It's estimated that Canale5 alone is worth €1 billion in advertising, about half of the advertising turnover for the entire group.

The position that makes Mediaset so alluring and such a crucial player in the national media system stems from the structure of the Italian market. Vivendi has set its sights on a television outlet that had 61.7% of the entire media market in 2015 (according to Mediaset's 2015 financial report). Also in Italy there is no a viable second-place, private-sector television rival to public tv.

Every other European market has two commercial television groups plus public television. In Italy, Rai, the public television, is Mediaset's only competitor in terms of viewers and advertisers.

Mediaset is a vertically integrated group: it owns 40% of EITowers, the leading Italian tower operator. In Europe, from the U.K. to France, transmission towers are controlled by operators that are independent from broadcasters, who pay to lease transmission capacity.
Mediaset would give Vivendi access to digital television networks.
Does all this mean that Italy is right to defend the “strategic” position of the national company controlled by Silvio Berlusconi?

No. It means that Italy should have, years ago, focused on developing a more competitive system able to encourage new entrants. It should have reduced the concentration of resources, of transmission rights, of valuable frequencies, instead of leaving them in the hands of one player, which is what happened.

Mediaset isn't only involved in television: it's expansion in radio, the 2015 financial budget reveals, “expands and completes the group's advertising offering which is becoming increasingly cross-media.”

And let's not forget that besides the €2.5 billion in revenue in 2015 that came from Italy, another €971 million came from Spain, where Mediaset owns 46% di Mediaset Espana, listed on the Madrid Stock Exchange. It controls Telecinco, the most watched Spanish commercial channel in 2015, the Cuatro network, and four digital channels (Factoria de Ficcion, Boing, Divinity and Energy). Spain is the key to accessing markets in South and Central America and the U.S. Spanish-language market.

One of Vivendi's objectives is Mediaset's vast library. As of December 31, 2015, its free-TV library contained 3,508 films; 771 TV series with 16,534 episods; 46 telenovelas with 4,780 episodes; 257 miniseries with 1,006 episodes, nine soap operas with 1,559 episodes, and 772 television movies.

The Italian company also has an output deal with Warner Bros. through 2020 and Universal through 2018 for films and television series across platforms, both free and pay.

In sports, Mediaset owns the rights to nine major Serie A teams for the three-year period 2015-2018 and exclusive rights across platforms to the UEFA Champions League for the 2015-2018 seasons (an agreement that must be renewed this year).

Mediaset had 4,299 employees at the end of 2015, while rival Rai had more than 11,000. The renewal of Rai's public service contract may impose limits on staffing, to Berlusconi’s network advantage.

There's one other particular aspect of Italy's system compared with the rest of Europe: conflict of interest. Mediaset's controlling shareholder ran the government for years and remains the leader of a political alliance.

In Italy, the politicians in Parliament appoint regulators. Members of Parliament and regulators then make the laws overseeing the television industry. Vivendi could “inherit” a whole series of rules that are favorable to Mediaset, including one that forbids one entity to control both a television group and Telecom Italia. A rule that was approved to avoid Mediaset's being swallowed by the telecom giant, and that now presents the only real legal obstacle Vivendi has encountered so far to its takeover, since it is the main shareholder of Telecom Italia.