Mediaset

Background information

Mediaset’s history is inextricably tied to that of its creator and founder, Silvio Berlusconi. The group was born in 1978 with the establishment of a local TV station called Telemilano. In 1980, the station began broadcasting nationally under the name Canale 5; it was later joined by Italia 1 (acquired from the publishing company Rusconi in 1982) and Retequattro (acquired from Arnoldo Mondadori Editore in 1984).
In the 1980s, the television conglomerate was christened R.T.I. (Reti Televisive Italiane) and had three stable national analog networks, flanked by a commercial advertising arm called Publitalia ’80. At the beginning of the 1990s, Berlusconi had some problems with bank credit, and the rapid growth of the group was primarily financed through the accumulation of debt. Cesare Geronzi’s Banca di Roma came to Berlusconi’s aid by guaranteeing him the necessary liquidity. In 1994, Berlusconi’s political career took off and he became prime minister; in 1996, he succeeded in listing Mediaset on the stock exchange, thus resolving all of its financial problems. One year later, the group decided to pursue expansion abroad as well, acquiring the private Spanish broadcasting station Telecinco, which was listed on the Madrid stock exchange in 2003.
Born of a daring gamble on commercial television in the ‘80s, Mediaset became one of the largest broadcasting companies in Europe, thanks to the help of the new Italian anti-trust laws and a favorable normative environment. The soul of Mediaset has always been Berlusconi (who owns it through his holding company Fininvest), even if it is effectively run by manager Fedele Confalonieri and the ex-premier’s eldest son, Piersilvio, while Publitalia is headed by Giuliano Adreani since 1994. This created a conflict of interest that garnered extensive attention in Parliament and on the national political scene. For years, the Italian premier’s political career and his television empire went hand in hand, mutually reinforcing one another. A study by three university professors who looked at election data starting in 1994, when Berlusconi ran for office for the first time, revealed that the more established Mediaset was in a given region, the stronger the support for Berlusconi’s political party.
Despite the expansion of the business and the launch of Mediaset Premium, a paid digital terrestrial television service, both television and Berlusconi are dealing with the economic crisis, and not just at the macro level, with the draining of advertising resources. At one time, the creator of Canale 5 could, in fact, boast of having captured not only the public in general, but also the most profitable segment of the advertising business: young people, the wealthy, and those constantly in search of the latest novelty. The State television (RAI) maintained the largest audience; however, as the Publitalia salespeople often repeated, Mediaset was a hit with the metropolitan crowd, leaving State TV to old ladies in middle-of-nowhere towns in the Apennines. Today, however, the memory of this success is fading. Young people turn more frequently to the Internet and their iPads for entertainment, and less to television. Mediaset’s competitor, Rupert Murdoch’s pay-TV Sky, which has over five million customers, is outperforming Mediaset in rights to sporting events, thus targeting the most loyal audience. According to experts in the media industry, Mediaset has failed to diversify its TV production and transform its pay-TV unit into a profitable business, as it remains tied to an outdated business model that is too focused on traditional advertising.
The company’s atmosphere has changed with regard to employee relations, as well. Mediaset was always viewed as a model of union relations, but in December 2012 it found itself dealing with protests from some of its approximately 6,000 employees. In 2012 the group recorded the first negative balance in its history, and thus the leadership was forced to rationalize personnel and cut costs, even closing some offices in Italy. In the meantime, competition increased among the four main player: RAI, Mediaset, Sky and La7, currently run by the entrepreneur Urbano Cairo. Experts believe that the hybrid political party-business model could be no longer viable, and that Mediaset, a driving force behind Berlusconi for years, will have to change gears.

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