Thursday, October 12, 2006

New Italian media law announced

The Prodi government has agreed changes to Italy's framework media law, reducing generous antri-trust limits set by the previous Berlusconi government.

Public broadcaster Rai and private corporation Mediaset - owned by former Prime Minister Silvio Berlusconi - enjoy a de facto duopoly over Italian television. Each has three of seven national terrestrial channels, and their advertising affiliates control over 90% of all television advertising. The law requires each organisation to move one channel to digital terrestrial television (where no organisation may own more than 20% of the market), and sets a limit of 45% on advertising sales. Mediaset's advertising arm, Publitalia, currently enjoys a 62% share (source: RepubblicaRadio).

By attacking the commercial interests of Mediaset, the government opens up a political debate with Silvio Berlusconi's party Forza Italia and his centre-right coalition, the House of Liberties. Berlusconi has attacked the law as "banditry".

The design of the law approved yesterday forecasts the transfer of one Rai and one Mediaset channel within 'fifteen months' of the law's passage. Passage through Parliament, however, may be difficult for the government, which enjoys an extremely narrow majority in the Senate. Whilst the government is unlikely to face significant problems within its own ranks, it may be vulnerable to procedural obstacles placed by the opposition.

Obstacles to implementation:
This is not the first time that Rai and Mediaset have been ordered to move channels to digital. A previous reform, which also set limits on publicity, was over-turned by a 1995 referendum. Berlusconi has already called for a referendum should Parliament fail to block the bill.

Should the law pass, and should two analogue channels become vacant in spring 2008, it is unclear who would wish to take up two national channels with only four years before digital switch-over and the shut-down of the analogue network. The most immediate and significant impact of the law would be to damage commercial prospects for Mediaset and Rai. Mediaset shares have dropped 1.5% this morning; their performance over the past three months has been dismal.

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