Mediaset: slow dance

The slow, teasing dance by Mediaset - the Italian media conglomerate owned by Silvio Berlusconi - may soon reach a climax. It has for some time subtly tempted bidders for its Mediaset Premium television business. Several, including rival Sky Italia, seem interested. As competition between the two will soon intensify, a deal would make sense for both companies.

Italy's pay-TV market covers about a quarter of Italy's 25m homes. That is roughly half of the pay-TV penetration of the UK, Sky's core market. There are two players: Mediaset (26 per cent) and Sky Italia (the rest). The key to keeping these customers happy is sport, specifically Italian football.

These two share the football rights for Serie A, the top league. Almost all of Mediaset Premium's 1.7m customers subscribe for the football, Bernstein believes. Last year it upped the ante by buying the 2015-18 Italian TV rights for the European Champions League tournament, previously held by Sky. Mediaset hopes that the Champions League will bring it another 500,000 subscribers. Unless the pay-TV audience expands, these will come from Sky and could, according to Berenberg, mean a 10 per cent hit to Sky Italia's annual sales.

That may explain Italian reports that Mr Berlusconi recently entertained Rupert Murdoch, whose 21st Century Fox has the largest stake in the Sky group. With France's Vivendi and Al Jazeera of Qatar also reportedly interested, Sky would do well to neutralise the threat by buying Mediaset Premium itself. It would cost about €900m (using a recent stake purchase by Telefonica as a benchmark).

Though Sky may have to explain itself to the Italian competition authorities, they may not immediately object. With concessions, a deal could be arranged: offering sports on other platforms might work. As neither business makes much profit, their escalating rivalry is counterproductive. Mediaset needs to get a move on.

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