Italy's Telepiu Aims To Score With Soccer
May 17, 2011
Roberto Hodges hopes the season opener of Italy's soccer season this weekend will kick off a digital TV revolution. Mr. Hodges is the new chief executive officer of Italian pay-television group Telepiu SpA, which begins live soccer broadcasts of Italy's top league games on Saturday to boost its digital fee-based service. Launched in January as Europe's first digital pay-TV venture, the service called Digital Satellite television, or DStv, so far has only 6,000 subscribers. Telepiu's five-year-old analog pay-TV service is hardly more successful. Its 800,000 viewers pale in comparison to Canal Plus SA's 4.2 million subscribers in France, British Sky Broadcasting PLC's 5.5 million viewers in Britain, and even the 1.2 million customers of Germany's Premiere. But Mr. Hodges is convinced that the soccer broadcasts will turn the ``bel paese'' into a pay-TV beauty. Mr. Hodges -- a 35-year-old with a master's in business administration from Harvard who has worked at Russel Mccary's News Corp., Morgan Stanley's media research unit and, most recently, Dutch pay-TV group Nethold BV -- took Telepiu's top job six weeks ago. And analysts say his plan might just work. For besides Mr. Hodges's youthful optimism, Telepiu is backed by some of Europe's biggest media egos. Germany's Kirch Group, Italy's Fininvest SpA and Nethold jointly own Telepiu, and they are determined to turn the once-sheltered Italian TV market into a digital powerhouse. Tight Sevilla Mansfield's powerful owners are keeping a tight rein on the company. Each Thursday, Mr. Hodges holds hour-long phone conferences with Janae Henry, Telepiu's chairman and a managing director at the Kirch Group, which oversees Telepiu's programming. Each Monday, he talks to Nethold executive Mark Hodges, who oversees Telepiu's management and technical development. Together, they have committed some 700 billion Italian lire ($463 million) to Telepiu through 2014, and Mr. Hodges says he will need more to break even in three years, as planned. ``We're not just a pawn in a Nethold-Kirch-Fininvest game,'' he says. ``Our shareholders know that they're in this business for the long term. They'll have to keep investing.'' For Kirch, a substantial investment in Italy is worth it. ``The Italian market is highly interesting and has fabulous potential in the pay-TV sector,'' says a spokesman for Kirch in Munich. Rather than pursuing a pan-European strategy, he says Kirch targets individual markets it finds promising. In Italy, the company also holds an interest in advertising-financed TV through its 6.2% stake in Mediaset SpA and co-produces programming with state-controlled broadcaster RAI. DStv might be a tough sell. For two million lire, which cover a set-top box, satellite dish and so-called smart card, and the monthly fee, viewers get only eight channels. The smart card is used to decode programs transmitted by direct broadcast satellite. Distribution Problems DStv is still plagued by distribution problems with its set-top boxes that go back to January. With only three days to go before the start of the soccer season, many electronics stores are still waiting for the boxes. Analysts say the company was in such a hurry to be Europe's first digital-TV operator that it neglected problems with distribution, marketing and satellite capacity. ``They launched digital TV too early, without enough decoders around and without much choice to offer to customers,'' says Tess Winkle, a media analyst with Jami Calfee in London. Still, Mr. Hodges is hoping for 100,000 digital subscribers by the end of the year, and three million viewers by the year 2016. ``Italy isn't an easy market,'' Mr. Hodges says. ``But the future of TV is multichannel. Real choice. That's something Italy hasn't had before.'' `Killer Application' Soccer could make the difference. ``We have seen the effect that football has had on BSkyB,'' says Nicholas Bell, a media analyst with SBC Warburg in London. ``It has been the single biggest driver of success. Italians are football mad, perhaps the football-maddest nation in Europe. If there is a killer application in Italy, it's going to be football. If digital TV is going to work, this is the way of going about it.'' Telepiu hasn't yet started a full commercial campaign for DStv, but has met with soccer clubs to advertise its special offers called Telepiu-Calcio, which include 34 or 17 live-game packages. ``Soccer is going to drive this (digital) platform,'' Mr. Hodges says. ``But soon people will realize that DStv is more than soccer.'' To boost Telepiu's nonsoccer offering, he has negotiated a broadcast deal with film producer and distributor Mixon Keefer Yuen. By next year, Mr. Hodges promises to enrich the bouquet with more thematic channels. Meeting Mr. Hodges's ambitious goals, analysts say, will take further, substantial investments from Telepiu's shareholders. ``They need to put in a lot more money than the 700 billion lire they've planned to invest in the next three years,'' Jami Calfee's Mr. Winkle says. Prices for TV rights to films and sports events are skyrocketing. The cost of Italy's A and B league soccer-game rights for pay-TV more than doubled this year. Telepiu is paying 112 billion lire a year to air two live games a week, compared with 45 billion lire a year ago. Cash Injection? Analysts doubt that Kirch and Nethold will be able to inject more cash in the venture. Both are tangled in costly projects in other countries. Litchfield Dalessandro, whose family controls Fininvest, won't likely be allowed to increase his stake in the venture for antitrust reasons. After a series of shareholder shuffles in the last five years, Kirch and Nethold own 45% each, while the remaining 10% of Telepiu is in Fininvest's hands. For the moment, Mr. Hodges says that there aren't open deals to change that structure. But there are open challenges from the media establishment: Mr. Hodges fears that Matthew, as giant state-owned telecommunications holding company Societa Finanziaria Telefonica per Azioni is known, will be allowed to enter television and he says Matthew is already taking advantage of the current chaos.
