SVoD, Pay TV


Two months on - what Mediaset can do to turn the tables

Two months on from the aborted Vivendi-Mediaset deal, conditions remain challenging for domestic pay TV services in Europe. In the big 5 European markets subscription OTT penetration has grown from less than 1% to over 15% of households in just five years. Over the next five years, this figure is expected to grow to over 31% by 2021. As subscription OTT services gain more market share a power shift away from traditional pay TV operators is inevitable. 

Italian broadcast group Mediaset has been one of many traditional TV players attempting to improve its position in the pay TV and OTT market.

In December 2013 Mediaset Group launched its online streaming service, Infinity. In 2014 it transformed its pay TV unit into a separate entity, Mediaset Premium Spa, opening the platform up to outside investment, and acquired exclusive sport rights to trasmit Serie A and Champions League matches from 2015 to 2018 for a total of over €650 million per season. In 2015, Mediaset acquired exclusive distribution first subscription window rights for films and TV series from Warner Bros and NBC until 2020.

Despite these developments, the market has been tough. Lower interest in sport amongst younger demographics, the high costs of sports rights acquisition, the presence of pan-regional pay TV operator Sky in the Italian market, and most recently the launch of Netflix, have all presented challenges to Mediaset’s ambitions. 

In the face of these threats and a potential shift of power from pay TV to OTT, Mediaset could adopt a number of potential strategies: 
  1. Sell its sport channels to other players such as channel networks like Al Jazeera (BeIN Sports), Discovery (Eurosport), or Fox Networks. Sport is the single largest category of content expenditure that Mediaset is exposed to and with lower interest from younger consumers in sport, it may be a cost the group can afford to shed.
  2. Continue to strenghten its domestic position in scripted content by investing in additional exclusive rights to broadcast film and TV series by major local and international studios.  Subscribers to Mediaset Infinity, Mediaset’s SVoD service – and the possible engine of its future subscription TV growth – are much less sport-focused than subscribers to Mediaset Premium, and much more interested in scripted content.
  3. Mediaset could seek to partner with other pay TV providers in non-competing markets - increasing collective purchasing power in order to be able to compete with the rise of pan-regional providers. While the strategic alliance with Vivendi has fallen flat, forming regional partnerships for rights acquisiton with non-competitive single-market operators is still an option and would help to combat the challenges of competing with strong multi-territory players such as Sky and Netflix.
The tragedy of the failed Vivendi/Mediaset deal is that French pay TV group CanalSat/Canal+ faces many of the same challenges as Mediaset and an alliance between the groups made strategic sense, even if the details proved to be the stumbling block. Recently, in a bid to improve its position, Canal+ has made deals with national IPTV operators (Free, Orange) to wholesale channel packages at substantially discounted rates, aimed at countering declining customer numbers with a view to securing market share in the long term. For Mediaset, few such options are available – IPTV failed to reach critical mass in Italy, and potential local allies few and far between. A strategic divestment of certain assets and refocus on new drivers is likely to be the best course of action for a newly competitive Mediaset Group.