INTERNATIONAL: MEDIA OWNER PROFILE - If Berlusconi gets into power can Fininvest stay at the top?/The success of Fininvest hinges on Berlusconi’s failure to bounce back in politics

By RICHARD COOK,, Friday, 06 June 1997 12:00AM

Kerry Packer was a man who would bet millions of pounds on the turn of a single card. Walt Disney flirted with cryogenics. But as media moguls go, Silvio Berlusconi’s story is, perhaps, the most remarkable of all.

Kerry Packer was a man who would bet millions of pounds on the turn

of a single card. Walt Disney flirted with cryogenics. But as media

moguls go, Silvio Berlusconi’s story is, perhaps, the most remarkable of


The former small-time cruise ship entertainer founded what was, for a

time, the largest media empire in Europe, ran the most successful

football team in the world and then a nation as well. A man who, in

opposition, is now topping the opinion polls even though he is also

facing three separate trials for alleged offences ranging from bribery

to false accounting and fraud.

Media operations account for just over half of turnover in Fininvest,

the Berlusconi family company. The other half is derived from a

collection of other businesses, not least of which is the football club,

AC Milan.

There is also a financial services division and a hypermarket chain.

It might seem a straightforward list - if you exclude AC Milan - but

just being able to talk about turnover, let alone the relative

performance of the various divisions, would have been a tough task until


Fininvest is a private company that had a reputation for guarding its

privacy with a tigerish zeal. These days, Italy’s second-largest private

company has adopted a more open stance. A precarious debt position in

the early 90s, Berlusconi’s burgeoning political ambitions and a climate

of criticism against media monopolies have brought about this


Perhaps change was inevitable, though, as soon as the company woke up

from its 80s acquisition spree with a huge financial hangover. By 1994,

Fininvest had debts of more than dollars 2 billion and was looking at

annual interest repayments of dollars 236 million.

Berlusconi was founding his right-wing Forza Italia coalition and

running for prime minister. Once elected in 1995, he ceded day-to-day

control of the family company - for all the upheaval Fininvest has been

through it is still wholly owned by the Berlusconi family - to his old

colleague, Fedele Confalonieri. He spent only seven months as prime

minister, before the defection of one of his alliance parties forced him


Berlusconi’s political ambitions remain undimmed, however, and the

question is how the company he built up will continue to develop without

his input, and with the growing influence of partners culled from some

powerful foreign media companies.

Its priority is to finish restructuring. What remains of that is the

flotation of a majority stake in its domestic pride and joy,


This is the division that had attracted much of the controversy in the

first place, and for a good reason. Although there are six national

terrestrial TV channels in Italy, three of them are owned by Rai, the

state broadcaster.

Mediaset controls the rest, as well as Publitalia, the sales house that

sells advertising for the channels and for all Fininvest’s magazines and

newspapers. It also owns a rights catalogue, capitalised on its own

account, of around dollars 1 billion. The Mediaset channels command a

little less than half of Italy’s TV audience, but because they can sell

more advertising minutage than the state broadcaster they also take

around 60 per cent of total TV ad revenue.

Even Berlusconi accepts that this cannot continue. Italian law decrees

that a prime minister cannot own TV franchises, but that didn’t stop


Nor did a court decision dating from 1995 condemning the size of

Fininvest’s market share. But that same year he took some powerful

outside investors into Mediaset and that, apparently, is bringing the

message home.

In 1995, Rupert Murdoch ran his slide rule closely over the group before

pulling out when it became clear Berlusconi was not interested in

relinquishing control.

Instead, Berlusconi brought in three major shareholders - ceding a

combined 18 per cent stake in return for an investment of dollars 1.1

billion. The three, which includes the German digital TV pioneer, Kirch,

also negotiated a right to veto areas of capital expenditure and of

intra-company dealings with other Fininvest operations.

Since then, the Fininvest stake in Mediaset has been diluted by the sale

of another 8 per cent in the company to investment banks, and Fininvest

is likely to be left with a less than half share, although, as things

stand, it will retain voting control of the company once the flotation

takes place later this year.

Fininvest identifies the development of TV projects throughout Europe as

the key to its future direction, and its links with Kirch are likely to

be crucial in that regard. There has been a tacit acceptance that

Fininvest’s still-considerable publishing interests - for all their

importance in revenue terms - are not going to be the key to future

growth. Its publishing arm, Mondadori, was the first casualty of the

restructuring in 1994. More than half of the company was floated off,

but it remains a powerful presence, responsible for almost a third of

total magazine circulations and the sensationalist daily newspaper, Il


Fininvest’s media fortunes will depend, perversely, on the failure of

Berlusconi’s political comeback. Although Confalonieri is deemed to be a

safe pair of hands, there is a feeling that it is only when the company

is back under the control of its founder that its future will be


But that is by no means uncertain. The incumbent Olive Tree Coalition

government pledged to serve five full years when it was elected last


But national strikes and unemployment indicate it is unlikely to see out

the summer. And, according to the opinion polls, Berlusconi commands the

support of 48 per cent of the population.

If politics do not get him, one of the lawsuits might. But if Fininvest

is to retain - and build on - its position as the second-largest media

company in Europe, it needs Berlusconi to hit all the right notes.


TV and advertising

Fininvest owns a 73.5 per cent stake in Mediaset, the parent of three of

Italy’s top TV stations, Canale 5, Rete 4 and Italia 1. Canale 5 shares

with the state channel, Rai 1, the accolade of being the most watched

channel in Italy. Fininvest’s other TV interests include 10 per cent of

Telepiu, a terrestrial pay-TV service controlled by Kirch. Fininvest has

a one-third stake in the German sports channel, Deutsche Sports

Fernsehen, and a quarter stake in Spain’s loss-making Telecino. It also

owns the Cinema 5 chain of 30 sites across Italy.


Fininvest has a 47 per cent stake in Mondadori, Italy’s largest magazine

publishing group. Titles include the TV listing guide, TV Sorrisi e

Canzoni, which sells almost two million copies a week; the women’s

weekly title, Donna Moderna, which has a circulation of more than

600,000 - more than double that ofits rivals. It also has joint venture

companies to publish Marie Claire and the G&J women’s monthly, Vera. Its

most important paper since the closure of the evening title, La Notte,

is Il Giornale.

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