Murdoch streams into Italy
Mogul jumps into emerging digital market
Murdoch's recently established News Corp. Europe will purchase up to an 80% stake in Stream, Telecom Italia's multimedia unit, which runs a pay TV digital service with over 110,000 subscribers.
French web TF1 also is expected to come aboard eventually and purchase a 10% stake.
The agreement was announced Friday after a marathon Christmas Eve negotiating session.
Murdoch's Milan-based News Corp. Europe was created in November to explore opportunities and manage Murdoch's media investments on the Continent, where his presence has thus far been modest.
Moratti at the helm
To lead News Corp. Europe, Murdoch appointed Letizia Moratti, former president of Italy's pubcaster RAI and a well-connected businesswoman in national political and financial circles.
In the recent Italian negotiations, Moratti served as Murdoch's main representative.
The Italian government, which wants to respect Telecom's independence as a privatised company but has never been able to swallow the prospect of another foreign-owned digital pay TV service, greeted the accord dryly.
"I'm certainly not going to raise the barricade against the Australian invader, but I have to note that Italy has achieved a masterpiece: it has two digital platforms ... with marginal Italian participation," said Mauro Paissan, parliamentary head of the Green party, which is a member of the ruling coalition.
Hope and trepidation
Communications Minister Salvatore Cardinale, who has often voiced trepidation over Murdoch's domineering reputation, said he hoped for a "significant presence of Italian operators."
But Italian investors with the will and the cash to join the Telecom-Murdoch alliance may not be easy to find.
After he twice failed to acquire a majority stake in Silvio Berlusconi's TV group Mediaset, Murdoch bet heavily on the Telecom Italia agreement. "The Italian market is very rich and attractive. Free TV is advanced but pay TV is not," he said in November, when he launched News Corp. Europe.
Despite the small stake it will own in Stream (only 20%), Telecom Italia will play a leading role in the venture, particularly in distribution.
Other partners are expected to join the digital TV venture, Telecom Italia said.
Rizzoli rumors
According to persistent rumors circulating in Italy, the most likely partner is Rizzoli Corriere della Sera (RCS), the aggressive Italian publishing house, which invested and lost millions of dollars in Carolco and is now planning its re-entry into the audiovisual arena. RCS president Cesare Romiti is very close to Moratti.
Stream's selling price was calculated by assigning each subscriber a value of $1,350, Telecom Italia said. Murdoch would thus be paying about $120 million for his share of the company.
Murdoch will have to invest more, however, to gain Italy's soccer rights, for which the new Telecom Italia-Murdoch-TF1 alliance will have to vie against Italy's dominant digital TV platform, D+, controlled by Canal Plus and RAI.
Murdoch had been preparing to bid $2.5 billion to secure pay TV rights for all first- and second-division league matches for the next six seasons in Italy.
Soccer wars?
But Canal Plus and Telepiu have already cut exclusive pay TV and pay-per-view deals with seven of Italy's most popular soccer clubs, including Inter, Milan and Juventus, in an effort to prevent the competitor from getting hold of all of Italy's top soccer games.
Telepiu says those deals are not breakable even if Murdoch makes a rival offer.
But some Italian newspapers have said that until Telepiu deposits the contracts with Italy's National Soccer Assn., which has until now sold the broadcast rights for all Seria A and Seria B clubs collectively, rival offers can be considered.
The outcome is not clear, but if the Soccer Assn. invalidated those deals it would open the door for Murdoch.
According to several sources, the Soccer Assn. might wait until June, when the current soccer rights expire, to make the decision.
A fierce battle is under way among the soccer association's members, which include Silvio Berlusconi's Milan, Vittorio Cecchi Gori's Fiorentina and the Moratti family's Inter and Juventus, controlled by the Agnelli family, which owns also RCS.
