World: Medium of the week - Pay-per-view scratchcard ignites an Italian TV war

Mediaset has thrown down the gauntlet to Sky to cover Serie A. Mediaset surprised everyone last month when it snapped up the rights to three Serie A football clubs with a view to broadcasting their games using an innovative pre-paid, pay-per-view system of scratchcards, available from newsagents.

The venture, which gives the Silvio Berlusconi-owned company the rights to the home games of AC Milan (of which Berlusconi is also the president), Juventus and Internazionale, is a significant encroachment on Sky's football territory in Italy. And the business model could go much further, reshaping the entire broadcast landscape in the process.

War between satellite and digital terrestrial TV has been declared. Mediaset has spent 86 million euros for the rights to broadcast the games on DTT and has the option to buy all rights in 2007, when the deal ends. This would enable Mediaset to assume the role of content provider for anyone wanting to broadcast games in Italy.

In reply, Sky has launched a package of special offers to attract viewers.

Rupert Murdoch's pay-TV venture spends 450 million euros a year in Italy on football and 40 per cent of its 2.6 million subscribers have a football package.

But this investment may not be enough. Starting this autumn, football fans will be able to buy single-use decoder cards which will allow viewers to watch a game on DTT at a cost of between two and five euros, a significant saving on a Sky subscription.

This business model has wider implications. Mediaset's hope is that the cards will accelerate digital TV take-up. This has so far been slow in Italy. Despite a government subsidy to encourage digital subscriptions, there are only 300,000 Italian households with decoders.

Mediaset is confident that sales of set-top boxes will now grow at a much faster pace - it has to be. As the law stands, if the digital system doesn't cover at least 50 per cent of households by next spring, Rete 4 (one of the three Mediaset TV channels) will be forced to transmit on satellite.

Italian media buyers are cautious about how much ad revenue could be generated by digital TV in Italy. More than a million boxes are ready for the run-up to Christmas, but the medium is still in its infancy.

"The idea is very interesting, even if we're still waiting to find out what advertising prices are," Walter Hartsarich, the president and chief executive of Aegis Media Italia, says. "Nevertheless, DTT offers an increased range of opportunities for clients, such as split-screen and interactive ads. There's no doubt it will reshape the market." (The Italian football market is estimated to be worth between 35 and 45 million euros.)

"The richest spenders might be able to advertise on both platforms," Roberto Roseano, the research director at Media Italia, says. "They'll be able to negotiate a price with estimated audiences if there aren't official audited numbers."

He is also looking forward to seeing how interactive advertising will perform around a subject like football that arouses such passion in Italy.

One thing's for sure - Mediaset versus Sky is going to be an interesting game to watch.

Mediaset football investment: 86 million euros

Sky football investment: 450 million euros

Digital TV viewers: 300,000

Sky football subscribers: 2.6 million