Former Italian Prime Minister Silvio Berlusconi’s political fortunes have rebounded since he played a big role in talks that led to the formation of a new government on April 28, ending a nine-week stalemate. But his media empire is in a slump. Mediaset, which owns TV networks in Italy and Spain and news websites, in March reported its first annual loss. Last year Mediaset sold its 33 percent stake in Endemol, creator of the Big Brother TV franchise, saying the Dutch company was no longer a strategic fit. For several months this winter, Milan-based Mediaset and the Benetton family tried unsuccessfully to sell a cinema chain they co-own.
“Berlusconi’s political adventure did Mediaset harm,” says Massimo Scaglioni, an assistant professor of media history at Catholic University of Milan. “In the early years when he was prime minister, the company got used to not having serious competition and drew advertising without much effort. This stopped it from focusing on the quality of its shows.”
Other Berlusconi ventures are also troubled. Arnoldo Mondadori Editore, a publishing group chaired by his daughter Marina that has 90 magazines in Italy and abroad, reported a 2012 loss of €167 million ($218 million) as sales fell 6 percent to €1.4 billion. Mondadori plans to close four publications and fire almost 100 of its 350 journalists, according to a company spokesperson. Fininvest, the holding company Berlusconi uses to control Mediaset, Mondadori, and other interests such as the AC Milan soccer team, hasn’t paid a dividend since 2010, after eight years of doing so.
Berlusconi, who was prime minister four times and was forced from office a year and a half ago, is also facing a growing list of court dates on charges including tax fraud, wiretapping, and paying a former belly dancer known as Ruby Rubacuori, or “Ruby Thief of Hearts,” for sex when she was 17 years old. “Berlusconi’s problem has always been too many things to look after,” says Giovanni Orsina, a history professor at Luiss-Guido Carli University in Rome. The trials “create a traffic jam for his time and attention.” Piero Longo, one of Berlusconi’s defense attorneys, says his client “is innocent in all the cases.”
Mediaset’s share price has tumbled 61 percent since the allegations of sex with a minor surfaced in 2010. The company has struggled to contain losses as spending on TV ads dropped 22 percent between 2008 and 2012 in Italy and 42 percent in Spain because of the economic downturn, according to researcher ZenithOptimedia. This year the researcher expects it to fall 5 percent in Italy and 10 percent in Spain. Mediaset is further burdened by expensive sports deals that are crucial to attracting soccer-mad Italians. The company spends about €260 million a year on such contracts, says François Godard, a media analyst at Enders Analysis in Naples. “The football rights are costing the company a fortune, so there’s little money left to spend on big American films,” Godard says.
For 2012, the company posted a loss of €287 million as revenue dropped 12 percent to €3.7 billion. Mediaset is also facing stiff competition from Rupert Murdoch’s pay-TV provider, Sky Italia. To counter that challenge, Mediaset has held talks with Qatar’s Al Jazeera and French pay-TV channel Canal+ about forming a partnership.
A Mediaset spokesman says the losses are due to declines in advertising and not any weakness in management.
Of the court cases Berlusconi faces, the most serious is a conviction last October for tax fraud. The 76-year-old billionaire, who describes himself as the most persecuted man in history, was sentenced to four years in prison in the case, in which he allegedly used an offshore company to buy rights to American movies to evade taxes for Mediaset. An appeal will be heard on May 8. And in March, Berlusconi was convicted and received a one-year sentence in a wiretapping case related to the 2006 battle for control of Banca Nazionale del Lavoro. He is appealing that conviction as well. Under Italian law, nonviolent defendants aren’t usually jailed until all appeals have been heard. “He’s been written off before and he’s always managed to come back,” says Claudio Aspesi, a media analyst at Sanford C. Bernstein in London. “Somehow he’s managed to transform his losses into quasi-victories.”