Has media magnate Mr Rupert Murdoch clashed head-on with a forceful blast of good old-fashioned protectionism in his attempts to buy his way into Italy's potentially lucrative digital pay-TV market? Events, or the lack thereof, in recent weeks have certainly prompted the question.
It was just three weeks ago that Mr Murdoch triumphantly announced in London that his News Corporation group was "very close" to finalising a deal with Telecom Italia and Televisione Francaise 1 (TF1) for the formation of a digital pay-TV venture in Italy to be known as News Corp Europe. Ms Letizia Moratti, former chairwoman of Italy's state broadcaster RAI, is the proposed head of the new, Milan-based company in which Telecom Italia will hold a 51 per cent stake; News Corp, 39 per cent; and TF1, 10 per cent.
Mr Murdoch has been nosing around the Italian TV market for at least three years, during which time he has tried and failed to either buy a controlling share in, or set up a joint venture with Mr Silvio Berlusconi's Mediaset empire.
Market analysts point out that his interest in Italy is logical since it is one of the only three continental European markets - France and Germany being the others - big enough to make pay TV economically viable. On the day the News Corp Europe deal was announced, Mr Murdoch said that he and the newly-appointed chief executive of Telecom Italia, Mr Franco Bernabe, still had to finalise various aspects of the deal, adding: "We are both so far very much of one mind. It will either start very quickly or not at all."
Bookmakers might give you long odds against the "very quickly" option. Over the last few weeks, political and economic considerations have emerged which, while they may not sink News Corp Europe even before its official launch, could certainly delay its descent down the slipway.
News Corp chose to do business with Telecom Italia for the obvious reason that Telecom already has its own pay-TV unit - the unprofitable Stream, which registered a loss of $118 million (£78.6 million) last year.
Although Stream has only 70,000 subscribers, Telecom and News Corp believe that over the next five to eight years that number could be increased more than twentyfold to 1.5 million. At the moment, only about 4 per cent of Italian homes subscribe to pay TV, compared with 30 per cent in Britain.
The Telecom and News Corp calculations may be partially based both on the success of BSkyB in Britain and on the relative success of Telepiu, Italy's dominant pay-TV company with more than 500,000 subscribers. For News Corp, too, some of the attraction of the Telecom Italia deal may have been the fact that it would allow it to compete directly with Europe's biggest payTV broadcaster, French company Canal Plus, which owns 90 per cent of Telepiu.
Sport is obviously the key to the development of digital TV, both in Italy and elsewhere, and soccer is the motor that drives the worldwide sports televisual market. Initial reports - which have never been denied - suggested that Mr Murdoch's basic strategy was for Stream to offer a staggering $2.5 billion for the TV rights to all Serie A and Serie B Italian league soccer games over the next six seasons.
That strategy, however, may be causing delays. On the one hand, Mr Bernabe is reluctant to see Telecom invest so much capital in a non-core business. The original deal had envisaged News Corp and TF1 buying 49 per cent of Stream but Telecom now seems to favour selling out a majority 50 per cent-plus holding in order to reduce its capital investment.
At this point, economic considerations tie in neatly with political ones. The easiest solution to Telecom's dilemma would be to encourage News Corp to buy out the majority holding in Stream but political considerations argue that Telecom might do better to find new Italian investors to fill the gap.
The announcement of the proposed Murdoch pay-TV deal had prompted a highly negative political reaction. The junior minister for communications, Mr Vincenzo Vita, expressed his fears of a "colonisation" of the Italian TV market by Mr Murdoch, adding: "Stream absolutely must not fall into Murdoch's control but rather maintain an Italian majority [holding]."
Mr Vita's boss, communications minister Mr Salvatore Cardinale, has expressed similar concerns, warning against the risks of a "Murdoch monopoly" and adding that Telecom has "done well to rethink" the entire deal.
While Telecom sets off in a difficult search for an investor willing to cough up a sizeable share of the estimated $600 million-plus that the venture is expected to cost over the next six to eight years, News Corp is becoming impatient. Two weeks ago Mr Murdoch threatened to go it alone if the News Corp Europe deal was not finalised soon. One possible partner could be RCS Editori, owners of Italian daily, Corriere Della Sera and of Spanish daily, El Mundo. One definite non-partner is state broadcaster RAI which, after months of talks with Telecom, surprisingly abandoned ship to throw in its (digital PayTV) lot with Telepiu in a deal concluded this week. The deal also involves the mobile phone company, Wind, and is expected to cost RAI an initial $40-45 million a year.
Time, of course, if of the essence and for a simple reason. The rights to Italian soccer have to be concluded in the next few months so that new contracts are up and running in time for the 1999-2000 season which starts in late-August, or early September 1999. A further complication arises here also. Italy's leading clubs seem certain to reject the custom and practice which allowed the Football Federation to conclude a collective deal on behalf of all clubs, big and small. However, that is a story for another day.
As we await to see how the Italian TV market develops, it is hard not to agree with Mr Patrizio Pazzaglia, fund manager at Nusa SIM in Rome, who told Italy Daily last week:
"There is a little bit of nationalism here as the government clearly wants an Italian-majority digitalTV platform. In theory, there shouldn't be a reason why other Europeans shouldn't buy that stake but, in practice, Italy is not yet part of that open European market."
Not yet, but perhaps not for much longer.
