Italy's Mediaset Falls to $57 Mil 9-Month Loss Amid Falling Ad Revenue

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Mediaset ad sales fell 14.9% over the first three quarters of the year compared to 2011, as the Italian ad market contracted almost across all sectors.

ROME – Italian television and cinema giant Mediaset recorded a loss of €45.4 million ($57.2 million) over the first nine months of the year, company officials said Tuesday, compared to a net profit of €164.3 million ($207.1 million) over the same period a year ago, as revenue fell across the board due to an eroding ad market.

The results were released after the close of the market Tuesday, but Mediaset shares rallied nearly 3 percent in the final 50 minutes of trading ahead of the announcement, implying there may have been speculation the results would come in stronger than expected. The finished the day at €1.275 ($1.61) -- above their 52-week low of €1.17 ($1.47) and about even with Monday’s close despite falling right out of the gate Monday.

In a conference call with journalists, Mediaset Chief Financial Officer Marco Giordani said the company’s outlook was mixed but that the broadcaster’s continued strength with young viewers gave some reason for optimism. Giordani also noted that the number of viewer minutes on Mediaset’s three national networks continued to trend upward.

Compared to the same period last year, ad sales were down 14.9 percent, weighing in at €1.66 billion ($2.11 billion), compared to €1.95 billion ($2.46 billion) in the year-ago period.

Among Italy’s other broadcasters, only state broadcaster RAI, where ad revenue fell 17.2 percent year on year, was hurt more than Mediaset. Sattellite broadcaster Sky-Italia, a subsidiary of Rupert Murdoch’s News Corp., and the smallest national broadcaster, Telecom Italia Media’s La7, saw ad sales rise 7.7 percent and 7.2 percent, respectively, over the first three quarters.

Mediaset’s ad sales dropped by more than the overall television ad market, which contracted 12.9 percent over the first nine months of the year compared to the same level in 2011, according to figures released earlier Tuesday by Nielsen. The Nielsen figures showed drops of between 9.8 percent and 21.7 percent across all advertising sectors in Italy -- television, newspapers, magazines, radio, cinema, and outdoors -- with the exception of internet advertising, which rose 11.6 percent compared to the same period last year.

Breaking out its Italian operations only -- Mediaset also owns the Tele Cinco network in Spain -- the overall results were even weaker, with a nine-month loss of €62.1 million ($78.2 million), compared to a profit of €121.2 million ($152.7 million) a year ago.

Revenues also fell dramatically, though the impact on that was limited by lower costs as the company reduced its investments in television rights and project development to €349.8 million ($440.7 million) compared to €439.6 million ($553.9 million) a year ago, while the €836.1 million ($1.05 billion) it spent for Serie A soccer broadcast rights was not renewed this year. But cash flow remained strong in 2012, a trend likely to continue into 2013. The company remained Italy's largest broadcaster.

Mediaset’s controlling shareholder in former Italian Prime Minister Silvio Berlusconi, whose leadership of the company has been limited by personal and legal scandals. Berlusconi, who was sentenced to four years behind bars for tax fraud last month, stepped down as prime minister one year ago last Friday amid fears Italy could fall victim to the European debt crisis.

Mediaset has been trying to raise cash by selling assets: it sold its Medusa Home Video subsidiary last month and is looking to sell its share in The Space Cinema exhibitor chain. The company is also reported to be shopping its Mediaset Premium service.