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FONDAZIONE ROSSELLI Institute for Media Economics

THE COMMUNICATIONS INDUSTRY IN ITALY 13th IEM REPORT

Public investment in the culture and telecommunications industry


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FONDA ZIONE ROSSELLI

Fondazione Rosselli Institute for Media Economics

THE COMMUNICATIONS INDUSTRY IN ITALY 13th IEM REPORT Public investment in the culture and telecommunications industry


Editor

Flavia Barca Coordinator

Andrea Marzulli

Contributors

Flavia Barca - Daniela Ciavarelli - Andrea Marzulli -Luca Murrau Lorenzo Principali - William Ricci - Paola Savini - Roberto Triola Chiara Valmachino - Bruno Zambardino

Fondazione Rosselli and its Institute for Media Economics thanks the following for their support

And also

While the information and data included in this report have been accurately assembled, there is nevertheless no intent therein to offer explicit or implicit formal guarantees that the sources which provided the data are reliable or exhaustive. Information was gathered expressly for use in the research for this study and is based on the data and sources available at the time of the writing of this report, which reserves the right to provide updates or corrections at any given moment. Fondazione Rosselli does not, therefore, take any formal responsibility for the data and opinions expressed in this report or for any future use that others may make of it, e.g. use of the information or opinions contained in this report as the basis for commercial evaluations or business initiatives.


Index Introduction (7)

by Flavia Barca and Andrea Marzulli

Part I: Markets Television

by Andrea Marzulli

1. Introduction (15) - 2. Share and penetration (16) - 3. The market (23) - 4. The television advertising crisis in Europe and programming investment (26) Radio

by Chiara Valmachino

1. Overview (33) - 2. Advertising investment (39) - 3. International comparison (41) - 4. Distribution platforms and the future of radio: performance and trends (42) Cinema

by Bruno Zambardino

1. Production, distribution and exhibition (48) - 2. Market resources (52) - 3. A comparison with the European markets (60) Home video

by Andrea Marzulli

1. The Italian market (63) - 2. The international picture (66) Books

by Daniela Ciavarelli

1. Book production and reading habits (71) - 2. The value of the market (74) - 3. International comparisons (77) Newspapers and Magazines by Paola Savini

1. Introduction (80) - 2. Newspapers and magazines in Italy: an analysis of the principal indicators (82) - 3. Publishing companies: sources of revenue and profitability (86) - 4. The international picture (89) Directory

by Luca Murrau

1. The Italian market (94) - 2. The European Market (96) Recorded Music by William Ricci

1. The Italian market (99) - 2. The European market (103) - 3. The world market (105) Advertising

1.Advertising: overview 2009-2010 (108) - 2. The Italian media mix (111) - 3. International comparisons (115)

Fixed telecommunications and broadband by Lorenzo Principali

1. The market in fixed network and broadband services (120) - 2. Operators, investments and ultra broadband (126) - 3. The international picture (132) - 4. The functional separation of the networks (135) Mobile telecommunications by Lorenzo Principali

1. Market overview (141) - 2. Infrastructure and mobile virtual network operators (MVNOs) (143) - 3. Mobile broadband: content, traffic and investment (145) 4. International comparisons (148) Information technology by Roberto Triola

1. Introduction (152) - 2. IT businesses in Italy (154) - 3. The Italian market (156) - 4. International comparisons (162) Video games

by William Ricci

1. The Italian market (166) - 2. The European market (172) - 3. Consumer habits (173)


Part II: In-depth case studies Public investment in the cultural and telecommunications industry

by Flavia Barca, Andrea Marzulli, Luca Murrau, Lorenzo Principali and Bruno Zambardino

1 Introduction and methodology (178) 1.1. Introduction (178) 1.2. Notes on the methodology (182) 2 State aid for culture and telecommunications: European Union guidelines and initiatives (186) 2.1 The new Guidelines on State aid (186) 2.2 The exception provided for aid to culture and supporting measures (188) - 2.1.1 The waiver for culture (188) - 2.2.2 The support initiatives (191) 2.3 European actions in favour of telecommunications (195) - 2.3.1 The overall picture (195) - 2.3.2 State aid for broadband (197) - 2.3.3 Assisted broadband areas (199) 3 Public expenditure in Italy in telecommunications and culture in the Regional Public Accounts (RPA) system (201) 3.1 Introduction (201) 3.2 The overall picture (202) 3.3 Public spending on telecommunications (205) -3.3.1 Overall expenditure for the Italian territory (205) - 3.3.2 Expenditure by region (206) 3.4 Public spending on culture (208) - 3.4.1 Overall expenditure for the Italian territory (208) - 3.4.2 Expenditure divided by region (213) 4 Public funding for the communications industry in Italy (215) 4.1 Radio and TV (215) - 4.1.1 Introduction (215) - 4.1.2 Support for National public television (216) - 4.1.3 RAI Contracts with the Public Administration (220) - 4.1.4 Subsidies granted by the Communications Department of the Ministry for Economic Development (226) - 4.1.5 Subsidies from the Department of Information and Publishing in the Prime Minister’s Office (230) - 4.1.6 Refunds for free self-managed messages during electoral campaigns (233) - 4.1.7 Contributions for digital terrestrial television (236) 4.2 Newspaper industry (244) 4.3 Cinema and live entertainment (249) - 4.3.1 Introduction (249) - 4.3.2 Trends in FUS allocations and macro-tendencies (255) - 4.3.3 The most significant sectors: cinema, operatic and symphonic foundations, musical activities and theatre (259) - 4.3.4 Public investment in favour of national TV drama production and regional funds for the audiovisual sector (268) - 4.3.5 Extra FUS funds (270) - 4.3.6 ARCUS resources for culture and entertainment (272) - 4.3.7 The Lottery resources for the entertainment sector (279) - 4.3.8 The distribution of national public spending at regional level (282) 4.4 Public incentives for telecommunications infrastructures (286) - 4.4.1 Introduction (286) - 4.4.2 The main institutions promoting the spread of broadband (288) - 4.4.3 The main interventions on the national scale (290) - 4.4.4 The main interventions at a regional level (296) - 4.4.5 Resources allocated to bridge the digital divide (298) Bibliography (300) Additional considerations by Carla Bodo (302) by Maurizio Dècina (305) by André Lange (306) by Mario Morcellini (307) by Mariella Volpe (310) About the authors (312)


Introduction by Flavia Barca and Andrea Marzulli

A substantial downturn in 2009 and a generally weak recovery in 2010, although with exceptions in some areas. The performance of the Italian communications industry during the economic recession was not very different to that of the country’s economy in general. The dip experienced by this macro sector (with a catchment boundary open to methodological clarification) was 4.4% overall, a figure close to the 4.9% forecast in the previous IEM Report, which reflects a better-than-expected recovery in the last months of 2009. The total value of this sector amounted to 96.147 billion euros (down from 100.520 billion in 2008), slightly less than its worth in 2005. The final figure at end of 2010 was not expected to reach the 100 billion mark; indeed, given the difficulties experienced in the ICT sector it was forecast to remain well below that figure. Figure 1 - Communications industry revenue, 2005-2009 105.000 100.321 100.000

100.520

98.712 96.263

96.147

95.000

90.000

85.000

80.000 2005

2006

2007

2008

2009

Source: IEM elaboration of various figures.

The performance of various markets in 2009 leaves little room for considerations beyond the channels already used to read and interpret events of recent years. The very few segments that ended the year on a positive note include Internet advertising, which confirms its role in the repositioning of communications investments, though its considerable growth did suffer a slowdown. Cinema box office results were also in the black, confirming the market’s extraordinary anti-cyclical nature. But the movie theatre represents only the first step in the chain of product exploitation in this sector and does not guarantee similar performance for the windows that follow, such as home video, which is in sharp decline, or television, which Introduction 7


has seen advertising revenues drop and subscription revenues slow. The third sector to register a positive result was below-the-line advertising, a form of commercial communication where investment is usually less affected by the general economic situation than traditional advertising. The list of negatively performing markets includes all sectors directly affected by the advertising crisis, albeit on different levels. Seen in this context, the 3.4% dip in the television market, where the fall in advertising revenue was less marked than in other media and also partially compensated for by the growth of the pay-TV sector (albeit at lower levels), can even be viewed as a positive result. Radio was worse affected, as were newspapers and magazines, for whom direct sales did not compensate but actually worsened their final performance. The decline in the music and home video sectors continues, penalised by alternative Internet offers (i.e., in the broad sense, file sharing), which also negatively influence the performances of newspapers and directories. But the most worrying data comes from the considerable slowdown in the IT sector (-8%). This market is already seen as extremely underdeveloped in Italy and has been strongly affected by the contraction in demand from business. Figure 2 - Performance in the communications markets (% var. 2009 on 2008) Internet (advertising)

6,4

Cinema

4,2

Below-the-line advertising

1,5

Mobile TLC

-1,5

Fixed TLC

-3,3

Television

-3,4

Books

-4,3

Communications industry

-4.4

Radio

-7,8

IT

-8,1

Newspapers

-9,0

Directories

-9,7

Videogames

-10,6

Recorded music

-13,1

Magazines Home video Outdoor advertising -25,0

-14,1 -17,9 -18,9

-20,0

-15,0

-10,0

-5,0

0,0

5,0

10,0

Source: IEM elaboration of various figures.

Signs of recovery were spotted in 2010, but not in all the sectors. In advertising, Internet investment returned to double figures during the January-October period, while radio growth was over 10%, recovering almost all of its 2009 loss, and television advertising also rose by a comforting 6%. On the contrary, the decline of the daily newspaper has not stopped, with sales falling by almost 5%, and advertising in this sector down 2.6%. It is almost taken as read that this further decline is connected to the rise in new media as a way of accessing information. Given the disastrous past few years, the music industry can be satisfied with its 7.7% increase in the first part of 2010, as can home video, up 2%. The video game sector has also taken off again, rising almost 7% in the first five months of 2010. However, the ICT continues to worry, with a drop in fixed telecoms (-4%), mobiles (-1%) and IT (- 2.5%). Businesses are still reducing investment in technology upgrades, with a continuing negative effect on IT results, while the TLC sector mainly registered a drop in telephone

8

Introduction


revenues and, in the fixed telecoms sector, a fall off in added-value services. This report systematically compares the Italian communications markets with those in the major European countries, showing Italy’s to be proportionately less rich than their European counterparts, whose habits of cultural and technological consumption are often much more highly developed. One exception is television advertising, where the Italian market is the richest on the continent. While this market is the most concentrated in Europe, its leading position is also due to the results registered by the Italian public broadcaster (higher than European counterparts) and to calculations that include advertising revenue from local broadcasters, which are either minimal or non-existent in the other countries taken into consideration. Figure 3 - Performance in the communications markets (partial 2010 % var. same period on 2009) Cinema (box office)

26,0

Internet (advertising)

17,7

Radio (advertising)

10,2

Music (physical & digital)

7,7

Videogames (hw & sw)

6,9

Television (advertising)

6,3

Above-the-line advertising

3,8

Home video

2,0

Mobile TLC

-0,9

IT

-2,5

Newspapers (advertising)

-2,6

Fixed TLC Newspapers (copy sales) -10,0

-4,0 -4,7

-5,0

0,0

5,0

10,0

15,0

20,0

25,0

30,0

Notes: The timeframes referred to above are: Advertising & Daily newspapers: January – October; Cinema box office: January - August; Fixed & mobile TLC, Home Video, Music: January - June; Video games: January - May. The percentage of variation is based on a comparison of results with the same time frame in the previous year. Source: IEM elaboration of various data.

If the same totals are considered per capita, Italy’s standing would drop in several areas, to the advantage of the less-populated Spain. When the percentage variation year-on-year is considered, 2009 sees Spain in the unenviable position at the bottom of the table in almost all industry sectors. Italy, however, is the worst performer in the cinema box office (in spite of its previously mentioned positive performance) and the book publishing sectors. In many cases, Italy records the second worst result, just ahead of the bottom-ranking Spain. However, when considering all the sectors in the table, the dip in Italy’s overall performance is less than the year-on-year variation of both Spain and the United Kingdom, while France and Germany registered more contained losses: respectively -3.2% and -4.9%.

Introduction

9


Table 1 - Comparing European communications markets, by total value (2009) France Television (advertising)

Germany

3544

Italy

UK

3983

3640

3467

Spain

Italy Ranking 1

2343

Radio (advertising)

676

679

436

456

537

5

Cinema (box office)

1232

976

664

1059

668

5

Home video

1411

1633

680

2877

125

4

Books

4213

9691

3407

3821

3109

4

680

1099

226

1128

176

4

Recorded music Traditional advertising

10724

14068

8844

13989

5621

4

Fixed TLC (services)

20000

34200

15390

9900

6500

2

Mobile TLC (services)

20400

23600

17700

16710

13340

3

IT

53100

69000

18686

59700

14400

4

2441

2364

1129

3110

1200

5

Video games

Note: figures in millions of euros. Source: IEM elaboration of various data.

Table 2 - Comparing European communications markets, per capita (2009) France Television (advertising)

Germany

56,44

Italy

44,52

UK

65,99

55,88

Spain

Italy Ranking

49,90

1

Radio (advertising)

10,77

8,31

7,22

7,35

11,44

5

Cinema (box office)

19,62

11,94

11,00

17,07

14,23

5

Home video

22,47

19,97

11,27

46,37

2,66

4

Books

67,09

118,53

56,45

61,59

66,21

5

Recorded music

10,83

13,44

3,74

18,18

3,75

5

Traditional advertising

170,78

172,07

146,54

225,48

119,71

4

Fixed TLC (services)

318,50

418,31

255,00

159,57

138,43

3

Mobile TLC (services)

324,87

288,66

293,27

269,33

284,10

2

IT

845,63

843,96

309,61

962,26

306,68

4

38,87

28,91

18,71

50,13

25,56

5

Video games

Note: figures in euros. Source: IEM elaboration of various data.

Table 3 - Comparing European communications markets, % variation 2009 on 2008 France

Germany

UK

Spain

-9,8

-9,8

-11,7

-11,0

-22,7

Radio (advertising)

-8,9

-5,6

-7,8

-7,1

-16,4

7,9

22,8

4,2

11,1

7,9

-0,2

5,0

-17,9

-10,0

-36,9

Cinema (box office) Home video Books Recorded music Traditional advertising

3,9

0,8

-4,3

-2,9

-2,4

-2,6

-3,0

-13,1

1,9

-14,6

-10,7

-9,7

-11,7

-11,0

-20,9

Fixed TLC (services)

-0,5

-3,1

-2,4

-2,9

-8,5

Mobile TLC (services)

1,5

-7,1

-3,5

-3,2

-5,5

-3,8

-4,6

-8,1

-6,7

-8,9

-17,1

-14,2

-10,6

-16,2

-16,2

-3,2

-4,9

-6,4

-6,6

-10,1

IT Video games Total (of sectors in table)

Note: figures in percent. Source: IEM elaboration of various data.

10

Italy

Television (advertising)

Introduction


This scenario prompts the need for a rethink of Italian State policy on the communications industry, as for any other sector of the national economy. Public policy is not necessarily limited to the levels of State spending (including local entities) and how it is used to support and stimulate the communications industry, although many of those working in or involved with the sector at various levels tend to generally concentrate on the ‘how much’ and ‘to whom’. 2010 was a year marked by endless controversy over the cuts to State funding: from local councils to publishing, from the General Entertainment Fund (in Italian Fondo Unico per lo Spettacolo, FUS) to investment in broadband. On the other hand, this kind of controversy rears up every year when the Finance Act or budget cuts are being discussed (like those contained in a wide ranging piece of legislation which amasses many different kinds of provisions and amendments under one bill, called ‘milleproroghe’). This in itself signals the lack of a long-term, wide-ranging plan, which is replaced by a complex, multilayered system of public funding that is wrongly mistaken for stability but which, to put it more correctly, is actually ‘chronically unstable’. In 2010, however, the economic crisis was used as a way to legitimise particularly deep budget cuts, both now and in the future, applied across the board in all sectors receiving public funding. But these reductions lacked clear criteria used to decide what and how to cut, and these issues do not even appear to have been considered at all. However, this year’s IEM Report’s in-depth look at public investment in the culture and telecommunications industries is not prompted by journalistic spirit. Although, of course, the present situation has brought this topic to the attention of careful observers. Analysis of the spending trends in the public sector is a necessary tool on which to base a qualitative assessment of funding, its efficiency in terms of economic results in the territory and social redistribution of revenue and, therefore, its productivity and social functions. A reliable and efficient method of tracking spending data is actually the starting point for measuring the impact of funding in the sector and the territory, and to gain an understanding on how much of it can be considered truly productive, e.g., in supporting innovation in businesses or systems, as opposed to sustaining activities with little or no impact on the productive capability of the sector or the economy. Above all, since fewer and fewer public resources are being allocated to culture and telecommunications, waste is no longer tolerable and any amount invested needs to be linked to an assessment of its efficiency. The political decision makers deliberating public funding should also provide measures to constantly monitor the money spent because in too many cases investment has been provided with insufficient knowledge of a situation and without verifying its effectiveness. Monitoring itself is an added cost which, however, should be considered essential. Focusing attention on public funding seemed particularly relevant because its intrinsic nature defines and conditions creative, productive and distribution processes that give form and visibility to the culture system. The chosen scope for this analysis, however, is unusual compared with a traditional definition of culture. It encompasses a universe composed of culture and telecommunications, which includes live entertainment, cinema, television, radio and publishing, all included under the heading ‘culture’. This choice is dictated by the desire to reflect on culture defined as a point of interaction between various, closely interconnected sectors within the same industry, where creation is upstream on one end of the chain and distribution lies downstream on the other end. Reflecting on the economic foundations of culture by focusing on a ‘culture chain’ indicates a conceptual leap: moving away from ideas of culture judged as an intellectual product to be milked as merchandise and towards an idea of it being a product of intellect and knowledge able to generate wellbeing and development, in a virtuous cycle of innovation and technological advancements. The sectors that operate within this culture chain have been ‘helped’ by the State, to differing degrees and for varying reasons and lengths of time, to the extent in which State help is able

Introduction

11


to increase wellbeing within society by ‘force’, stimulating several crucial areas in the system, without interfering with natural laws of competition. The aim of the in-depth survey in this Report is to measure this State help, that is the amount of public spending in culture and telecommunications. It is a first step, to be used as a starting point for any reflection on merit or method. The Report’s mission is to present the figures and make them clear. This data has been elaborated with a comparative and diachronic analysis, which attempts to place the accounts in their context and, therefore, reflect the changes of previous years while comparing the various segments of the culture industry. We hope this will provide a useful prelude for further thought on the logics that determine spending policy and, thereby, lead to wider reasoning on State policy for culture.

12

Introduction


Part I Markets Television Radio Cinema Home-video Books Newspapers and magazines Directory Recorded music Advertising Fixed telecommunications and broadband Mobile telecommunications Information technology Video games Radio

13


Television

14


Television by Andrea Marzulli

1. Introduction The television market in Italy is finally feeling the effects of some of those structural changes that have already been in place for several years in the more advanced markets. The growing level of competition should certainly be seen as a positive trend. Although the drive for innovation may still appear weak, it can be hoped that some trends will settle over the next few years and mobilise market dynamics to the benefit of the essential purpose of television which is - always worth remembering - to satisfy the viewer’s demand for entertainment and information. The switch to digital, which offers a wealth of choice for the viewer and consequently fragmented ratings, has sparked off more decisive competitive practices than the Italian market has been used to. Traditional broadcasters are leading the new range of television products, on both digital and on-demand channels, and are reorganising their Internet presence (e.g. the Rai.tv and La7 portals and Video Mediaset) in response to the challenge presented by Over-the-top TV (TV content through broadband connection), which could have a potentially destabilising effect on the present status quo and usher in a progressive opening/ convergence of traditional television viewing with professional and semi-professional products on the web. While the advertising crisis is having a particularly adverse effect on the production market, which is especially hard on independent production, there is also a drive to find new solutions that was not present in easier, more fruitful times when the market was somewhat a world unto itself. Now the challenge is to find new ways to create efficient production budgets, tapping different sources of funding to allay financial pressure, and also to produce formats and productions that can deliver the audience figures that are no longer guaranteed. If the increase in competition actually leads to an increase in quality and a wider range of content will only be proved by the facts that emerge over the next few years. Furthermore, as the public service broadcasters throughout Europe remodel their funding sources to free themselves from the fluctuating advertising market, there will be limited growth in the medium term. Both France and Spain have changed course, opting for a BBCstyle model, which leaves Italy as the only large country where the public broadcaster has bilateral funding, from both licence fees and advertising. Giving up advertising revenues is certainly a necessary (although not sufficient) step towards improving quality and saving public broadcasters from the endless scrabble to produce ratings results. The elements of potential change, therefore, are many, though only some can be traced in the data that is presently available.

Television

15


2. Share and penetration The launch of the DTT (Digital Terrestrial Television) channels now available for an increasing number of Italian viewers is probably the main reason for the latest growth registered in the 2009 television audience, an increase that was also well distributed over all the time slots. It is also possible that the general fall in consumer sales has provided further incentive towards forms of consumption that cost nothing, or almost nothing, such as free-to-air television. The average amount of television viewed per day is a stable 3hours 59 minutes (up from 3h 49m in 2007) while the average audience watching the small screen over the entire 24-hour cycle is 9.44 million viewers. In the tricky prime time slot, the total number of viewers has risen to 24.42 million (although the rating does not reach 43%, in comparison with the 44% recorded in 2005). The biggest growth in the other time slots was registered in the morning, between 7a.m. and 12 noon. These are timeslots where the general interest broadcasters have intensified investment and effort as, with the increasing spread of DTT influence, the proliferation of choices compete to increase audience levels. Table 1: Audiences and share ratings in an average day, 2005-2009 2009 Time slot

2008

2007

2006

2005

Audience Rating Audience Rating Audience Rating Audience Rating Audience Rating (000) (%) (000) (%) (000) (%) (000) (%) (000) (%)

07.00-09.00

4,660

8.16

4,383

7.73

4,292

7.61

4,338

7.79

4,256

7.67

09.00-12.00

4,967

8.70

4,686

8.26

4,378

7.76

4,485

8.06

4,572

8.24

12.00-15.00

14,076

24.65

13,767

24.28

13,634

24.18

13,911

25.00

14,030

25.29

15.00-18.00

10,331

18.09

9,878

17.42

9,497

16.84

9,885

17.76

9,811

17.68

18.00-20.30

15,516

27.17

15,282

26.95

14,936

26.48

15,348

27.58

15,518

27.97

20.30-22.30

24,425

42.92

24,161

42.61

23,695

42.02

24,424

43.88

24,615

44.36

22.30-25.59

10,364

18.15

10,093

17.80

9,887

17.53

10,163

18.26

9,835

17.73

02.00-25.59

9,445

16.58

9,211

16.25

8,989

15.94

9,230

16.58

9,213

16.60

Average minutes watched daily

238.7

234.0

229.5

238.8

239.0

Source: IEM elaboration of Auditel data.

In 2009, little more than 1 share point separated the total audiences of RAI and Mediaset channels, with the public broadcaster in the lead. This marks the closest result between the broadcasters’ audiences for many years (one has to look back to 1993 to find a smaller difference: 45.9% vs. 44.5% - and in those 16 years, overall they have both lost approximately 10 points). While the consolidated trend shows general interest broadcasters losing audiences to the digital channels (some of which are forsaking the niche and single interest sectors and heading towards a semi-generalist configuration), new offers from the two major audience catchments partially compensate the losses. The 2009 results depend mostly on the efforts made by Mediaset to retain viewers for Canale 5, the channel responsible for gathering roughly 2/3 of Mediaset’s advertising revenues and the only general interest channel to have increased its share (from 20.33% to 20.65%). It is worth noting the drop in audience for RAI Due (-1.4%): the station was penalised by an ill-defined identity and by the transition to digital in various regions where it operated as a trail blazer (as did Rete 4 which, however, only lost 0.5%). Another point was won by “other terrestrial” broadcasters, especially by DTT channels not affiliated to RAI or Mediaset, as data relative to local broadcasters shows their difficulty in

16

Television


retaining audience. Another percentage point was gained by the satellite TV broadcasters, who appear to be consolidating the relationship with their audience, despite the fall in the overall number of subscribers. Table 2: Audience share in an average day, 2005-2009 Broadcaster RAI Uno

2009

2008

2007

2006

2005

21.17

21.80

22.49

23.15

23.00

09 vs 08

09 vs 05

-0.63

-1.83

RAI Due

9.20

10.60

10.48

11.35

11.37

-1.40

-2.17

RAI Tre

8.94

9.07

9.15

9.38

9.18

-0.13

-0.24

RAI digital channels

1.36

*0.82

.

.

.

0.54

-

sub-total RAI

40.67

42.29

42.12

43.88

43.55

-1.62

-2.88

Canale 5

20.65

20.33

20.60

20.95

21.84

0.32

-1.19

Italia 1

10.38

10.83

11.17

11.09

11.47

-0.45

-1.09

Rete 4

7.78

8.28

8.63

8.18

8.59

-0.50

-0.81

Mediaset digital channels

0.80

0.29

-

-

-

0.51

-

39.61

39.73

40.40

40.28

41.93

-0.12

-2.32

La7

sub-total Mediaset

3.01

3.08

2.97

3.02

2.71

-0.07

0.30

Other terrestrial

7.57

6.57

6.45

6.14

6.33

1.00

1.24

Other satellite Total

9.22

*8.33

8.05

6.75

5.51

0.89

3.71

100.00

100.00

100.00

100.00

100.00

-

-

Note: (*) in 2008, 0.48% of the RAI SAT channels, hosted at the time on the satellite channels, was shifted to the RAI digital channels and no longer included in “other satellite”. Source: IEM elaboration of Auditel and RAI figures.

Table 3: Prime time audience, 2005-2009 Broadcaster

2009

2008

2007

2006

2005

09 vs 08

09 vs 05

RAI Uno

22.34

22.67

23.28

24.22

23.91

-0.33

-1.57

RAI Due

10.04

10.70

10.28

10.51

10.63

-0.66

-0.59

RAI Tre

9.42

10.06

10.15

10.28

9.75

-0.64

-0.33

1.01

*0.57

.

.

.

0.44

-

Sub-total RAI

RAI digital channels

42.81

44.00

43.71

45.01

44.29

-1.19

-1.48

Canale 5

21.04

20.69

21.57

22.01

22.50

0.35

-1.46

Italia 1

9.77

10.29

10.73

10.53

11.51

-0.52

-1.74

Rete 4

7.80

8.57

8.35

8.05

8.80

-0.77

-1.00

Mediaset digital channels

0.56

.

.

.

.

-

-

39.17

39.55

40.65

40.59

42.81

-0.38

-3.64

2.63

2.62

2.30

2.42

2.06

0.01

0.57

Sub-total Mediaset La7 Other terrestrial

7.33

6.64

6.33

5.98

5.84

0.69

1.49

Other satellite

8.10

*7.19

7.01

6.01

4.99

0.91

3.11

100.00

100.00

100.00

100.00

100.00

-

-

Total

Note: time slot 20.30-22.30; (*) in 2008, 0.48% of the RAI SAT channels, hosted at the time on the satellite channels, was shifted to RAI digital and no longer included in “other satellite”. Source: IEM elaboration of Auditel data.

Share results for the prime time slots on the general interest channels are better than the allday results, with the exception of Italia 1, which drops below 10% for the first time in many years. Here too, Canale 5 is the only generalist channel to register growth, rising to over 21%. The digital channels are weaker in this time slot, as is habitual. In the past 5 years, RAI has only dropped 1.5 points compared with Mediaset’s fall of over 3.5 points, digital channels included.

Television

17


As the reach of the DTT channels gradually grows, so the overall share for digital channels increases. In 2009, the total share for the DTT and digital satellite monitored channels increased by over 2 points, rising from 9.3% to 11.5%. In June 2010, this share exceeded 14% (due in part to SKY’s broadcast of the entire cycle of the FIFA World Cup). Table 4 – Audience share, digital channels, 2008 - June 2010 (%) Broadcasters and broadcasting groups - SKY - Sports channels

June 2010

2009

2008

4.29

3.02

2.76

2.38*

1.12

0.92

- Cinema channels

1.44

1.28

1.24

- Other channels

0.47

0.62

0.58

- Fox

1.84

1.75

1.68

Newscorp (SKY+Fox)

6.13

4.77

4.44

RAI

3.11

1.36

0.82

- Boing

1.36

0.72

0.29

- Iris

0.58

0.03**

-

- Premium Calcio

0.03*

-

-

Mediaset (tot.)

1.97

0.80

0.29

Disney

0.91

0.86

0.75

Switchover Media

0.74

**0.27

-

Viacom – MTV Italia

0.60

0.36

0.31

Discovery

0.41

0.32

0.28

Turner Italia (Time Warner)

0.33

0.42

0.31

De Agostini

0.19

0.04

-

Sitcom

0.19

0.12

0.12

Axn (Sony)

0.12

0.08

0.05

La7D (Telecom Italia Media)

0.11

-

-

Eurosport (Groupe Tf1)

0.10

0.07

0.09

Digicast (Rcs Mediagroup)

0.09

0.06

0.07

Elemedia (Gruppo Espresso)

0.05

0.05

0.05

Other channels and groups

1.97

1.95

1.69

Total

14.02

11.53

9.27

Note: timescale 02:00-26:00, total households, individuals aged 4 and over. Table ordered by June 2010 share; (*) June 2010 reflects the broadcast of FIFA World Cup (which increased share for SKY's sports channels) and the end of Italy's Serie A season (which decreased share for Mediaset's Premium Calcio channels). In April 2010, SKY Sports (soccer and other sports) had a 1.40% share (0.34% for the SKY soccer channels alone) and Mediaset's Premium Calcio 0.62% (on a total share for Mediaset digital channels of 2.13%); (**) weighted annual result based only on the months monitored. Source: IEM elaboration of Auditel data.

Almost all the broadcasters recorded positive trends during 2009. The results for RAI and Mediaset have already been noted while SKY also increased its share to over 3%. In the early months of 2010 the general interest broadcasters’ DTT channels registered the greatest growth. While Boing (owned by Mediaset and TBSE) leads the digital channels, the RAI offer took over 3% of the total national share (and almost 7% in the fully digital regions). The departure of the RAI SAT package from SKY, and its consequent rebranding, turned out to be the catalyst for an increase in overall share, even if advertising revenues are not yet able to compensate for the loss in subscriber revenue (a couple more years are still needed for that). RAI Yoyo (previously pay) quickly overtook RAI Gulp in share (0.45% vs. 0.35% in June 2010) while RAI Premium and RAI Movie swiftly established themselves among the most watched digital channels (a truly remarkable result when considering they are only present in the fully digital regions), behind

18

Television


RAI 4 (0.81% in June 2010). Mediaset almost reaches 2%, thanks to the success of its channels Boing (1.36%) and Iris (0.58%). Among the minor broadcasting groups, Switchover Media is the big success story with its kids’ channel, K2, consistently recording over 0.50% (thanks in part to the syndicated analogue slots on local TV stations). DTT channels are, however, progressively taking share from the local broadcasters. Data from the fully digital regions show a 20-30% drop in net daily contacts for the principal broadcasters in each region. Though increases were registered in Tuscany, Marche, Sicily and Puglia. The larger local broadcasting groups, such as Telelombardia and Telenorba, who have invested in local original production, actually retained their audience. In general, however, there was an almost 5% drop in contacts in 2009, with an especially devastating effect on the smaller channels. The data appears to confirm that original, local, identifiable content is the main key to audience loyalty, a choice which is not available to all. The essential question of positioning in the LCN system is connected to the need to create audience loyalty through programmes the viewer will ‘actively’ seek out rather than ‘passively’ stumble across. Policy choices aside, this does appear to be the key issue, and one that is possibly even more important than the creation of spin-off single interest channels to broaden the offer, a process many broadcasters opted for, albeit with differing levels of quality and investment. Table 5: Average daily reach, local broadcasters, 2005-2009 (top 3 per region) Broadcaster

2009

2008

2007

2006

2005

Δ % 09-08

Δ % 09-05

Piedmont-Val d’Aosta Telecity Piemonte

337

411

411

410

459

-18,0

-26,6

Telecupole

261

302

316

333

371

-13,6

-29,6

Quarta Rete

190

280

318

325

343

-32,1

-44,6

Primo Canale

232

244

254

236

268

-4,9

-13,4

Telenord

154

129

122

112

142

19,4

8,5

Telecittà

88

88

99

103

122

0,0

-27,9

Liguria

Lombardia 1190

1190

1222

1177

1118

0,0

6,4

Antenna Tre

Telelombardia

874

961

1006

1093

982

-9,1

-11,0

Telenova

637

683

714

656

659

-6,7

-3,3

1091

1174

1197

1346

1318

-7,1

-17,2

Antenna Tre Nord Est

594

658

677

650

656

-9,7

-9,5

Rete Nord Telenuovo

540

533

561

621

645

1,3

-16,3

Veneto 7 Gold Telepadova

Trentino-Alto Adige Rttr

124

167

144

137

139

-25,7

-10,8

Tca

114

150

146

137

143

-24,0

-20,3

Friuli-Venezia Giulia Telefriuli

158

166

165

192

214

-4,8

-26,2

Rete Nord Telequattro

134

118

98

107

112

13,6

19,6

Emilia-Romagna 7 Gold Sesta Rete

564

579

658

663

559

-2,6

0,9

E’ Tv Emilia Romagna

386

395

402

418

-

-2,3

-

Telesanterno

154

177

192

202

224

-13,0

-31,3

Italia 7

450

434

468

411

3,7

9,5

Tuscany 481

Television

19


Rtv 38

367

356

Tvr Teleitalia

173

149

325

392

417

3,1

-12,0

-

-

-

16,1

-

138

140

156

26,3

10,9

Marche Tv Centro Marche

173

137

7 Gold Teleadriatica

98

80

55

60

-

22,5

-

E' Tv Marche

41

32

42

42

-

28,1

-

Umbria Tv

67

81

69

83

79

-17,3

-15,2

Rte 24

53

63

59

59

-

-15,9

-

Tef

34

32

-

-

-

6,3

-

376

393

466

-15,4

-41,0

Umbria

Lazio Tvr Voxson – Teleregione

275

325

Super 3

273

251

252

233

365

8,8

-25,2

Teleroma 56

135

187

226

212

244

-27,8

-44,7

Abruzzo Rete 8

137

132

138

118

121

3,8

13,2

7 Gold Antenna 10

125

131

133

110

92

-4,6

35,9

Telemolise

73

68

59

59

64

7,4

14,1

Teleregione Molise

25

-

-

-

-

-

-

1072

1229

1231

1209

1291

-12,8

-17,0

Teleoggi - Canale 9

510

593

710

729

758

-14,0

-32,7

Napoli Canale 21

448

459

438

380

371

-2,4

20,8

1407

1391

0,8

5,2

Molise

Campania Telecapri

Puglia & Basilicata Telenorba (Tn7)

1464

1452

1302

Teledue (Tn8)

635

586

536

502

495

8,4

28,3

Antenna Sud

260

243

212

226

229

7,0

13,5

8 Videocalabria

174

203

198

202

236

-14,3

-26,3

Reggio Tv

57

74

61

58

70

-23,0

-18,6

Teleuropa

52

64

54

-

-

-18,8

-

524

506

508

11,3

20,1

Calabria

Sicily Antenna Sicilia

610

548

Telecolor Italia 7

368

334

353

388

373

10,2

-1,3

Tgs

356

379

430

425

443

-6,1

-19,6

Sardinia Videolina Tcs 5 Stelle Sardegna Total contacts

395

474

561

559

580

-16,7

-31,9

47

81

127

147

142

-42,0

-66,9

19

39

59

-

-

-51,3

-

16788

17621

17851

18025

17776

-4,7

-5,6

Note: values expressed in thousands; results tables for previous years may have included broadcasters not present in the 2009 “Top 3”; only Auditel monitored broadcasters in 2009 have been taken into consideration, irrespective of previous years' results; in cases where monitoring did not cover all 12 months, the annual result is based on the average of the monitored months. Source: IEM elaboration of Auditel figures.

20

Television


The average audience and share results for the local broadcasters on a national scale (data easily compared with results for nationwide and digital broadcasters) demonstrate their present struggle. The three main nationwide networks show a significant drop in share (especially Odeon 24, affected by its inheritance of Odeon TV), as do the majority of the 10 leading local broadcasters, headed by Telenorba, which holds 0.28% of the Italian market (down from 0.3% in 2008). Telelombardia and Antenna Sicilia, however, are growing, with 2,000 and 3,000 viewers respectively. There is a sharp drop in audience for the local broadcasters in Campania and Sardinia, regions that have now switched entirely to digital. Table 6: Principal local TV stations and networks, average audience and share, 2008-2009 (all-day) 2009 Broadcaster

Area

Average audience

2008 Share

Average audience

Share

In syndication 7 Gold

National

43,410

0.30

47,613

0.52

Canale Italia

National

18,885

0.20

21,844

0.24

Odeon 24

National

486

0.01

15,452

*0.17

26,374

0.28

27,658

0.30

Local Telenorba

Puglia & Basilicata

Telecapri

Campania

15,521

0.16

17,796

0.20

TeleLombardia

Lombardy

14,661

0.16

12,460

0.14

Antenna Sicilia

Sicily

12,352

0.13

9,330

0.10

7 Gold Telepadova

Veneto

11,461

0.12

12,028

0.13

Nuova Antenna Tre

Lombardy

9,445

0.10

9,519

0.10

Teleoggi Canale 9

Campania

7,516

0.08

8,535

0.09

Videolina

Sardinia

6,890

0.07

9,486

0.1

Antenna Tre Nordest

Veneto

6,727

0.07

6,642

0.07

Napoli Canale 21

Campania

6,703

0.07

6,085

0.07

Note: (*) data relative to Odeon TV channel. Source: IEM elaboration of Auditel data.

Platforms and subscribers By the end of 2009, penetration of digital television had reached over 19 million households with televisions (over 80% of households) thanks to the increasing spread of DTT (up 7 million in 2009). Other digital platforms also registered growth, albeit smaller: digital satellite rose to 6.6 million families (in spite of a decrease in the pay audience), partly due to the diffusion of Tiv첫 Sat cards and the installation of dishes in areas where switch-off was particularly problematic. IPTV has reached just over 700,000 subscribers, thanks to a policy of keeping prices low to attract new clients. Although there has been a delay of several months in the planned switch-off in Northern Italy, digital penetration is destined to rise by end 2010 (by end April 2010, 16.88 million households accounted for 68.5% of penetration, with a total number of receivers, set-top boxes and integrated TV sets amounting to 27.46 million).

Television

21


Table 7: Penetration of TV distribution technology, 2006-2009 (first access) 2009 Households with TV

% 09

2008

2007

2006

24,28

100,00

23,60

23,50

23,40

6,60

27,18

6,35

5,93

5,43

(of which pay)

4,74

19,52

4,75

4,43

4,03

(of which free)

1,86

7,66

1,60

1,50

1,40

12,43

51,19

5,70

4,80

3,60

satellite

DTT ADSL /fibre optic (tot. Multichannel households) analogue terrestrial only

0,69

2,51

0,40

0,25

0,20

19,72

80,89

12,45

10,98

9,23

4,56

19,11

11,15

12,52

13,17

Note: values in millions. Source: AGCOM, ItMedia, Makno.

The technical complexity of the National Plan for Frequency Assignment approved by Italy’s communications watchdog, AGCOM (Resolution 300/10/Cons), led to delays in convening technical planning committees, shifting switch-off procedures back a month for the technical areas of Northern Italy (Lombardy, Emilia-Romagna, Veneto and Friuli-Venezia-Giulia while Liguria was postponed to early 2011). Local broadcasters have complained that the NPFA did not respect the frequency reserve of one-third, neither on a quantitative or a qualitative basis, and that the range is too narrow, especially in terms of international coordination of border frequencies. The Logical Channel Numbering Plan approved by AGCOM (Resolution 366/10/Cons) opted to start numbering with two digit figures, instead of three digits, thereby providing an advantage for the nationwide broadcasters (generalist and digital) and some local broadcasters, especially those who will be allocated a number between 10 and 19 through a system based on audience preferences. New and important regulatory changes included the possibility for SKY Italia to participate in the contest for the 5 digital dividend frequencies (with the obligation to offer programmes free-to-air) and the adoption of the Audiovisual Media Services Directive (Legislative Decree N.44, 15 March 2010), which amended the previous “Television Without Frontiers” Directive. The AMS directive introduces a common regulatory framework for linear and non-linear audiovisual services and allows for the use of product placement in television programmes. It also limits the amount of advertising on Pay-TV channels and intervenes in the codes of conduct for the attribution of residual rights to producers of independent content, linking this to the producers’ contribution to the funding of the production. Pay-TV in Italy in all its various forms of distribution and commercialisation now reaches 10 million clients. Competition from Pay DTT channels contributed to slow the growth of SKY Italia’s subscriber base, which counted 4.752 million at the end of 2008 and rose to 4.790 million by mid-2009. However, there were 4.740 million subscribers at end 2009, a figure that later dropped to 4.734 million in June 2010, equating to a loss of 56,000 subscribers in less than 12 months. Mediaset Premium’s PPV DTT added 800,000 new ‘active clients’ in 2009, bringing the total to over 3.7 million clients, compared to 2.9 million at end 2008. Approximately 1.8 million of these 3.7 million are subscribers while the others use pre-paid cards, which suggests a growing conversion from ‘active clients’ to proper subscribers. Dahlia, the channel targeting a male audience, ended 2009 with 450,000 subscribers, rising to 600,000 by mid 2010. Growth in subscriber numbers on other digital platforms, however, has stalled. IPTV reached 687,000, but by mid 2010 a dip was seen. Drops were also recorded in the number of subscribers to Mobile TV, estimated at 720,000 by end 2009 (compared with 790,000 at end 2008), although other sources suggest that less than half are actual users of TV via mobile phone.

22

Television


Table 8: Pay-TV subscribers, 2005-2009 Operator

Platform

SKY Italia

Satellite

Fastweb

2009

2008

2007

2006

2005

4.740

4.752

4.430

4.030

3.560

ADSL -fibre optics

213

****200

****190

****180

191

80

31

-

-

-

-

-

Alice Home Tv

ADSL

423

329

Infostrada Tv

ADSL

51

20

Tiscali Tv

ADSL

-

-

Tot. Households with Pay-TV

10

5.427

5.301

4.710

4.241

3.751

Mediaset Premium

DTT

*3.725

*2.911

*2.067

*1.560

nd

La7 Cartapiù

DTT

-

240

700

***715

nd

°°450

-

-

Dahlia Tv

DTT

La3 Tv

DVB.H – UMTS

Vodafone SKY Tv

DVB.H – UMTS

Tim Tv

DVB.H

Tot. Other Pay TV

°720 (°790)

**400

****4.895

****3.550

-

-

-

-

**300

nd

****3.070

-

-

2.525

-

Note: values in thousands at 31 January each year. (*) Number of “active clients”, including 228,000 EasyPay subscribers, at 30 September 2008 (official Mediaset data). By end 2009, Milano Finanza estimated EasyPay subscriptions at 1.8 million. DTT Pay clients not included in PayTV subscribers due to absence of official data differentiating between “subscribers” and “active clients”. (**) Source: 2007-AGCOM, 2008-Rethink. Other sources estimate mobile TV users in Italy at 850,000 (2007) and 1.2 million (2008), but it is probable that this reflects numbers of “owners of TV-ready terminals”, regardless of subscription. (***) Number of smart-cards activated since service launch (of 11 million cards sold). (****) Estimates. (°) Estimates from Assinform/Netconsulting; (°°) Of which approx. 20% are subscription. Source: IEM elaboration of data from AGCOM, Newscorp, Assinform, Rethink and Mediaset.

3. The market Resources The television market dropped 3.4% in 2009, measuring almost 8.5 billion euros in total against the 8.8 billion in 2008, an effect of the crisis in the advertising sector. Television advertising on both national and local broadcasters dropped 11.7% to below 4 billion euros and, for the first time in the history of commercial broadcasting, occupied less than 50% of the market, 46.9%, compared to 51.3% in 2008. Subscriber revenues reached over 200 million euros (almost 34%), of which over half was driven by DTT. The licence fee continues its slow progress, reaching 1.630 million euros and accounting for 19.2% of the market, despite the estimate by Associazione Contribuenti Italiani (association of Italian consumers) that over 40% of households do not pay the licence fee. Table 9: Resources available in the TV market, 2005-2009 Type

2009

2008

2007

2006

2005

∆ %09-08

∆ %09-05

Values in millions euros licence fee

1.630

1.603

1.567

1.491

1.483

1,7

9,9

Advertising

3.983

4.512

4.482

4.463

4.418

-11,7

-9,8

Pay-TV

2.873

2.671

2.384

2.221

1.717

7,6

67,3

Total

8.486

8.786

8.433

8.175

7.618

-3,4

11,4

Values in percentages licence fee

19,2

18,2

18,6

18,2

19,5

1,0

-0,3

Advertising

46,9

51,3

53,1

54,6

58,0

-4,4

-11,1

Pay-TV

33,9

30,4

28,3

27,2

22,5

3,5

11,4

Television

23


Total

100,0

100,0

100,0

100,0

100,0

-

-

Note: calculations in this and the following tables focus on revenues from the three sources detailed, ignoring for example, resale of rights to other operators and income from network operations. Source: IEM elaboration of network data, AGCOM, Assocomunicazione, FRT, Upa et al.

Broadcasters’ income When it comes to the partition of income among the big three, SKY leads the Italian market with 2.686 billion euros, of which 2.463 billion are subscriber fees. The drop in advertising revenues put RAI back to 2.552 billion and Mediaset to 2.592 billion. The public broadcaster registered a drop in advertising revenue above the market average (-17.2%) but managed to partially compensate with other activities1. Advertising revenue on Mediaset’s general interest channels was worth over 200 million euros in 2009, a 8.6% drop from 2008. Approximately 130 million euros were recovered through pay activities (which registered over 50% growth) and advertising revenues on digital channels2. Local television networks and stations and music channels (especially All Music, but also MTV) registered severe losses. The terrestrial broadcaster La7 increased by 13% while the Pay DTT channel Dahlia TV took 12 million euros in income in its first year of activity. Table 10 – Television broadcaster income, 2005-2009 Broadcaster

2009

2008

2007

2006

2005

Δ % 09-08

Δ % 09-05

Licence fee

1.630

1.603

1.567

1.491

1.483

1,7

9,9

RAI

1.630

1.603

1.567

1.491

1.483

1,7

9,9

Advertising

3.983

4.512

4.482

4.463

4.418

-11,7

-9,8

RAI

908

1.096

1.137

1.133

1.121

-17,2

-19,0

RTI - Mediaset

2.241

2.452

2.451

2.425

2.516

-8,6

-10,9

La7

91,7

81

91

84

75

13,2

22,3

MTV

45,7

63

67

67

71

-27,0

-35,6

Rete A – All Music

6,8

16

19

19

18

-57,5

-62,2

Sportitalia**

7,5

5,9

6

8

9

27,1

-16,7

SKY

223

232

200

192

144

-3,9

54,9

Other satellite channels*****

43

45

32

30

nd

-4,4

-

DTT

40,5

25,9

22,9

13

11

23,1

268,2

- RAI°°

14

10

8

nd

nd

40,0

-

- Mediaset free

10,3

9,1

6,0

6,5

6,2

13,2

66,1

1 The consolidated income of the RAI Group in 2009 was 3.178 billion euros (3.211 billion in 2007). Other revenues were provided by commercial activity (RAI Trade), film and home video (RAI Cinema and 01 Distribution), contracts for radio and television services abroad, radio advertising, RAI SAT revenues and other. Principal compensation for the loss in revenues was provided by ceding the rights to the FIFA World Cup in 2010 and 2014 (for 175 million euros). 2 The overall revenues for Mediaset amounted to 3,883 million euros in 2009 (4,199 million in 2008), of which 656 from the Spanish operation Telecinco (982 in 2008). The Spanish operation can be held responsible for the group’s entire loss. Revenues from the Italian companies were 3,219 million (3,229 million in 2008) of which 2,351 million from the free-to-air channels (including 2,241 from advertising on generalist channels), 219 as network operators (but with 125 million of intergroup revenues), 561 in the Pay sector (including 223 million from resale of rights and other revenues and 311 million from subscription sales) and 425 from other activities (including 105 in foreign sales by Medusa and Taodue, 61 from Mediashopping and 191 million in intergroup revenues). It should be considered, however, that the share of the advertising revenues passed to RTI (the holding group that owns Mediaset’s Italian TV channels) was 1,983 million. The Endemol group (1,189 million in global revenue in 2009, 1,301 in 2008) of which Mediaset indirectly owns 33% is not consolidated in the group’s balance sheet.

24

Television


- Mediaset pay

29,8

13,1

8,1

5,7

4,6

127,5

547,8

- Qoob (MTV)**

0,4

0,7

0,8

1

-

-42,9

-

Local broadcasters

*375

487

454

491

453

-23,0

-17,2

Dahlia

0,15

-

-

-

-

-

-

TLC operators***

0,7

1,2

2

1

nd

-41,7

-

Subscribers / PPV

2.873

2.671

2.384

2.221

1.717

7,6

67,3

SKY Italia

2.463

2.373

2.172

2.030

1.642

3,8

50,0

Mediaset Premium

311

199

125

84

36

56,3

763,9

La7 Cartapiù

-

11

12

10

6

-

-

Dahlia**

12

-

-

-

-

-

-

Conto Tv**

3

4

-

-

-

-25,0

-

-

TLC operators*** - Fastweb

84,1

- H3g

88

75

27

97 (****38)

-

- Other

-4,4

154,8

6

RAI sub-total

2.552

2.709

2.712

2.624

2.604

-5,8

-2,0

RTI-Mediaset sub-total

2.592

2.673

2.590

2.521

2.563

-3,0

1,1

SKY Italia sub-total

2.686

2.605

2.372

2.222

1.786

3,1

50,4

TI Media° sub-total

138

155

171

162

152

-11,3

-9,3

8.486

8.786

8.433

8.175

7.618

-3,4

11,4

Total

Note: values in millions of euros. (*) Assocumicazione estimated growth (Frt data used on the capital groups to 2008). (**) Estimates (other sources have 17.5 million for Dahlia). (***) IPTV and Mobile TV offers. (****) AGCOM indicated 97 million euros for 2006 in the 2007 report and 38 million in the 2008 report. (*****) Estimates by Assocomunicazione. (°) La7, MTV, Qoob, La7 Cartapiù (Alice Home TV cannot be extracted from TLC operators) for “sub-total Telecom Italia”. (°°) Including satellite channels to 2008. Source: IEM estimates and elaboration of company reports, AGCOM, Upa, Assocomunicazione, Frt et al.

Turning to new Pay-TV platforms, AGCOM values revenues from the operators active in DTT at 323 million, while Confindustria (Confederation of Italian Industries) estimates user spending at 377 million. The combined revenue from IPTV and Mobile TV operators is 84 million euros, while Confindustria has re-valued its previous estimates of user spending on these platforms at 188 million euros (127 million euros IPTV, 61 million euros Mobile TV). According to AGCOM, income from new platforms (satellite excluded) is estimated at 407 million euros, while user spending according to Confidustria comes to 565 million euros. Table 11 – Revenue for new Pay-TV platforms, 2007-2009 Market

AGCOM (operator revenue) 2009

DTT IPTV Mobile TV Total

2008

2007

323

210

137

84

**88

75

407

298

212

Confindustria (user spending) *2009

2008

2007

377

239

201

127

111

75

61

74

76

565

424

427

Note: figures in millions of euros, excluding advertising revenues. (*) Estimates. (**) AGCOM indicated 33 million euros in revenues from IPTV alone in 2008. Source: IEM elaboration of data from AGCOM, Confindustria Servizi Innovativi e Tecnologici, Assinform, Netconsulting.

Television

25


Estimates of the worth of the television advertising market vary considerably among sources, because of differing methods in calculating company investments and revenues from media outlets and because operators with smaller shares of the market (local and satellite broadcasters) can considerably vary the final results. Estimates range from 3.5 billion (AGCOM) to 4.7 billion euros ( Assocomunicazione - association of communications companies). Table 12: Comparison of television advertising data, 2008-2009 Source

2009

2008

Var. %

Note

AGCOM

3.541

3.929

-9,9

Net values for national terrestrial stations (share remitted to broadcaster). Underestimates local and satellite stations.

Assocomunicazione

4.756

5.296

-10,2

Gross values for national terrestrial stations including agency discounts. Underestimates local stations.

IEM

3.983

4.512

-11,7

Operator balance sheet data, integrated with other sources for local television and digital platforms.

Nielsen Media Research

4.359

4.851

-10,2

Net investment values for national terrestrial stations. Reduced scope for local and satellite stations.

Note: values in millions of euro. Source: IEM elaboration of AGCOM, Assocomunicazione, Upa, Nielsen Media Research data.

4. The television advertising crisis in Europe and programming investment At the end of the day, 2009 was a year of negative fluctuation for television advertising in all the major European countries, continuing the trend already registered at end of 2008. All countries recorded drops of around 10% (9.8% in France and Germany; 11% in UK; 11.7% in Italy), except for Spain where it was over 20% (Spain also registered the biggest fluctuation in 2008). The decrease had already begun to bite in the 2008 balance sheet for all countries, except Italy, which recorded the slightest of positive trends (although, conversely, without registering growth beyond 1% per-annum in the previous four years, unlike the other countries, which confirms the market’s greater lack of elasticity). Fig. 1: Growth in television advertising, 2006-2009 (%) 15,0

2006

2007

10,0

2008 7,3

5,1

4,7

5,0 1,0

0,0

3,2

3,1

1,0

0,4 0,7

-2,3

-2,9

-5,0 -10,0

-4,3 -9,8

-2,9

-9,8

-11,0

-11,7

-15,0

2009

8,8

-15,4

-20,0 -22,7

-25,0 Italy

Germany

France

Source: IEM elaboration of operator and advertising monitoring data.

26

Television

UK

Spain


One constant in all the countries is the negative result for the leading free-to-air channels (ITV, Telecinco, TF1, the Rtl Group in Germany) and the smaller free channels (such as M6, Five and Cuatro). This loss was generally compensated by the digital channels enjoying a period of audience growth. The best result on this front was registered by the French DTT free channels with a notable rise of 46%, while other countries where the consumer base is already more advanced, like the UK market, saw a drop in multichannel use which, while only a slight fall (-1.9%) contrasts with its 2005 result of +44%. The crisis also weighed heavily on the public broadcasters’ balance sheets, especially for France Télévision with the gradual exclusion of advertising spaces from its programming schedule. However, 405 million euros in income was a much more positive result than expected as the group had predicted a much worse outcome. The Spanish channel Tve also suffered, following the same trend to end 2009. RAI limited its losses to 17% by preserving its funding model. The television advertising crisis of the past two years has been borne better in Italy (where television advertising considerably outweighs print or internet advertising) than elsewhere, making the Italian market the richest at just below 4 billion euros. France, Germany and UK are stable around 3.5 billion euros while Spain has lost 1.2 billion in 2 years, by end of 2009 its market was worth 3.2 billion.

Table 13: France’s television advertising revenues, 2005-2009 Operators

2009

France 2 (public)

2008

2007

2006

2005

Δ % 09-08

Δ % 09-05

nd

310

427

442

428

France 3 (public)

nd

221

289

289

270

-

-

France 5 (public)

nd

18

36

34

33

-

-

405

549

752

765

731

-26,2

-44,6

Sub-total France Télévisions

-

-

Tf1

1429

1647

1718

1708

1648

-13,2

-13,3

M6

606

658

676

650

625

-11,0

-6,8

DTT free

338

232

109

40

18

45,7

1767,4

150

172

181

169

149

-12,8

0,7

3544

3930

4106

3977

3783

-9,8

-6,3

Cable and (digital)

satellite

Total

Note: values in millions of euros. Source: IEM elaboration of Npa Conseil data.

Table 14: Germany’s television advertising revenues, 2005-2009 Operators

2009

2008

2007

2006

2005

Δ % 09-08

Δ % 09-05

Ard (public)

141

171

168

177

158

-17,5

-10,8

Zdf (public)

112

123

117

125

102

-8,9

9,9

Rtl Group

1583

1872

1799

1802

1721

-15,5

-8,0

ProsiebenSat.1 Media

1511

1582

1791

1786

1717

-4,5

-12,0

Other (analogue+digital)

293

287

280

224

231

2,1

26,7

Total

3640

4035

4156

4114

3930

-9,8

-7,4

Note: values in millions of euros. Source: IEM elaboration of operator and Zaw data.

Television

27


Table 15: United Kingdom’s television advertising revenues, 2005-2009 Operators

2009

2008

2007

2006

2005

Δ % 09-08

Δ % 09-05

ITV 1

1238

1406

1532

1655

1880

-12,0

-34,1

Channel 4

601

699

760

748

796

-14,1

-24,6

Five

233

305

322

322

339

-23,5

-31,0

Multichannel (digital)

1395

1422

1333

1170

969

-1,9

44,0

- of which ITV digital

275

272

235

176

125

1,2

120,7

- of which C4 digital

192

190

167

140

99

0,8

94,3

- of which Five digital

49

64

48

21

0

-22,8

-

- of which Bskyb

346

368

395

384

369

-6,1

-6,4

Sub-total ITV

1513

1678

1767

1831

2005

-9,8

-24,5

Sub-total Channel 4

792

890

926

887

895

-10,9

-11,5

Sub-total Five

283

369

370

343

339

-23,4

-16,4

Total

3467

3896

4013

3894

3984

-11,0

-13,0

Note: values in millions of euros, calculated at average exchange rate for 2009 (0.8909 GBP = 1 euro). BSKYB data published 30 June annually. Source: IEM elaboration of operator and OFCOM data.

Table 16: Spain’s television advertising revenues, 2005-2009 Operators

2009

2008

2007

2006

2005

Δ % 09-08

Δ % 09-05

Tve (public)

422

597

715

693

709

-29,3

-40,5

Autonómicas (public)

238

320

355

345

381

-25,6

-37,5

Telecinco

590

893

1006

923

871

-33,9

-32,3

Antena Tres

555

659

802

804

800

-15,8

-30,6

Cuatro

249

293

273

173

21

-14,9

1109,7

La Sexta

189

157

120

45

-

20,0

-

Veo Tv (digital)

9

11

5

-

-

-15,2

-

Net Tv (digital)

22

9

<1

-

-

149,4

-

Local

9

38

51

47

42

-76,0

-78,4

Single interest (digital)

60

56

60

44

31

7,1

91,4

Total

2343

3032

3582

3291

3067

-22,7

-23,6

Note: values in millions of euros. Data available for the Spanish market often tends to underestimate local television and themed channels. Source: IEM elaboration of Cmt, Infoadex data.

The advertising crisis has had, and will continue to have significant consequences on the production market, especially for privately owned broadcasters whose income derives principally from commercial revenues and who represent a significant segment of the advertising market. Consequently, most European independent broadcasters cut their programming budgets by varying degrees, trying to find a balance that would conserve operating margins while preserving the appeal of their content, to retain their audience and avoid a negative cycle of loss. However, the programming cuts are having a particularly detrimental effect on original production content, whether created by independent or broadcaster-affiliated production companies. In times of cutbacks, broadcasters will obviously favour their affiliates and inhouse companies in an attempt to safeguard profit margins and increase any secondary income. An analysis of broadcasters in Italy, France and UK over the past three years demonstrates that the decrease in revenues has lead to cuts in programming investment and eroded the programming margin (the percentage by which programming costs eat into income from advertising revenue). This was particularly serious for British broadcasters who were headed for breaking point but were saved by the margins produced by the digital channels and other activities.

28

Television


Fig. 2: Percentage impact of programming costs on revenue, 2007-2009 (%) 100,0 86,9 87,1

90,0

2008

2009

82,1

77,7

80,0

2007

86,8 77,1

70,0 59,6

60,0

62,7 64,9

54,8 52,7

50,6 50,9

50,0

50,1

44,8

40,0 30,0 20,0 10,0 0,0 Itv 1

Channel 4

Tf1

Mediaset

M6

Source: IEM elaboration of company reports.

Profit margins have grown slender, especially in the British market, where tough competition in the domestic market means quality cannot be compromised. In spite of this, the biggest cuts were made by the broadcasters funded by advertising such as Channel 4 and ITV. For example Channel 4’s profit margins have halved in the past two years.

Fig. 3: Channel 4’s revenues and programming costs 2007-2009 (M£) 800 700

Advertising revenue

677

Cost of programming

620

600

522

509

535

465

500 400 300 200 100 0 2007

2008

2009

Source: IEM elaboration of Channel 4 company reports.

Television

29


Fig. 4: ITV 1’s revenues and programming costs, 2007-2009 (M£) 1400 Advertising revenues

1224

1200

Cost of programming

1127 951

1000

979

993 865

800 600 400 200 0 2007

2008

2009

Source: IEM elaboration of ITV company reports.

Margins are relatively higher in the French market where the relentless growth of digital channels is still a fairly recent phenomenon. In 2009, leading channel TF1 recovered 100 million of the +200 million euro loss in 2009’s advertising revenues from programming cuts, keeping the gross operating margin at 500 million euros. With lower revenues but historically high margins, the smaller channel M6 recovered +40 million euros through budget cuts, recouping part of the 50 million euros lost in advertising revenues. Fig. 5: TF1’s revenues and programming costs, 2007-2009 (M€) 2000 1800

Advertising revenue

1718

Cost of programming

1647

1600

1429

1400 1200

1024

1032

927

1000 800 600 400 200 0 2007

Source: IEM elaboration of TF1 company reports.

30

Television

2008

2009


Fig. 6: M6’s revenues and programming costs, 2007-2009 (M€) 800 Advertising revenue

676

700

658

Cost of programming 606

600 500 400

347

303

300

304

200 100 0 2007

2008

2009

Source: IEM elaboration of M6 company reports.

The same is true for our last case study, Mediaset. The group has always had higher margins than its European counterparts, operating in a market context that is only now starting to register digital competition in the ratings, although this presence has yet to be reflected by similar levels of advertising revenues. Few of the free-to-air digital channels reached break even and a good part of DTT income went to the Mediaset channels. However, in a situation where the generalist broadcasters lost 8.6% in advertising revenues, Mediaset programming cuts amounted to only 1.8% (20 million euros). These cuts were made in original drama production, which saw a drop in spending of 60-80 million euros in 2009 according to market estimates. Fig. 7: Mediaset’s revenues and programming costs, 2007-2009 (M€) 3000 Advertising revenue

2500

Cost of programming

2452

2451

2241

2000 1500

1239

1249

1227

1000 500 0 2007

2008

2009

Note: only generalist channels. Source: IEM elaboration of Mediaset company reports.

Television

31


Radio

32


Radio

by Chiara Valmachino

1. Overview According to Audiradio, the Italian radio sector counted 39.1 million listeners on an average day in 2009, which amounted to a 1.87% increase from the previous year. This data confirms the trend of constant growth, at an average rate of 1.25% per annum, which began in 2005 and stalled only once, in 2008 when there was a drop of 0.7% on the previous year.

Year 2005 2006 2007 2008 2009

Table 1 – Radio audience in Italy, 2005-2009 Listeners (000) Year on year variation % 37.205 1,76 37.995 2,12 38.654 1,73 38.381 -0,70 39.098 1,87

Note: listeners on an average day: individuals aged 11 years and over. Source: IEM elaboration of Audiradio figures.

Radio registers its peak number of listeners in the time slot between 6 and 9 a.m., where it reaches about 21.3 million people. The curve gradually declines over the late morning and then picks up again between 3 and 6 p.m. (with an approximate audience of 16.5 million), later dropping to 5.6 million listeners in the evening, between 9 p.m. and 12 midnight. Peak audience occurs during “drive time” - when people are travelling in their cars – which suggests that radio is prevalently listened to outside the home. According to Audiradio, on an average day at least 73% of listeners in 2009 used the radio outside the home and 60% in particular listened in the car. As previous IEM Reports have highlighted, portability is one of the key reasons for radio’s longlasting success, making it a versatile source of entertainment, that underscores and punctuates the day, used as an interstitial, adapting to the differing daily activities of a varied audience. The total number of listeners grew in 2009, as did radio penetration (i.e. number of radio listeners as a percentage of the 11+ population) in an average day, which settled at 73.1%, up from 72.3% in 2008. Radio’s core target is the young adult: over 80% of 15-44 year olds are radio users and the highest penetration – 83.7% - is registered in the 25-34 age range. The numbers drop steeply as Radio

33


people grow older, reaching 56.9% penetration in the over 65-year-olds. When compared with 2008, however, the 2009 figures demonstrate a slight ageing in the demographic profile of the radio user. Radioâ&#x20AC;&#x2122;s appeal drops in the 18-24 age range (-1.5% from 2008), remains steady among 25-34 year olds (-0.3%) and rises in all the older age groups. There is a 1.7% increase in penetration in the 45-54 age group and 1.5% in the over 65-year-olds. Audioradio data for 2009 confirms a prevalently male listenership, compared with previous years: 78.4% of males over the age of 11 are radio users, compared to 68.2% of women. Fig. 1: Percentage of radio penetration by age group (2009) 90

81.1

78.1

80

82.1

83.7

80.6 75.0

73.1

66.9

Rate of penetration

70

56.9

60 50 40 30 20 10 0

Total listeners 11-14 yrs 11+

15-17 yrs

18-24 yrs

25-34 yrs

35-44 yrs

45-54 yrs

55-64 yrs

65+ yrs

Age bracket

Source: IEM elaboration of Audiradio data.

Fig. 2: Percentage of radio penetration by gender, education and geographical area (2009) 0

20

40

60

73,1

Men

78,4

Women

68,2

University degrees/diplomas

77,9

Secondary school certificate Primary school certificate/none

geographical area

level of education

gender

Total (average %)

72,3 54

Northwest Northeast Centre South and islands

Note: Target, people aged 11 and over. Source: IEM elaboration of Audiradio data.

34

80

Radio

75 74,6 73,3 70,8

100


Penetration reaches its peak among people with diplomas or university degrees (77.9%) and drops to its lowest among those with no academic qualifications (54%, which represents a 1.6% decrease on 2008). Radio use is more frequent in the Northern Italian regions, where there is an average penetration of 74.8%, than in the Centre or South. Furthermore, a new kind of user emerged from the 2009 data. Compared with previous years, the 2009 listener is more ‘nomadic’, who probably tends to intertwine, alternate and accumulate different multiple sources from different platforms. The average amount of time spent listening to the radio, has dropped, by 7.3% from 179 to 166 minutes, the lowest number registered since 20051. Fig. 3 – Average radio listening time in Italy (2005-2009) 185 181 180 175

179

173 171

170 166 165 160 155 2005

2006

2007

2008

2009

Note: radio listening time (minutes) in average day, people aged 11 and over. Source: IEM elaboration of Audiradio data.

The Italian radio market consists of 18 national broadcasters, both publicly and privately owned, who mainly transmit in analogue terrestrial. Adding to the radio panorama are nationwide or pan-regional syndications (consortia of local stations who share advertising revenues and buy part of their programming from a superstation, broadcasting it simultaneously); community radios (both local and nationwide) and local stations. Identifying a precise number of local radio stations in FM is difficult. As the radio association FRT points out, the radio market has progressively become more concentrated over the years and frequencies used by smaller broadcasters are often bought up and incorporated into bigger networks without much fanfare. However, somewhat cautiously, FRT estimates that there were 930 local broadcasters on air (FM) in 2007. The principal radio operators in the Italian market can be divided into 3 categories: •

Public broadcaster:

1. RAI – Radio Televisione Italiana: RAI owns three national stations (Radiouno, Radiodue and Radiotre) whose infrastructure is handled by the group’s subsidiary company, RAI Way. The public broadcaster also owns the public utility radio Isoradio, which transmits traffic information and music mainly on ISO frequencies. •

Privately owned networks, whose core business is radio, including:

1. Gruppo Finelco (whose majority shareholder is company president Alberto Hazan) owns 1 In 2009, the privately owned Radio 105 registered the longest listening time, an average of 105 minutes per day. In second place was RAI Radiotre with 104 minutes, followed by the religious broadcaster Radio Maria at 97 minutes. The shortest listening time was recorded for Radio Radicale and M2o, with 58 minutes each on an average day.

Radio

35


three national stations: Radio 105, Radio Montecarlo (RMC) and Virgin Radio. Virgin Radio is the re-branded Play Radio channel bought from RCS Media Group in 2007. In exchange, RCS became a 34.6% shareholder in Finelco. In July 2009, the Finelco-RCS agreement was extended from 2012 to 2014. The new deal includes a 10 million euro increase in capital for Finelco, which corresponds with an increase of RCS shares in the group (to 37.2%) and gives RCS option rights to acquire the entire group between 2014 and 2015. 2. Radio Dimensione Suono (owned and managed by Eduardo Montefusco) broadcasts radio channel RDS 100% Grandi Successi nationwide and local stations Dimensione Suono Roma, Dimension Suono Due, Ram Power and Discoradio (bought in 2006). 3. Rtl 102.5 Hit Radio (founded by company president Lorenzo Suraco) controls the nationwide network RTL 102.5 and the TV channel of the same name (previously Hit Channel), which broadcasts free-to-air ‘radiovision’ on satellite and DTT. 4. Radio Italia owns the national network Radio Italia Solomusicaitaliana and from 2004 also used to run the satellite TV channel, Radio Italia TV until its closure in July 2009. Since 1 January 2010, Radio Italia’s advertising has been handled exclusively by Manzoni, a subsidiary of Gruppo L’Espresso, which also handles Elemedia’s radio channels. 5. Radio Maria Association broadcasts the religious channel, Radio Maria, which started out as a parish radio in Arcellasco d’Erba, Como and later became a national network. In 1998, the association founded the NGO World Family of Radio Maria involving 45 radio broadcasters worldwide to date. •

Radio networks that are subsidiaries of publishers whose core business is print media. These include the following:

1. Elemedia (owned by Gruppo L’Espresso) broadcasts three stations nationwide: Radio Deejay (general interest), Radio Capital (information and music) and M2o (music with a youth target). The group also owns the TV channel, Deejay TV, which replaced Allmusic in September 2009 and continued its programming. Deejay TV can be seen free-to-air on DTT and analogue. Allmusic was replaced on the SKY satellite pay-TV package by a new music channel, MyDeejay TV. 2. Monradio (belonging to Gruppo Mondadori) owns the general-interest channel Radio 101 (R101). It should be noted that Mondadori Pubblicità acquired the exclusive rights to manage the advertising revenues of the privately owned, Naples-based network Radio Kiss Kiss in March 2009. 3. Nuova Radio (owned by Gruppo Il Sole 24 Ore) manages the news-and-talk station, Radio 24. 4. RCS Mediagroup. As previously noted, the Milanese company is presently the minor shareholder in Gruppo Finelco to whom it ceded Play Radio in 2007. In December 2008, RCS ceded the brand Radio Italia Network to Domenico Zambarelli’s Next Group. The network resumed broadcasting across several regions in FM in January 2009. Analysis of the 2009 radio audience figures shows a general decrease in the number of contacts for national networks, down 5.5% from 2008, despite the previously mentioned overall increase in listeners. It seems probable that local and intra-regional stations detracted audience from the national networks. On the nationwide front, the only success stories were Radio Kiss Kiss (2.1%) and the Finelco networks Radio 105 (with an excellent 23.1% increase on 2008) and Virgin Radio (up 4.6%). The public broadcaster’s main channel, Radiouno, confirmed its leading position, held since 2005, with 6.2 million contacts on an average day. However, the 2009 results are down 9.1% from the previous year. The other RAI channels also registered a drop in listeners with Radiotre down 6.3% while Radiodue fell 23.1% from 4.9 to 3.8 million listeners, probably due to the

36

Radio


closure of the hit show Viva Radiodue hosted by Fiorello and Marco Baldini. Rtl 102.5 follows Radiouno in the national radio network league, as it did in 2008, with 5.3 million contacts, even though it suffered a drop of 2%. Coming in at third place is Radio Deejay, which lost 210,000 listeners in 2009, thereby contributing to the less than stellar results of Elemedia Gruppo, which registered a 5% loss for the second year running, although still retaining its position as the leading privately-owned network. Contrasting these results is the rise of the Finelco network, which registered a 4.8% overall growth on 2008’s figures, with excellent performances from Radio 105 (+530,000 listeners) and Virgin Radio, which managed to compensate for the Radio Montecarlo losses (-13.6%). Table 2: National radio networks’ audience share, average day (2005-2009) 2009

2008

2007

2006

2005

Yr on yr % 2008-09

RAI Radiouno (R)

6.250

6.876

6.744

6.720

6.399

2008-09

RTL 102.5

5.291

5.399

5.166

4.907

4.125

-2,00

Radio Deejay (E)

5.037

5.249

5.586

5.758

5.587

-4,04

RDS 100% Grandi Successi

5.034

5.263

5.014

4.965

4.505

-4,35

Radio 105 Network (F)

4.507

3.975

3.961

3.703

3.547

13,38

RAI Radiodue (R)

3.781

4.918

4.988

5.486

4.213

-23,12

Radio Italia Solo Musica Italiana

3.662

3.799

3.776

3.223

3.260

-3,61

Radio Kiss Kiss

2.290

2.242

2.374

1.724

1.355

2,14

Radio R101

1.990

2.080

1.952

1.381

n.d.

-4,33

Radio 24 - Il Sole 24 Ore

1.885

2.113

1.859

1.763

1.572

-10,79

RAI Radiotre (R)

1.868

1.993

1.943

1.914

1.858

-6,27

Virgin Radio (F)

1.786

1.707

n.d.

n.d.

n.d.

4,63

Radio Maria

1.608

1.715

1.806

1.694

1.829

-6,24

RMC Radio Montecarlo (F)

1.571

1.818

1.920

2.056

2.075

-13,59

Radio Capital (E)

1.520

1.623

1.857

2.039

1.980

-6,35

M2O (E)

1.292

1.469

1.416

1.066

1.007

-12,05

Isoradio (R)

969

1.181

1.177

1.115

1.086

-17,95

Radio Radicale

448

515

536

545

449

-13,01

12.868

14.968

14.852

15.235

13.556

-14,03

RAI Group (R) Elemedia Group (E)

7.849

8.341

8.859

8.863

8.574

-5,90

Finelco Group (F)

7.864

7.500

5.881

5.759

5.622

4,85

50.825

53.935

50.685

50.059

44.847**

-5,77

Total contacts * national broadcasters

Note: thousands of listeners in an average day; Public broadcaster in italics; (*) Contact data includes daily listening of more than one network; (**) Data not comparable because of absence of R101’s results for 2006. Source: IEM elaboration of Audiradio data.

It should be noted that Audiradio began to test a new method of data gathering in 2009, which was refined and amplified in its 2010 survey. Results garnered from traditional telephone interviews (120,000 individuals) have been integrated with a diary system used by a panel of 14,400 people. The new system also gathered listening information about an average day for the national broadcasters who signed up for it. The published data for early 2010, relative to the first quarter, show a radically modified

Radio

37


situation, which - if confirmed2 – could stimulate new ideas, even though the survey cannot simply be compared to previous results but requires further elaboration. Firstly, the total number of contacts for national radio networks, 58 million per average day, is much higher than totals for the previous five years, which registered numbers between 50 and 54 million. Performances by individual networks also register variations to the established status quo. In short, the first quarter of 2010 brought unexpected success with Radiouno recording 7.6 million listeners, placing it streets ahead of Radio Deejay, which overtakes Rtl 102.5 (stable at 5.5 million) to occupy second place with over 6 million contacts. Surprisingly, and in contrast to previous results, RAI’’s Radiodue comes in at fourth place with 5.3 million, followed by Finelco’s Radio 105 with 4.7 million listeners. The great leap forward taken by Radiotre, now reaching just over 3 million of contacts in an average day, completes a very positive result for the public broadcaster. All the stations in the 2009 Top Ten have seen their audience share improve, with the exception of RDS Radio Dimensione Suono, which has had heavy losses, dropping to 4.6 million listeners from the 5 million recorded in the previous 3-year period. Table 3: Audience figures for national radio broadcasters, average day (1st quarter 2010) Audience (1st quarter 2010) Rai Radiouno (R)

7.634

Radio Deejay (E)

6.276

RTL 102.5

5.533

Rai Radiodue (R)

5.280

Radio 105 Network (F)

4.764

RDS 100% Grandi Successi

4.658

Radio Italia Solo Musica Italiana

3.902

Rai Radiotre (R)

2.978

Radio Kiss Kiss

2.494

Radio R101

2.491

Radio 24 - Il Sole 24 Ore

2.371

Radio Capital (E)

2.251

RMC Radio Montecarlo (F)

1.731

Radio Maria *

1.626

Virgin Radio (F)

1.605

M2o (E)

1.031 986

Radio Radicale *

470

Total contacts **

Isoradio (R) * RAI Stations(R)

16.878

ELEMEDIA Stations (E)

9.558

FINELCO Stations (F)

8.100

Total listeners ** national broadcasters

58.081

Note: listeners in thousands, average day; public broadcaster in italics. (*) Radio Maria, Isoradio and Radio Radicale did not take part in the diary panel research, data relative to these channels is from telephone interviews only; (**) data includes the possibility of multiple channels listened to in the same day. Source: IEM elaboration of Audiradio data.

2 The Audiradio research method will probably be modified again in the near future. In July 2010, the board of directors charged the chairman with identifying the most reliable solutions for refining the results of this new research model, which has been criticised by various industry members since publication.

38

Radio


In a general analysis of the performances of the main privately-owned radio networks, on the one hand it should be noted that the Gruppo Elemedia network reached 9.5 million of contacts overall, which marks a great improvement from 7.8 million in 2009, although the successes of Radio Deejay and Radio Capital are balanced out by the lacklustre performance of M2o, which is stuck at approximately one million contacts. On the other hand, the results of Gruppo Finelco provide a marked contrast, having slightly increased, to 8.1 million, from the 7.9 million contacts in 2009. While Radio 105 keeps fifth place in the general ratings, Virgin Radio is stuck at 1.6 million listeners and has been ‘overtaken’ not only by its cousin, Radio Montecarlo, but also by Radio Capital.

2. Advertising investment Nielsen Media Research estimated that advertising investment in the Italian mass media outlets (press, radio, television, cinema, internet and billboards) was worth 7.99 billion euros in 2009, a 13.2% drop from 2008. In this context, radio’s 7.7% loss at the end of the year is relatively modest, while the investments totalled 436.3 million euros, down from 472.9 million in 2008. Nielsen also estimates that the radio share of the advertising market in 2009 was 5.46%, a slight increase from the previous report. Table 4 – Radio: advertising investment, Italy (2005-2009)

Total advertising (*) Radio (**) Percentage % radio of total

Var. % 2008-09

2009

2008

2007

2006

2005

2004

7.994.277

9.214.314

8.978.580

8.553.825

8.460.442

8.116.241

-13,24

436.317

472.904

476.084

440.669

408.597

400.214

-7,7

5,46

5,13

5,3

5,15

4,83

4,93

-

Note: thousands of euros; (*) Includes investment in the following mass media; TV, press, radio, cinema, internet, billboards; (**) investment in nationwide radio stations. Source: IEM elaboration of Nielsen Media Research estimates.

It is worth noting that a comparison of advertising investment analysis by Nielsen Media Research and other sources highlights several discrepancies, mainly due to the different methods of calculating the data (at times considered gross, at others net of the sales commissions and/ or agency discounts)3. In any case, two important constants appear: all sources agree that the radio market was worth between 5 and 5.5% of the advertising market in 2009 and that advertising investment in radio in 2009 was down from 2008, by a percentage varying from around 8% (AGCOM, Nielsen, Fcp-Assoradio) to 11% (Assocomunicazione). The downturn in the advertising sector in Italy, which began in the second quarter 2008 as a consequence of the international economic crisis, showed signs of abating at the end of 2009. Nielsen Media Research estimates that the drop in total investment in December 2009 was only 1.6% compared with December 2008 while the radio market showed encouraging monthly performances, with a 24.6% increase on December 2008.

3 It should be remembered that, since January 2009, Nielsen Media Research has used data gathered by Osservatorio FCP (Federation of Advertising Agencies) - Assoradio as the basis for its estimates of the radio advertising market. Assoradio consolidates monthly advertising income data (supplied by the national agencies) eschewing the policy of applying an average rate of abatement to published rack rates, as Nielsen previously did.

Radio

39


Table 5 – Comparison of data for nationwide radio stations (2008-2009) Radio – total Radio – total investment 2009 investment 2008

Suorce

Variation %

% radio of all media investment 2009 (*)

Nielsen Media Research

436.317

472.904

-7,7

5,46

Fcp-Assoradio

370.859

402.037

-7,7

-

Agcom / Nielsen Media Research (**)

403.000

437.000

-7,8

5,32

-

396.530

-

-

443.000

498.000

-11

5

Agcom – IES (**) Assocomunicazione (***)

Note: Thousands of euros; investments in nationwide radio stations.; (*) Including investments in the following mass media: TV, press, nationwide radio, cinema, Internet, billboards; (**) The annual AGCOM report elaborates data supplied by Nielsen Media Research. AGCOM also produces a second analysis of the radio market with data taken from IES (Informatica Economica di Sistema); (***) Provisional estimates, produced over the year for the nationwide radios. If the local radios were included, the figure would be 589 million. Source: IEM elaboration of Nielsen Media Research, Fcp- Assoradio, AGCOM, Assocomunicazione estimates.

This hint at a cautious recovery was confirmed early the following year. Nielsen calculated a 4.35% increase in advertising investment in the mass media for the first quarter of 2010 compared with the same time period in 2009. Results for the radio sector were particularly encouraging, with 12.6% growth in the first quarter of 2010, due mainly to the success of commercial spot advertising. Table 6 – Radio: advertising investment, Italy (First quarter 2010) Total advertising (*) Radio (**)

I quarter 2010

I quarter 2009

Variation, year on year

%

1.959.338

4,35

104.726

93.031

12,6

Of which commercials

96.491

85.282

13,1

Of which other advertising

8.236

7.748

6,3

Note: Thousands of euros; (*) including investments in the following media: TV, press, radio, cinema, Internet, billboards; (**) investment in nationwide radio stations. Source: IEM elaboration of Nielsen Media Research estimates.

Assocomunicazione’s 2010 Comunicare Domani Report also notes that “in spite of the continuing difficulty in the economy and the investment market, the first solid signs of recovery have been seen […] in communications investments”. Assocomunicazione forecasts a slow but constant growth that should enable recovery of 2008 level investments in four years’ time. Overall growth for 2010 in advertising investment is estimated at around 2%. In this context, advertising on national radio networks should register a 4% increase on 2009, given impetus by the 4.5% growth in the private broadcaster sector, an increase that is more than double the public networks (+2.2%). Unlike other sources4, Assocomunicazione also measures investment in local radio. Calculating that the local radio market was worth 28% of radio investment in 2009, amounting to 171 million euros, Assocomunicazione predicts a continuation of the present situation for 2010, with investments worth 170 million euros, roughly 29% of the total.

4 AGCOM also produces data on advertising investment in local radio, integrating information from Informativa Economica di Sistema which is supplied by the principal local operators, with estimates on the remainder. The most recent figures available, however, date back to 2008 and record 182 million euros in local radio advertising, equal to 31.4% of total radio advertising.

40

Radio


Table 7 - Advertising investment in radio, Italy (forecast 2010) Forecast 2010

Year on year %

419.000

4

Public broadcasters

91.000

2,2

Private broadcasters

National networks

328.000

4,5

Local radio

170.000

0

Tot. radio

589.000

2,8

Note: Figures in thousands of euros. Source: IEM elaboration of Assocomunicazione data.

3. International comparison Advertising investment in radio worldwide came to 24.3 billion euros in 2009. According to Zenith Optimedia, this outcome was a 10.9% drop on 2008, a loss that was one percent more than the 9.8% average decrease in global advertising revenues, which totalled 319 billion euros in 2009. In Europe, the 2009 radio advertising market was worth 5.2 billion euros, equal to 21.4% of global investment in this media. Radio advertising in Europe in 2009 dropped 13.3% on the 2008 figures, while Eastern Europe, in particular, depreciated even further, recording a 25.6% fall on the performance in 2008. Table 8: Radio advertising investment, worldwide and in Europe (2008-2009) 2009

2008

Total advertising (world)

319.900

354.500

-9,8

Radio (worldwide)

24.300

27.300

-10,9

Radio (Europe)

5.200

6.000

-13,3

radio: Western Europe

4.300

4.800

-9,4

900

1.200

-25,6

radio: Eastern Europe

Î&#x201D;%

Note: figures in millions of euros. Source: Zenith Optimedia

It is difficult, and risky, to compare advertising spending data for the individual European markets because of the variations in data gathering methods and data analyses carried out by research companies in different countries. In general, it can be noted that in 2009, radio advertising represents a reduced proportion of the media mix in the two largest European markets: the UK (2.8% of the total 16.3 billion euro mass media advertising investment) and Germany (3.7% of the total 18.3 billion euro mass media advertising investment). The next largest player in the EU-5 market is Italy (where radio represents 5.46% of the mass media investment) followed by France (6.57%) and Spain, with the smallest advertising market at 5.6 billion euros, where radio has the most consistent share, 9.6% of total mass media advertising. The aforementioned economic crisis had negative repercussions on all the principal advertising markets in 2009, although in different proportions. The German radio market held up better than others, dropping only 5.6% (the equivalent of 40 million euros) on 2008, while the average total decrease of advertising spending in Germany was 9.8%. This is partly because investment from the automobile sector remained comparable to 2008, according to Nielsen Media Research, occupying one third of total radio ad-spending, namely 228.5 million euros.

Radio

41


Table 9: Advertising investment in the major European markets (2009) Tot. advertising

Radio

% radio on total

France

10.291

676

6,57

Germany

18.337

679

3,70

Italy

7.994

436

5,46

United Kingdom

16.275

456

2,80

Spain

5.621

537

9,55

Total

58.518

2.784

4,76

Note: Millions of euros, referring to net advertising investment; (*) Italian figures refer to nationwide radio broadcasters only; (**) UK data is net of sponsorships and branded content. Source: IEM elaboration of IREP, Zaw, Nielsen, Warc/AA, Infoadex data.

The radio market most negatively affected by the poor economic climate was Spain, which slowed down in 2008, after three years of growth between 2005 and 2007, and decreased by 16.3% in 2009. However, this loss was less than the overall 20.9% decrease in the so-called conventional media in Spain. In Italy, the UK and France, losses in 2009 settled at between 7 and 9%. However, while radio advertising investment in Italy has grown an average 1.7% p.a. over the past five years, in the UK and France radio appears to be undergoing a more serious crisis, as suggested by the average decreases in those countries between 2005 and 2009, 7% in the UK, 4% in France. Table 10: Radio â&#x20AC;&#x201C; Advertising investment in the major European markets (2005-2009) 2005

2006

2007

2008

2009

Î&#x201D;% 2008-09

Average growth

France

795

807

767

742

676

-8,89

-3,97

Germany

664

681

743

719

679

-5,56

0,56

Italy (*)

408

440

476

473

436

-7,82

1,67

Spain

610

637

678

642

537

-16,36

-3,14

United Kingdom (**)

609

549

555

491

456

-7,13

-6,98

Note: Figures in millions of euros, referring to net advertising investments; (*) Italian figures refer only to nationwide radio broadcasters; (**) UK data is net of sponsorship and branded content. Sources: IEM elaboration of Irep, Zaw, Nielsen, Warc/AA/Ofcom, Infoadex data.

Zenith Optimedia forecasts a cautious recovery in global advertising investment for 2010. According to estimates published in April, this recovery should come to around 2.2% overall. Ongoing recovery is occurring at varying speeds around the world, differing in individual countries and in the separate media sectors. However, Zenith forecasts a stagnant year for radio in 2010, (-0.5%). Radio advertising revenues worldwide should slowly begin to grow by 2.3% in 2011, in the context of a 4.1% increase in mass media advertising investments, with a further rise of 4.5% expected in 2011.

4. Distribution platforms and the future of radio: performance and trends The IEM annual Reports have often highlighted the extraordinary ability of radio to adapt to contemporary technological scenarios. A venerable medium, it has learnt to integrate with new technology and today can be used through:

42

Radio


audio receivers; both analogue (for traditional transmissions in FM and AM) and digital (e.g. DAB-T systems for digital terrestrial reception; DAB-S for direct satellite reception5; DRM);

television; whether digital, terrestrial (standard DVB-T), satellite (DVB-S), mobile (DVB-H) or cable (DVB-C);

mobile phone handsets, which receive analogue signals in FM, and increasingly offer web radio in streaming for use with Internet connections (3G, 3.5G, GPRS, WiFi);

computers and portable devices, for broadband reception of web and podcasts.

In general, the increase in platforms presents the opportunity for radio to extend its listenership, with the creation of more listening points than the present number of radio channels can provide and with an increased offer through new broadcasters. The UK regulator OFCOM, for example, estimates that there were 333 digital radio broadcasters in Italy, France, Germany and UK in 2007 and 717 in 2009 (a rise of 115%). Information from the UK is particularly relevant, where a huge increase in digital broadcasters over a two-year span, has brought the number from 172 to 423 (380 private and 43 public). Fig. 4 – Number of available channels on digital radio platforms (2007 and 2009) 450 2007

400

423

2009

350 300 250 200

172

150

113

107

116

100 50

65

46 8

0 France

Germany

Italy

UK

Note: Excluding webcast radio. Source: IEM elaboration of Idate/Ofcom data.

It should be noted that the different distribution platforms penetrate the markets at varying speeds. In Europe, in particular, there are three interconnected trends that are pronounced at the moment: 1. The resilience of analogue radio distribution; 2. The difficulty experienced by audio digital terrestrial networks in establishing themselves; 3. The success of radio via Internet. 5 The main provider of DAB-S (Digital Audio Broadcasting – Satellite) radio in USA and Canada is Xm/ Sirius, an operator created in 2008 with the merger of the two biggest providers, Xm and Sirius; DAB-S radio users in USA were 20 million in 2008. Outside of North America, the main provider of satellite radio was WorldSpace Inc. until its bankruptcy in 2008 (it was later bought, in March 2009, by its CEO and founder, Noah Samara). WorldSpace’s departure halted many European expansion projects, including the launch of satellite radio in Italy, announced in 2007, by WorldspaceItalia, a joint venture between Worldspace Inc. and Newsatellite Radio (part of the Class Editori group).

Radio

43


These common trends are accompanied by several developments that are specific to individual local markets. In Italy, for example, the mobile phone is a particularly popular device for listening to radio in FM and increasingly in streaming via the Internet6. OFCOM estimated that 22% of Italian adults with access to an Internet connection in 2008 used their mobile phones to listen to FM radio, compared to 16% of German and 13% of French adults. Recent research carried out by Aegis Media Expert and published in June 2009 by I Quaderni della Comunicazione stated that 21% of Italians between 15 and 64-years-old regularly use mobile phones or portable devices to listen to the radio.

Analogue and digital terrestrial radio “The future of radio”, a document published in 2008 by the Swedish TV and Radio Authority, states that analogue terrestrial FM radio offers lasting advantages, including a guaranteed reach over the territory, network stability and reliability, signal quality, economical transmission systems and accessibility – all factors that continue to satisfy both operators and users. The well-known limit to analogue distribution is, of course, the lack of frequencies still available for use, which limits development possibilities for radio. New channels and additional services could be established and guaranteed through the use of sound-radio based digital terrestrial technologies, which use the electromagnetic spectrum with greater efficiency. However, to date, radio’s switch to digital has been a complicated path, whose final destiny is still not yet clear. In this context, the standard European dish used for digital terrestrial radio transmission, DAB-T (Digital Audio Broadcasting - Terrestrial), has been fairly symbolic. Experimentation of the DAB system was started in 1995 by the European Union, which identified blocks of available frequencies (in VHF III and UHF-L bands) and allowed each nation to choose when to introduce the new technology. In Italy, the first development plan for DAB-T radio began in 2001. During the following decade, experimentation with DAB technology has continued, alongside testing of the more evolved technologies, DAB+ and DMB (Digital Multimedia Broadcasting), which transmits Mobile TV via DAB. At the same time, other digital terrestrial technology is being tested, including DRM (Digital Radio Mondiale), which uses AM frequencies for digital radio. In 2005, AGCOM published the first regulations for market behaviour and assigned digital frequencies. Various factors, however, have blocked a wholesale adoption of the system. In Italy, there is a combination of technological and logistical problems, including: •

the great expense of creating transmission centres able to provide countrywide coverage;

the scant availability of good receivers at reasonable prices;

the defects in the perceived audio quality, a problem later overcome with the implementation of the DAB+ system, introduced in 2006;

the delays in freeing up the identified frequencies, previously occupied by television broadcasters, and problems with the system standards for canalisation of the III band.

In November 2009, a new AGCOM regulation (Resolution 664/09/CONS) assigning digital frequencies to radio broadcasters was approved. The document assigned 14 frequency blocks in band III to radio, three intended for nationwide broadcasters and 11 for local radio stations. The three main Italian consortia of privately-owned radio networks authorised, along with RAI, to transmit in digital (Club DAB, C.R. DAB, Euro DAB) believe the new regulations are 6 Forrester Research believes that the Italian market, along with Austria, UK and the Nordic countries, leads the spread of mobile Internet services worldwide; the American group forecasts that over 60% of Italian mobile phone users will have a 3G or 3.5G handset by the end of 2010 and that Italy will be one of the first countries to adopt 3.5G services, reaching a 25% penetration by the end of 2013, as opposed to the forecast of 20% for France, Germany and Holland.

44

Radio


insufficient for an effective launch of DAB. The consortia also point out that the regulation actually penalises local stations by dictating the requisites for access to the rights for use of these digital frequencies. Furthermore, they believe that the National Plan for Assignment of Digital Frequencies, approved in June 2010, has kept insufficient frequencies in reserve for local radio stations, favouring television broadcasters instead. Development of DAB is proceeding in fits and starts even in those European markets that have avoided any head on debate about digitalising the FM analogue network (through, for example, HD radio format7 or FmeXtra) versus the adoption of new systems (such as DAB or DRM). In any case, no country has yet announced a date for the analogue signal switch off. Table 11: Digital terrestrial radio in the main European markets (France, Germany, United Kingdom)

France

• • • • •

Germany •

• •

United Kingdom

Testing of DRM, DAB, DAB+, DMB-T and HD radio has been ongoing for years. The 2007 Technical Forum organised by the Conseil Supérieur de l'Audiovisuel lead to the 2008 decision to adopt the DMB-T (Digital Multimedia Broadcasting) standard for digital radio, which also allows broadcast of mobile TV within the DAB network. By 2013, all radios for sale must be DMB-compatible. DAB-T radio has been transmitting since 1999, but with low penetration levels, with fewer than 500,000 receivers sold to date. The Commission for Financing of Audiovisual Media suspended public funding of DAB from January 2008 to end 2009 because of the scant results produced by the system. Re-start of digital radio was planned for spring 2008 with tests on DAB+, DRM and HD Radio. Digital DAB+ radio should be fully operational between end of 2010 and early 2011. Digital terrestrial radio has been transmitting in the UK since 1997. At end 2009, with 400 radio channels and 10 million DAB receivers sold, the British market was the leading DAB market in Europe. There are, however, observers who believe that without further innovation, such as the use of the more evolved DAB+ technology to replace first generation DAB, the digital terrestrial market is close to saturation. In contrast with other markets, in 2009 the British government announced analogue radio switch off by 2015. However, this was withdrawn in July 2010 by the Cameron government, thereby prolonging the FM standard for the indefinite future.

Radio via Internet: web-radio, podcasting and broadcasters’ websites For various reasons, radio via the Internet and podcasting appear to provide a valid alternative to digital terrestrial networks and are an essential complement to analogue radio networks. The main advantage of radio in streaming on the web is a potentially unlimited number of channels and programmes. Furthermore, accessibility, limited management costs and the possibility of broadcasting without having to apply for licences allows multiple operators to enter the market with niche channels and targeted programming. While web radio was previously used prevalently through fixed computers, today’s wireless technology complements an important characteristic of radio: portability. The combination of Internet and radio provided by the new generation of mobile phones, mentioned earlier, is a prime example of the new way of using web radio on the move. In this situation, podcasting offers the ideal complement to the radio via web. Files downloaded from the Internet can be listened to on a computer or on portable devices such as MP3 players, 7 The USA opted for the hybrid analogue-digital FM HD model as the way forward for digital radio; after a decade of unsuccessful experimentation of DAB-T in Canada, licences in L band were revoked in June 2010, probably to be replaced with the HD radio model.

Radio

45


as podcasting allows the consumer to choose when and what to listen to, an option not offered by web radio in streaming8. It should also be noted that Internet is not simply a distribution platform for radio channels but, increasingly, offers support for all radio broadcasters and other distribution platforms. Radio broadcasters’ websites encourage consumer loyalty and integrate radio content, providing the consumer with at least seven different options. The most recent Consumer Connection Source Research carried out by Aegis Media Expert organises these functions into the following categories: •

(Re)listen: listen to the radio or listen again after having heard it during a concert;

(Re)watch: watch music-related content and personalities from radio sector;

Search: find music (album, titles, songs, concerts...);

Deepen: enhance knowledge of the music world, with further reading, news, articles etc.;

Explore and discover: explore the world of music to discover new songs, artists, genres;

Live and Buy: buy songs, merchandising, concert tickets, for the full experience;

Share and discuss: share and discuss music interests with online communities.

8 Radio on broadband registers huge use in all the European markets. OFCOM reported that over 30% of adults with a household broadband connection in 2008 in the four main European markets (France, Germany, Italy and the UK) stated they listened to the radio through the internet, with Germany registering the highest results at 37%. Furthermore, 39% of Italian and 35% of British Internet users regularly listened to podcasts through the Internet at home. In June 2009, Aegis Media Expert estimated that approximately 5 million Italian Internet users regularly listened to the radio through the Internet while 1.3 million users downloaded podcast content every month.

46

Radio


Cinema

47


Cinema by Bruno Zambardino

1. Production, distribution and exhibition In the year 2009 there was a dramatic fall in the number of films produced with 100% Italian capital, totalling 97, which was 26 titles fewer compared with the previous year, equating to a drop of roughly 29%. Only 26 films received public funding, in comparison with 41 in 2008. There was a slight increase in the number of foreign co-productions, going from 31 to 34, thanks to a rise in Italian minority share co-productions. So the total number of films produced in 2009 (including co-productions) stood at 131, 23 fewer than in 2008, recording a drop of almost 20% in the two-year period, a lower percentage fall than for films that were entirely Italian productions. The reduction in films made was influenced by the 46% drop in public investment in Italian productions. In fact, the overall number of films that benefitted from public funding dropped from 56 to 38 titles. Table 1: Films produced in Italy, 2004-2009 2009

2008

2007

2006

2005

2004

Productions funded with 100% Italian capital

97

123

90

90

68

96

of which, receiving "cultural interest" public funding

11

23

19

15

6

32

1

10

4

2

6

9

Of which first and second films

14

8

6

4

2

_

Foreign co-productions

34

31

31

26

30

38

With a majority share

17

20

17

11

16

15

With a minority share

17

11

14

15

14

23

(of which, receiving "cultural interest" funding)

9

10

15

3

3

5

(of which first and second films or funded under ex Art. 8)

3

5

2

0

1

0

131

154

121

116

98

134

20

33

34

18

9

37

Of which those receiving funds allocated under ex Art. 8

Total films produced Of which, receiving "cultural interest" funding

1

10

4

2

7

9

Of which first and second films

17

13

8

4

2

_

Total films produced with public contributions

38

56

46

24

18

46

Funded under ex Art. 8

Source: IEM elaboration of ANICA data. The term â&#x20AC;&#x153;film producedâ&#x20AC;? is considered as submitted by censorship rating commission.

48

Cinema


A lower number of films were distributed in cinemas during the year 2009 for the first time, compared with the previous year (-5.6%), standing at a total of 355 titles. The share of Italian films distributed, including co-productions, fell to 32.4% of the total, a loss of 2 percentage points to the advantage of films made in the USA, which reached a share of 45% in spite of having 4 fewer titles distributed than in 2008. European and non-European films held their ground, after the sharp drop recorded in the previous two years, strengthening their share that now reaches 30%. If we also include runs of films spilling over from 2008, there were a total of 857 titles in 2009, of which 294 Italians (including co-productions), 313 Americans and 250 from Europe and other countries. If we take this larger sample into account, the difference between the American and Italian shares is just over 2 percent (36.5 % against 34.3%), compared with the 12.4% difference recorded for films released in 2009 alone. Table 2: Films distributed in Italy by country of origin, 2004-2009 2009

2008

2007

2006

2005

2004

Italy ( incl. co-prod.)

115

130

110

USA

159

163

154

81

83

355

Italy USA

Δ % 09-08 Δ % 09-04

100

98

106

-11,5

10,6

161

166

152

-2,5

4,6

106

124

128

113

-2,4

-28,3

376

370

385

392

369

-5,6

-3,8

32,4

34,6

29,7

26,0

25,0

28,2

-2,2

4,2

44,8

43,4

41,6

41,8

42,3

41,2

1,4

3,6

Other EU countries (excl. IT) and non-EU

22,8

22,1

28,6

32,2

32,7

30,6

0,7

-7,8

Total

100

100

100

100

100

100

-

-

Absolute figures

Other EU countries (excl. IT) and non-EU Total Percentages

Source: IEM elaboration of ANICA data (films actually released during the year in question).

There was a slight decrease in cinema admissions in Italy in 2009 (-1.6%), according to consolidated figures from the Italian Society of Authors and Publishers, SIAE, compared with 2008. However, in the face of the general crisis in consumption, the cinema market held up better than other sectors, confirming its anti-cyclical nature. Examining admissions by the nationality of the production, one can see that the Italian share (including co-productions) dropped by almost five points, going from 29.3% to 24.3%. The beneficiaries were films originating from America, with a share that exceeds 60%, a jump of two percent on the previous year, thus returning to the levels recorded in 2004. Italian production’s drop in share of the national market, amounting to a net loss of almost 5 million admissions (from 29 to 24 million), is due to factors relating to business trends in a cinema season that lacked domestic titles. In fact, distributors concentrated releases of many Italian films in the first months of 2010 (Io, Loro e Lara by Carlo Verdone, La prima cosa bella by Paolo Virzì, Baciami Ancora by Gabriele Muccino, Mine Vaganti by Ferzan Ozpetek, Happy Family by Gabriele Salvatores). Analysing the admissions for the first six months of 2010 one can see how home-grown films saw a renewed popularity with audiences, rising to a market share of 30% (compared with 25% recorded in the same period in 2009). In 2009 Italian co-productions also lost ground: the 69 titles (including runs continuing from the previous year) programmed in 2009 recorded 863,000 admissions compared with the 1.3 million people who saw the 74 films released in 2008. Non-Italian European films did better, strengthening their share which rose from 10% to 12%, amounting to 2 million spectators. There was also an increase, though more contained, in admissions for films of non-European or American origin, rising from 1.08 to 1.70%.

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49


Table 3: Italian theatre admissions (totals and by films country of origin) 2004-2009 2009 Tot. Admissions (SIAE)

2008

2007

2006

2005

2004

109.228.858 111.017.381 116.429.995 104.979.882 104.684.194 113.214.274

Δ% 09-08

Δ% 09-04

-1,6

-3,5

Percentage of admissions by films’ country of origin (Cinetel) Italian 100%

23,48

27,91

26,96

20,51

18,69

14,04

0,9

13,87

Italian coproductions

0,87

1,38

4,96

4,52

6,01

6,27

-3,6

-4,89

Total Italy

24,35

29,29

31,92

25,03

24,70

20,31

-2,6

8,98

Europe (excl. IT)

12,13

9,98

11,86

11,58

19,58

10,93

-1,9

-0,95

USA

61,83

59,64

54,89

61,33

53,78

61,91

4,7

-2,27

1,69

1,08

1,33

2,06

1,94

6,84

-0,2

-5,76

Other nationalities

Source: IEM elaboration on data from Cinetel and SIAE (including continuing runs released the previous year). Results up to 31.12.2009.

In 2009 there was a continuing downward trend in the total number of theatres, dropping by 2.2% on the previous year (-11.2% in the last six years), while the number of cinema screens saw persistent growth, standing at 3,202 (61 additional screens than in 2008), a rise of around 2%; the proportion of screens to theatres rose to 2.90 in 2009, confirming the rising spread of multiplexes and multi-screen cinemas. Table 4: Theatres and screens, 2004-2009 2009

2008

2007

2006

2005

2004

Δ% 09-08

Δ% 09-04

Theatres

1.104

1.129

1.164

1.210

1.275

1.243

-2,2

-11,2

Screens

3.202

3.141

3.086

3.062

3.016

2.802

1,9

14,3

2,90

2,78

2,65

2,53

2,37

2,25

0,12

0,65

Rel. Screens /theatres

Source: IEM elaboration of ANICA data.

The process of “genetic mutation” of cinema theatres is consolidating. The number of multiplexes and their relative screens rose by over 5% (+45.1% compared with 2004). There is a similar increase in their market share of admissions: after passing the 50% mark in 2008, they have consolidated their share of total admissions, going from 52.1% to 53.3%. The panorama for multi-screen cinemas (between 2 and 7 screens) has not seen any major changes: in the face of a basically stable number of operations (403) and a slight increase in screens (+2.7%), there has been a small drop in admissions (-1.1%) after the big decrease recorded in the previous two years. Multi-screens’ share of the market stood at 36.1%. The market share taken by single-screen cinemas is in constant, inexorable decline and has practically halved compared with 2004. In six years, these cinemas, down to 582 in 2009, have lost 10 million spectators (from 20.7 to 10.5 million). In the two-year period 2008-2009, singlescreen theatres have recorded a drop of just over one million admissions, yet there is a small sign of staying power compared with the haemorrhages recorded in the previous two years (when these cinemas lost 2.6 million spectators). This segment’s market share is becoming increasingly marginal, now covering just over 10% of total admissions. In six years, single-screen cinemas have seen their box office takings slide by more than half, going from 117 million euros in 2004 to 59.5 million in 2009. Italian and quality European films were particularly penalised by the changes in the theatrical panorama as these titles

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Cinema


find more distribution slots in city centre cinemas. The decline of urban theatres has, in fact, generated a progressive substitution of older audiences going to city centre cinemas with younger cinemagoers attending multiplexes1. Table 5: Multiplexes and multi-screen cinemas operating in Italy, 2004-2009 Multiplexes (8+ screens)

2009

2008

2007

2006

2005

2004

Δ% 09-4

Δ% 09-4

119

113

108

103

93

82

5,3

45,1

Total screens

1245

1184

1132

1080

981

844

5,2

47,5

Admissions (in millions)

52,8

51,8

51,1

43,7

40,6

39,6

1,9

33,3

(% of total admissions)

53,3

52,1

49,3

47,4

44,7

40,4

1,2

12,9

Multi-screens (2-7 screens)

403

404

398

394

403

383

-0,2

5,2

1381

1345

1296

1269

1256

1180

2,7

17,0

Total screens Admissions (in millions)

35,7

36,1

38,4

34,5

34,3

37,7

-1,1

-5,3

(% of total admissions)

36,1

36,3

37,0

37,8

37,8

38,5

-0,2

-2,4

Single-screens

582

612

658

713

779

778

-4,9

-25,2

Total screens

582

612

658

713

779

778

-4,9

-25,2

Admissions (in millions)

10,5

11,5

14,1

14,0

15,9

20,7

-8,7

-49,3

(% of total admissions)

10,6

11,5

13,6

15,2

17,6

21,1

-0,9

-10,5

Source: ANICA.

The digital switch-over in cinemas is in full swing, further encouraged by the positive results recorded for 3D screenings and in line with international trends2. At the end of April 2010, there were over 500 digital screens in Italy, illustrating the major growth over the two-year period, given that there were just 50 digital (2K) screens in July 2008. This phenomenon also puts a further brake on the exploitation of domestic films. Regions with the greatest spread of digital screens are led by Lombardy with 70, followed by Lazio (64), Piedmont (45) and Tuscany (40). Rome is Italy’s most digital city with 31 screens, followed by Milan with 18. Digital also offers city centre cinemas, including arthouse theatres, new opportunities and strategies, from the chance to offer more flexible quality programming to providing alternative kinds of content. According to sector professionals, with the confirmation of the tax credit system (which provides measures to support investment in updating technology in cinemas) the number of digital screens could break through the 1,000 mark by 2011, making it possible to hit the target of converting the whole exhibition sector to digital by 2012. The main impetus for this growth was 3D cinema in the 2009-2010 period, as mentioned before. So the percentage of screens equipped with 3D technology has risen from 54.4% in June 2009 to 68.8% in January 2010.

1 In order to counteract this trend, since 2006 the Italian Film Board has been supporting a special project called “Quality Screens”, in collaboration with ARCUS. Now in its fourth year, it is run by exhibitor and film industry bodies AGIS, ANEM, ACEC and FICE. The project gives economic incentives to theatres (672 screens are involved, showing 214 films with the necessary requisites) programming a certain number of quality Italian and European films, calculated on the basis of size of theatre and population catchment. A Cattid-Sapienza study conducted for AGIS proved the project’s effectiveness in supporting the national market share and, more generally, increased box office earnings as a result of the film’s longer lasting staying power within the circuit. Cfr. IV Quaderno ANICA “Cinema di Qualità. Analisi del progetto Schermi di Qualità (Editions from 2007 to 2009), curated by Ufficio Studi ANICA. 2 According to Media Salles, in January 2010, there were 4,693 digital screens, an increase of 206% on the previous year. The rate of penetration is equal to roughly 13% of the total screens in Europe, compared with the 4.1% in the previous year. Growth is highest in the five main European markets: France, with 19.3% of the total number of digital screens in Europe; the UK has 14.2%; Germany 12.6%; Italy 9.1% and Spain 5.1%.

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51


2. Market resources After four years of continual growth, Italian investment in film production fell into a lull in 2009, dropping to below 300 million euros and recording a 10% fall compared with the previous year. The downturn is the result of the big drop in public funding (-46.4% compared with 2008, including co-productions) and the deadlock in the fund guaranteeing access to credit (Fondo di garanzia). Entrepreneurial investment in the sector is stationary, with contributions resting the same as in 2008 (258 million euros). However, this progress seems more dynamic when looking at the figures over a longer period: in 6 years it has risen by 36%. The composition of investments is even more imbalanced than in the past, with 87.2% coming from private sources (in particular, the three major broadcasters) and the remaining 12.8% from the public purse. From 2004 (the year the “Urbani Law”3 came into force) to 2009, the volume of public resources has been cut by 60%. Nevertheless, starting from 2010, this will be partially compensated by the first sums of money provided by the Ministry of Culture for the authorisation of fiscal incentives, under the form of tax credits (see below). The average value of Italian investment per single film has risen significantly (+42% on the previous year) as a result of the effect caused by the lower number of films produced, exceeding the threshold of 3 million euros4. Table 6: Italian investment in production, 2004-2009 Investment in production

2009

2008

2007

2006

2005

2004

Δ% 08-0

100% Italian films

Δ% 09-04

218,9

253,3

221,1

187,6

152,1

197,4

-13,6

10,9

Of which public contributions

24,5

49,3

41,5

37,1

21,8

83,4

-50,3

-70,6

Average investment per film

2,26

2,06

2,46

2,08

2,24

2,06

9,6

9,5

Films co-produced

77,1

76,8

91,4

69,7

62,4

86,9

0,4

-11,3

Of which public contributions

13,6

21,7

21,5

6,2

7,7

11,4

-37,3

19,3

Average investment per film

2,27

2,48

2,95

2,68

2,08

2,29

-8,4

-1,0

Total Italian investment

296,0

330,2

312,5

257,3

214,4

284,4

-10,4

4,1

Of which from industry enterpreneurs

258,0

259,1

249,4

214

184,9

189,5

-0,4

36,1

(%)

87,2

78,5

79,8

83,2

86,2

66,6

8,7

20,6

Of which public contribution

38,1

70,9

63

43,3

29,5

94,9

-46,4

-60,0

(National cultural interest)

29,0

55,1

53,7

38,5

21,2

85,9

-47,4

-66,2

-

-

-

-

7,3

8,9

-

-

(Under former Art.8) (first and second films) (%) Average Italian investment per film

9,0

15,8

9,3

4,8

0,9

-

-43,0

-

12,8

21,5

20,2

16,8

13,8

33,4

-8,7

-20,6

3,051

2,144

2,582

2,218

2,188

2,122

42,3

43,8

Note: absolute figures in millions of euros. Source: IEM elaboration of ANICA data.

The share of the General Entertainment Fund (FUS, Fondo Unico per lo Spettacolo)5 supporting cinema activities (development, production, distribution, exhibition and promotion) was worth 75.8 million euros, an increase (+8.8%) on the previous year thanks to the overall rise in the fund as a whole and on a par with cinema’s share of the fund (18.5%). It should be 3 The regulations governing cinema are based on the Legislative Decree N. 28 of 22 January 2004 (“Reform of the regulation on cinematography, according to article 10 of the Law from 6 July 2002, N. 137) and on subsequent decrees implemented. 4 In 100% Italian films with the greatest commercial drive (with budgets over 1.5 million euros) the average investment has risen from 4.3 to 4.5 million euros. 5 Created under the Law of 30 April 1985 N. 163 “New regulation on State intervention in favour of entertainment”. The Ministry of Culture issues an annual allocation decree which, on the basis of the level of the overall fund established in the Budget (Finance Act) and the relative shares to be apportioned, fixes the funding to be given to each sector (opera, music, theatre, cinema, circuses and travelling shows).

52

Cinema


remembered that original budget for 2009 was subsequently increased thanks to a top up of 24 million euros6. The contraction of ordinary national resources in the industry reflects the general trend in the overall financing available in the Entertainment Fund. While the fund was slightly increased for the year 2010 compared with 2009 (+3.2%), it should be remembered that the three-year forecast contained in the last Budget, indicates a drastic cutback for the years 2011 and 2012, which would reduce the overall Fund to just over 304 million euros7. Table 7: Cinema’s share of the general entertainment fund (FUS), 2004-2010 Funding

2010

2009

2008

2007

2006

2005

Δ% 10-09

Δ% 10-05

Total FUS

409,7

397,0

470,0

441,3

427,3

464,6

3,2

-11,8

Of which funding for cinema

75,8

69,7

90,0

79,4

77,9

83,6

8,8

-9,3

Share of cinema / FUS %

18,5

18,5

19,5

18,0

18,2

18,0

-

-

Note: absolute figures in millions of euros. Source: IEM elaboration of data from the Ministry of Culture.

In 2009, the Italian Film Board at the Ministry of Culture made provision for funding and contributions to production amounting to an overall sum of 36.2 million euros, a decidedly lower volume of resources compared with the previous year (7 million euros less), in spite of the fact that the number of projects did not change8. In five years, the amount of funding has practically halved, going from around 74 million euros allocated in 2005 to just over 36 million in 2009. Looking at the situation in more detail, the Ministry funded 27 films judged to be of cultural interest (2 more than in 2008) for a total of 24.9 million euros and an average investment that falls below one million euros. The 27 first and second films judged as worthy to receive funding were overall financed to the tune of 9.6 million euros, a lower figure than the 10.8 million allocated to these films in 2008. In 2009, 6 fewer short films received public financing, while the screenplay development fund, worth 700,000 euros and the relative number of projects funded (20) were at the same levels as previous years. The average amount of funding in relation to the overall number of Ministry-supported projects has been progressively reduced over the last five years, standing at just under 370,000 euros. Table 8: Ministry investment in film production, 2005-2009 Funding

2005

2006

Num. films

Cultural interest

First and second films

Short films

54.000.000

17.996.000

1.599.200

Development 375.000

Total 73.970.200

37

26

40

15

118

Average

1.459.459

692.154

39.980

25.000

626.866

Funding

34.500.000

11.700.000

960.000

700.000

47.860.000

26

25

24

20

95

1.326.923

468.000

40.000

35.000

503.789

Num. films Average

6 In fact, in September 2009, the government decided to replenish the Entertainment Fund with an additional 60 million euros, divided up between the various entertainment sectors. Cinema received an extra 24 million, with production receiving 18 million and 6 million for exhibition. So cinema’s “integrated” share in 2009 amounts to around 94 million euros. 7 Law N. 191 from 23 December 2009. The three-year spending programme is outlined in Table C, attached to the Budget. The allocation of money refers to ordinary resources, to which supplementary funds are added. It should be noted that the planned figures for the years to come are often modified in the subsequent Finance Act for the following year, depending on the administration’s needs. 8 In actual fact, a higher number of films were recognised by the State. The table only contains figures relating to those receiving a financial contribution.

Cinema

53


Funding

2007

2008

2009

34.500.000

Num. films

12.000.000

1.080.000

700.000

48.280.000

27

26

27

20

100

Average

1.277.000

461.538

40.000

35.000

482.800

Funding

30.600.000

10.800.000

1.200.000

700.000

43.300.000

25

22

30

20

97

Average

Num. films

1.224.000

490.909

40.000

35.000

446.391

Funding

24.900.000

9.600.000

960.000

700.000

36.160.000

27

27

24

20

98

922.222

355.555

40.000

35.000

368.979

Num. films Average

Note: figures in euros. In some cases companies subsequently declined this financing. Source: ANICA elaboration of Ministry of Culture data (the outcomes decided by the Cinema Committee in the years in question).

Regional audiovisual funds A valuable source to complement national financing comes from the regional audiovisual funds. In recent years, regional authorities have been showing a growing interest in cinema and the audiovisual industry and their impact on the territory, both economically speaking and in terms of marketing. This interest has developed through the creation of Film Commissions, which are public agencies (rarely private or public-private) set up to attract audiovisual production to the local area, provide administrative assistance and often act as intermediaries in the supply and demand for professional skills and resources in the production industry. In the post-2005 period, many Regions established Film Funds to support production, usually tied to clauses requiring investment to be made in the specific territory. These funds are often managed by the Film Commissions, and as such represent a key tool to help them to accomplish their mission. Alternatively the funds are handled directly by the regional authorities, through the competent council department9. Table 9: Regional audiovisual production funds (2009) Fund

Budget

Film Commission Funds

8,57

F.C. Sicily Region

3,00

Friuli Venezia Giulia F.C.

2,09

F.C. Campania Region

1,80

Apulia F.C.

0,70

Piedmont Doc Film Fund (F.C. + Region)

0,50

Bologna F.C.

0,24

Emilia Romagna F.C.

0,14

Marche F.C.

0,10

Regional Authority Funds

6,44

Tuscany Region

4,50

Lazio Region (through FILAS)

1,29

Sardinia Region

0,65

Total regional funds

15,01

Note: figures in millions of euros. Source: Ente dello Spettacolo.

An initial assessment of the regional resources available for the audiovisual industry was carried out by the Fondazione Ente dello Spettacolo10 (Foundation promoting cinema culture in Italy). In 2009 the regional Film Funds had a total pool of resources amounting to 15 million 9 Cfr. A. Versace, L. Canova, T.M. Fabbri, F. Medolago Albani, “L’evoluzione del sostegno pubblico all’audiovisio” in L’industria della comunicazione in Italia. XI Rapporto IEM, Guerini e Associati, Milan 2008, also for an historical examination of regional audiovisual funding on an Italian and European level. 10 Fondazione Ente dello Spettacolo, Il mercato e l’industria del cinema in Italia. 2009 Report.

54

Cinema


euros, a figure that has more than tripled from the 4.9 million euros in 2007. These funds have almost compensated for the cuts in the national General Entertainment Fund/FUS (though without taking into consideration the additional national resources assigned outside the FUS, and remembering that the majority of regional resources are destined for TV drama) and are mainly allocated by the Film Commissions, though a considerable proportion of these resources (6.4 million euros, over 40%) are managed directly by the Regions.

Legal provisions supporting cinema The two most significant legislative measures were activated in 2010. The first, dated 30 July 2010, involved the Cabinet’s approval of the preliminary consideration of a government Bill. It regards the Ministry of Culture’s intervention in cinema activities, and is a major reform of the measures assisting cinema passed in 2004 (in the Urbani Law). The provisions foresee that from 2011, direct intervention from the State will be concentrated on first and second films, short films and documentaries11. It is unclear if and how they intend to revise the system governing access to contributions calculated on the percentage of box office takings and capital funding for cinema theatres. In the field of promotion, State intervention will be reserved purely for associations and events of national or international importance, with the aim of streamlining procedures and improving the management of resources, eliminating waste in the allocation of public funds. In addition, the composition of the Cinema Committee will be reduced in the light of its new, limited role. The Bill also makes changes to the classification of films by the censor: as well as films being classified to be seen by all, suitable only for over 14 years and for adults only (over 18 years), a new category will be introduced for films suitable only for 10 years and over12. The second measure is the three-year renewal of the tax incentives (at the moment the Cabinet has made a commitment to do this) for the years 2011-2013. These tax breaks have been seen as effective in the first phase of their application, garnering unanimous consensus among film industry professionals13. The provisions for tax breaks for companies, internal and external to the cinema sector (which, nevertheless, have different timescales) became fully operational between 2009 and 201014. The internal Tax Credit system came into law on 7 May 2009 and provides for an income tax credit for film production companies, set at 15% of the overall cost of the production of films recognised as Italian. The credit can amount to a maximum of 3.5 million euros a year for each tax year15. For executive production companies and the technical industries commissioned by foreign clients, the credit rises to 25% of the production’s budget, up to a maximum of 5 million euros per film16. 21 January 2010 was the date when the eagerly-awaited law to encourage investment from 11 The measures being discussed also include the introduction of a maximum of 20 contributions to the authors of original screenplays, with 5,000 euros given to each project. 12 This provision puts Italy in line with the majority of other countries and gives more precise and efficient safeguards for the sensitivities of infants and pre-teens, while at the same time the new category widens the audience for films that would otherwise be limited to over 14s. 13 If the measures are confirmed in their current regulatory framework, there will be no need to ask for new authorisation from the European Commission. 14 The complicated legal path for the provisions originated in the 2008 Budget, passed on 24 December 2007. The regulation marks a shift in the way public funding is attributed, moving the focus from direct contributions to indirect, automatic mechanisms that reduce the discretionary powers of the Cinema Committees, rewarding producers’ entrepreneurial skills and opening the market up to new private investment from outside the film industry. For more detail, see the previous edition of the IEM Report. 15 The benefit is always qualified by the need for the production to spend its budget on Italian territory, for an overall figure that must be no less than 80% of the tax credit figure for each production. 16 The measure was backdated to apply from 30 June 2008 and was fully operational from September 2009, when the application forms were published.

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55


those outside the film industry (also distributors and in part, exhibitors17) came into force, following the European Commission’s approval given on 22 July 2009. The external tax credit is recognised for investments in the production of films of “cultural interest” or with the requisites to be classified as Italian. “External” investors can benefit from a tax credit equating to 40% of their financial contribution, up to a maximum of one million euros for each tax period18. As a result of the opportunity to benefit from this incentive, the Intesa Sanpaolo banking group decided to invest 2.5 million euros in the new film by Paolo Sorrentino (This Must Be the Place)19. Two different percentages and maximum thresholds were set for film distribution companies, depending on the kind of film in question: 10%, up to a maximum of 2 million euros for budgets supporting the national distribution of Italian films; and 15% up to a maximum of 1.5 million euros if the film in question is also of cultural interest20. Both distributors and exhibitors can draw up partnership contracts (like companies outside the film industry) to participate and support the production of Italian films recognised as being of cultural interest. In this case, the tax credit rate is set at 20% of the financial contribution provided and can amount to a maximum of one million euros a year for each fiscal period. To be eligible for the tax breaks, the film projects must meet the necessary criteria as being of cultural value, evaluated through specific “cultural tests”21. As far as the internal tax credit is concerned, according to figures supplied by the Italian Film Board in 2010 there were 129 applications and 107 projects applying. The requests came from 79 companies, 6 of which were foreign operations. The amount of tax credit already authorised amounts to 6.7 million euros for 7 foreign films and 20 Italian pictures. In the two years the system has been operating (June 2008 – June 2010), film industry professionals applied for tax breaks totalling around 48 million euros, of which roughly 10 million euros from foreign producers. Overall, it has been calculated that on an annual basis, in the face of reduced taxes paid amounting to 77 million euros, the induced effect would actually generate more income for the State, to the tune of 173 million euros. A third, more general measure that also has implications for the cinema industry is the Decree issued by the Ministry of Culture regarding fair compensation in the field of copyright, which was passed in January 2010, putting into effect the Legislative Decree N.68/2003. The measure establishes new sums of money for the price rises, to be paid by manufacturers and importers, that must be applied to memory storage devices, for example blank recordable DVDs and USB Memory sticks/flash pen drives. The sums vary according to the capacity of these items, and 17 Nevertheless, incentives for the digital conversion of cinemas are excluded, since the European Commission decided to launch a public consultation on the matter. As a temporary measure, exhibitors are applying the socalled de minimis principle, imposing a maximum threshold for public contributions, within which funding does not classify as State aid (and so the Commission’s permission is not needed for payments below this ceiling). As a result of the economic crisis, the EU has raised de minimis threshold from 200,000 to 500,000 euros. 18 Once again in this case, the film production companies receiving these investments must spent 80% of these resources in the national territory, employing Italian workers, using Italian services and promoting training and apprenticeship in all technical areas of production (respecting the territorial criteria set out on a European community level). In addition, these investments cannot amount to a majority of the film’s budget (they can amount up to a ceiling of 49%), thus always leaving the film producer as the owner and manager of the “project”. Basically, the external player is encouraged to draw up a “partnership contract” with the producer, used to fix the percentage of the investment in proportion to the film’s total budget and the relative percentage of profit sharing, which cannot exceed 70% for external companies, again with a view to safeguarding the producer’s autonomy. 19 The investment was 10% of the total budget (28 million dollars) for the film, an international co-production between Italy (Lucky Red, Medusa and Indigo, each with a 20% share) France and Ireland. It is the first time in Italy that a bank has participated in the production of a film shouldering a business risk. 20 Under Article 7, Law. 22.1.2004, n.28. 21 Cultural tests are defined through the use of tables with certain kinds of specific content that are necessary for the film to be eligible, with a system of minimum and maximum points for each film, attributed through procedures that are mainly automatic. Proposed by the national Authorities, the “tests” are examined by the European Commission, to verify the concrete and effective link between the aid given and the cultural product that benefits from the aid.

56

Cinema


are also applicable for computers and mobile phones that allow users to record and/or watch audiovisual works protected under copyright law. These charges, falling under the heading “fair compensation”, are added to the fees paid to authors and publishers through the SIAE agency. Between the end of 2009 and the start of 2010, debate concentrated on two other issues, both linked to the spread of new platforms to exploit films and the search for new forms of funding22. The first is linked to the idea of creating a range of films that can be legally watched via or downloaded from the Internet. Some industry players see this as the only weapon against piracy. The second, which is related to the first, is a revision of the current system that regulates the commercial exploitation of a film through set time limits for releases, referred to as “windows”. The idea would be to make the system more flexible. These are probably matters that should be regulated by the industry itself through its various associations, before resulting in eventual legislative provisions.

Box office revenues According to consolidated SIAE data, box office revenues in 2009 recorded a rise of around 4.3% (27 million euros in absolute figures) compared with 2008, equating to a value of roughly 664.2 million euros. The increase can be attributed to the first releases of 3D films charged at higher ticket prices (about 20%). Starting from 2010, the year when the number of 3D film releases increased considerably, the gap between admissions and box office figures is destined to get progressively bigger, to the advantage of the American box office. Table 10: Cinema box office, 2004-2009 Tot. Takings (mil €)

2009

2008

2007

2006

2005

2004

( SIAE)

664,2

636,7

669,6

601,2

599,5

655,4

Δ % 09-08 Δ % 09-04 4,3

1,3

Source: IEM elaboration of SIAE data

Examining the percentage composition of takings by nationality of productions (according to Cinetel sources), the share of Italian films dropped by 5 points compared with 2009, standing at 23.4%. While this trend was the opposite for American films, which made up a further 3 points, giving them the highest market share in the last six years (63.5%). The downturn in the national market share translated into a loss of over 26 million euros (falling from 171.8 to 145.5 million euros). As has already been mentioned, this was also linked to a cinema season somewhat “lacking” in national films. Considering the fact that the majority of Italian titles were released in the first half of 2010, then that year should record a considerable recovery in domestic market share23. Non-Italian European productions saw a slight improvement in takings, equating to 11.5%; and the same was true for the market share of non-European films, which reached 1.6% in 2009. In 2009 Medusa won back the top slot in terms of takings, even though its figures dropped by about 11% on the previous year24. On the film distribution side, the Italian market is dominated by the American majors’ national operations (Universal/UIP, Warner Bros, Disney/Buena Vista, Fox and Sony,) which 22 In regard to this, the possibility of introducing a “French-style” system establishing a charge on the whole cinema industry chain seems to have been shelved. While there are active discussions on an eventual charge on cinema tickets to be managed by the industry Associations, which would be limited to the theatrical and home video sectors. At the beginning of the scheme, the resources generated would be given to urban cinemas and independent production. 23 This is confirmed by the Cinetel figures for the first six months of 2010, which record the share of the domestic market as returning to 30% (including co-productions), compared with the 25% recorded in the same period in 2009. The share taken by American films stood at 60%, as opposed to the 64% in the previous year. 24 In 2010 Medusa invested 90 million euros in films, for acquisitions and productions, of which 70 million euros were for Italian cinema.

Cinema

57


strengthened their overall market share, rising from 48.4% to 56.1%. Analysing the individual market shares, no homogeneous trends emerge. Universal UIP, which led the ratings in 2008, lost 30% in 2009. Whereas the opposite was the case for Sony Pictures (+131%), with box office takings rocketing from 30 to 70 million euros, also thanks to a stronger Italian slate (52 titles distributed, compared with 24 in 2008). 20th Century Fox also put in an excellent performance (+53%) which, what’s more, will benefit from the success of James Cameron’s film Avatar in 2010. Table 11: Percentage share of box office takings by nationality, 2004-2009 Origin

2009

100% Italian Co-productions

2008

2007

2006

2005

2004

22,6

27,7

26,9

20,5

18,7

14,0

0,8

1,3

4,8

4,3

6,0

6,3

Total Italian

23,4

29,0

31,7

24,8

24,7

20,3

Europe

11,5

9,8

11,6

11,2

19,6

10,9

USA

63,5

60,2

55,4

61,9

53,8

61,9

Other nationalities Total

1,6

1,0

1,3

2,1

1,9

6,9

100%

100%

100%

100%

100%

100%

Source: Cinetel.

The other Italian mini-major, 01 Distribution, saw a decisive backslide (-25%) with takings falling below 50 million euros, dropping from 3rd to 7th place in the listings. Filmauro also lost ground, going from 5th to 9th position. In overall terms, the box office takings for the company led by Aurelio De Laurentiis amounted to 35.6 million euros compared with the 47.3 million recorded in 200825. The most noteworthy performance came from Eagle Pictures26, which saw its takings over the two-year period rise by 80%, topping the 40 million euros mark. As far as independent companies were concerned, Bim saw takings rise by 6.4% and caught up with Lucky Red which, in contrast, lost almost 9%. The two companies both have a market share of 2.5%. The distribution sector continues to have the highest level of concentration, relegating the independents to a marginal position, where the leading companies exercise a strong financial weight on production, imposing their slates on exhibitors. A demonstration of the difficulties of the (re)positioning comes in the form of the historic name Mikado which, after the failed re-launch carried out by Franco Tatò, has returned under the total control of the De Agostini Group. As a result of Mikado’s debts this Group intends to put it back on the market27. Table 12: Distributors’ market shares 2009 Company

Takings 09

% 09

% 08

% 07

% 06

% 05

Δ% 09-08

Medusa

87.768.874

14,2

16,60

17,33

12,98

10,4

-10,9

Universal/UIP

83.077.041

13,4

19,68

13,11

13,07

19,95

-28,9

Warner Bros

75.664.780

12,2

9,59

13,64

7,45

13,97

32,8

Sony Pictures

69.675.764

11,2

5,08

6,35

9,25

6,68

131,0

Walt Disney/Buena Vista

61.490.021

9,9

7,67

9,25

12,03

8,90

35,0

20th Century Fox

58.020.156

9,4

6,37

11,00

11,77

5,94

53,4

01 Distribution

49.968.645

8,1

11,10

9,90

9,49

9,99

-24,2

Eagle Pictures

41.952.090

6,8

3,94

3,68

6,02

7,33

79,4

25 Filmauro continues lead the pack for the best average takings per film (approximately 7 million euros for 5 titles distributed) followed by Disney/Buena Vista (1.6 million for 37 titles released) and 20th Century Fox (1.5 million for 37 titles distributed). 26 The company is controlled by Tarak Ben Ammar’s Alliance Film Europe. 27 In 2009, the market share of the company founded by Luigi Musini and Roberto Cicutto (sold to the Novara Group in 2007) is equal to 0.27% of the total share of the top 20 distribution companies listed by box office returns.

58

Cinema


Filmauro

35.568.883

5,7

7,97

8,21

8,18

6,13

-24,9

Lucky Red

15.692.807

2,5

2,90

1,36

0,84

1,70

-8,8

Bim Distributione

15.476.735

2,5

2,45

0,87

2,39

1,76

6,4

Moviemax

13.421.538

2,2

2,35

1,86

1,09

0,70

-3,9

Others

12.096.576

2,0

4,57

1,88

4,44

5,28

-52,4

USA majors (UIP-WB-BV-Sony-Fox)

347.927.762

56,1

48,40

53,35

53,57

55,44

21,1

IT majors (Medusa-01 Distr)

137.737.519

22,2

27,70

27,23

22,47

20,39

-16,3

IT super-indies (Eagle-Filmauro)

77.520.973

12,5

11,91

11,89

14,20

13,46

9,6

Others

56.687.656

9,1

11,98

7,53

9,66

10,71

-20,3

619.873.910

100,0

100,00

100,00

100,00

100,00

4,4

Total

Source: Cinetel. Box office takings until 31.12.2009, including continuing runs.

The top 20 films for box office takings in 2009 represent around 42% of the entire market. Six Italian productions make it into the top 20 (one less than in 2008), 13 were USA films and one was from the UK. Domestically produced films have a 23.3% share of the top 20 takings, as opposed to the 35% share registered the previous year. The top two Italian films were distributed by independents, Filmauro (Natale a Beverly Hills) and Medusa (Cado dalle nubi). Table 13: Top 20 films in theatres in 2009 Title

Country

Takings (Mil. euros)

Distributor

Ice Age 3: Dawn of the Dinosaurs

USA

20th Century Fox Italia

29,690,712

Angels and Demons

Usa

Sony Pictures Italia

18.724.657

Harry Potter and the Half-Blood Prince

Uk

Warner Bros Italia

18.356.557

New Moon

Usa

Eagle Pictures

16.427.604

Natale a Beverly Hills

Ita

FilmAuro

16.339.019

UP

Usa

Walt Disnesy S.M.P Italya

15.345.556

2012

Usa

Sony Pictures Italia

14.311.547

Cado dalle Nubi

Ita

Medusa Film

12.787.555

Italians

Ita

FilmAuro

12.158.520

Seven Pounds

Usa

Sony Pictures Italia

11.258.003

A Christmas Carol

Usa

Walt Disnesy S.M.P Italya

11.001.542

The Curious Case of Benjamin Button

Usa

Warner Bros Italia

10.935.460

EX

Ita

01 Distribution

10.652.049

Baaria

Ita

Medusa Film

10.534.935

Inglourious Basterds

Usa

Universal

9.324.983

Gran Torino

Usa

Warner Bros Italia

9.127.986

Io & Marilyn

Ita

Medusa Film

8.883.362

Fast & Furious: New Model. Original Parts

Usa

Universal

8.323.487

Journey to the Center of the Earth

Usa

Universal

8.203.251

Transformers: Revenge of the Fallen

Usa

Universal

8.189.080

Total Italian films in the top 20

60.703.391

Total USA films in the top 20

199.872.474

Total top 20 films

260.575.865

Note: Italian films are in bold. Source: Cinetel, ANICA.

Cinema

59


3. A comparison with European markets Once again in 2009, a comparison with the other major European markets (France, Germany, the UK and Spain) shows the Italian system lagging behind, especially in reference to the traditional performance indicators. In fact, taking into account admissions and box office takings, the Italian market is on the same level as Spain, quite far behind Germany, the UK and France. In 2009, the French box office exceeded the historic threshold of 200 million tickets, with takings amounting to 1.2 billion euros (practically double the figures recorded in Italy). The number of domestic films produced in Italy, which had showed encouraging signs of growth until 2008, dropped in 2009 (falling from 154 to 131 titles) bucking the trends seen in other markets, apart from France, which nevertheless continues to maintain its leadership for volume of output. Looking at the number of times people go to the cinema in relation to the population, Italy is near the bottom of the table, with a pro-capita average of 1.9 screenings a year. Table 14: The cinema market in the major European countries, 1999-2009 2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

Tot. national films

230

240

228

203

240

203

212

200

204

171

181

Admissions (millions)

200,9

190,1

178,2

188,8

175,5

195,7

173,5

184,4

187,5

165,8

153,6

Average attendance

3,4

3,2

3

3,2

3

3,3

3

3,2

3,2

2,8

2,6

France

Total takings (Mil. €)

1232

1141,7 1060

1120,7

1031,9

1138,9

996,1

1030

1021

894

824

For national films (%)

35,6

45,1

36,1

44,6

36,3

38,4

34,6

34,6

41,4

28,1

32,5

For USA films (%)

51,7

43,9

50,1

44,7

46,5

48,3

52,9

50,2

46,6

63,2

54,4

9,2

12,1

8,8

15,5

9,4

5,3

8,4

7,5

6,1

11,1

For European films (%) 9,6 Germany Tot. national films

144

125

129

122

103

87

80

84

83

75

74

Admissions (millions)

146,3

129,4

125,4

136,7

127,3

156,7

149

163,9

177,9

152,5

149

Average attendance

1,8

1,6

1,5

1,7

1,5

1,9

1,8

2

2,2

1,9

1,8

Total takings (Mil. €)

976,1

794,7

757,9

814,4

745

892,9

850

960,1

987,2

824,5

808,4

For national films (%)

27,4

21

15,1

21,5

13,9

20,8

16,7

9,5

15,7

9,4

11,1

For USA films (%)

n.d

66,9

73,2

72

77,2

72,1

76,8

83

77

81,9

78,6

For European films (%) n.d

16,9

19,5

13,8

22,2

13,6

9,4

21,4

18,6

8,8

14,3

Italy Tot. national films

131

154

121

116

98

134

117

130

103

103

108

Admissions (millions)

109,3

111

116

105

104,7

113,2

105

111,5

110

100,9

103,5

Average attendance

1,9

1,9

1,9

1,8

1,9

2

1,9

1,9

1,9

1,8

1,8

Total takings (Mil. €)

664,1

636,7

669,6

601,2

559,5

655,4

608,6

654

600,7

545,8

532,9

For national films (%)

23,4

29

31,7

24,7

24,7

20,3

21,8

22,2

19,4

17,5

24,1

For USA films (%)

63,5

60,2

55,4

61,9

53,8

61,9

64,5

60,2

59,7

69,5

53,1

9,8

11,6

11,2

19,6

10,9

8,3

12,6

23,7

11,4

14,3

For European films (%) 11,5 UK* Tot. national films

125

126

127

134

164

174

196

119

83

90

103

Admissions (millions)

173,5

164,2

162,4

156,6

164,7

171,3

167,3

175,9

155,9

142,5

139,1

Average attendance

2,8

2,7

2,7

2,6

2,7

2,8

2,8

2,9

2,6

2,4

2,4

Total takings (Mil. €)

1059,3 953,5

921,5

855,3

864,3

864,3

832,8

847,4

724

654,4

631,9

For national films (%)

16,5

31,1

28,6

19,1

33

23,6

10,2

8,3

4,9

19,6

16,5

For USA films (%)

n.d.

65,2

67,7

77,1

63,1

73,2

73,5

71,3

73,9

75,3

80,5

2,3

1,8

1,2

3,1

1,3

2,5

1,2

4

1,5

1,6

For European films (%) n.d

60

Cinema


Spain Tot. national films

186

173

172

150

142

133

110

137

106

98

82

Admissions (millions)

109,5

107,8

116,9

121,7

127,6

143,9

137,5

140,7

146,8

135,3

131,3

Average attendance

2,4

2,4

2,6

2,8

2,9

3,5

3,3

3,4

3,7

3,4

3,3

Total takings (Mil. €)

667,8

619,3

643,7

636,2

635

691,6

639,4

625,9

616,4

536,3

495,9

For national films (%)

16

13,3

13,5

15,4

16,7

13,4

15,8

13,7

17,9

10,1

13,9

For USA films (%)

70,6

71,5

67,6

71,2

60,3

69,8

67,3

66,1

62,2

82,7

64,2

13,6

14,5

12,2

20,3

9,9

12

14,8

15

7,2

13,1

For European films (%) n.d

Note: (*) For the UK, an annual exchange rate for 2009 was used (equating to 0.89094 or 1.12241 euros per pound) supplied by the Italian Exchange Office from the Bank of Italy. Source: IEM elaboration of data from ANICA, SIAE, Cinetel and Centre National de la Cinématographie.

Analysing the trends in market share in the five countries, the only country to record progressive growth in the last three-year period is Germany28. In 2009, the market share for French films returned to the levels seen in 2007, resting at 35.6% after the surge recorded in 2008 (45.1%) thanks to the phenomenal success of the film Welcome to the Sticks. There was also a considerable drop in the share of Italian domestic productions (23.4%, dropping by over 5% compared with the performance the previous year)29. The figure for the UK was also very negative: the market share for its national films was halved in 2009, dropping from 31.1% to 16.5%, a sharp downturn on the growth recorded in the previous three years, placing it on a level with the domestic market share recorded for Spanish films (16%) which, on the contrary, gained almost 3% on 2008 levels. Fig. 1: Market share for national films, 1999-2009 50

France

Germany

Italy

UK

Spain

45 40 35 30 25 20 15 10 5 0 1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Source: IEM elaboration of data from ANICA, SIAE, Cinetel and Centre National de la Cinématographie.

28 The figure for the National market share recorded in Germany in 2009 (27.4%) should be considered with caution, as it refers to admissions and not takings and includes co-productions made in the UK supported by American investment. The figure was taken from the CNC database, which had performed its own elaborations using the Lumière database overseen by the European Audiovisual Observatory in Strasburg. 29 As has already been mentioned, in the first half of 2010, the market share had already risen back to 30%, including co-productions.

Cinema

61


Home Video

62


Home Video by Andrea Marzulli

1. The Italian market Once again in 2009, as in 2008, the home video market in Italy witnessed a steep decline. The sum total for rentals and items sold dropped by nearly 19% (after a 20% drop in 2008) to under 100 million. As recently as 2006 the volumes were over 160 million. And, for the umpteenth year in a row, rentals were the hardest hit: now stabilised at 42.9 million, rentals declined by over 22 % last year and have more than halved since 2005. According to the Rimini CCIAA, as published in the 2010 Univideo Report, in 2009 nearly 500 video rental stores went out of business (in 2007-2008 the figure was over 400), with the total number of stores still operating estimated at 3,800 (a figure that seems too high, to tell the truth, when compared to the segment’s market value; according to Screen Digest, in 2008 the number of active rental outlets was 2,200). However, while individual stores and “bricks-and-mortar” chains are hurting the most – in the USA the videorental chain Blockbuster has filed for Chapter 11 bankruptcy protection, after its main competitor Hollywood Video went bust – their digital rival Netflix is enjoying a powerful upswing (with sales of 1.67 billion dollars in 2009) thanks to its online subscription video-on-demand service operating both the over-the-top model, and the home delivery / collection model for film rentals (a trend that confirms what previous editions of this report have pointed out: users find the “logistics” of physically going to the rental store more and more irksome). The steady decline of the sector is also due to the pressure exerted by many film distributors to extend the rental time window, as well as filesharing (by filesharing customers or the leading cyberlocker sites for remote storage, headed by Megavideo). In recent years, the rental/sales ratio has flipped to favour the latter, which has seen less of a decline (circa 24% in the last 5 years, compared with a drop of over 54% for rentals). More and more, video consumption now goes through the major intermediaries (which mainly only offer items to purchase not rent), rather than video stores. Of all sales channels, newsagents have been hit particularly hard in 2009: sales have fallen by 24%, further proof of the decline of the saturated market for add-ons (products sold along with newspapers or magazines). The negative trend seems less severe for Normal Trade, dropping 8% in 2009, although no figures for sales by outlet type have been made available to the public for years now. That said, sales have not ended the year in the black since 2006, although in the first half of 2010 sales did increase by 2% thanks to Blu-ray (the 2009 sales for which were under a million pieces – a figure that reveals Italy is very late in catching up with other major European countries in superseding DVDs: only 119,000 Blu-ray readers were sold in Italy in 2009).

Home video

63


Table 1: Sales/rentals (in millions), 2005-2009 2009 Rentals

42,9

2008 55,4

2007

2006

75,4

∆% 09-08

2005

86,2

94,2

∆% 09-05

-22,6

-54,5

- DVDs

42,8

55,3

75,2

81,8

86,8

-22,6

-50,7

- Blu-ray Discs

0,14

0,04

0,03

-

-

250,0

-

- VHS

-

0,1

0,2

4,4

7,4

-100,0

-100,0

Sales - DVDs

54,3

64,5

75,7

76,3

70,2

-15,8

-23,6

53,3

63,5

74,2

73,4

63,4

-16,1

-15,9

(of which Normal Trade)

29,5

32,3

37,5

37

33,5

-8,7

-11,9

(of which Newsagents)

23,8

31,2

36,7

36,4

29,9

-23,7

-20,4

0,9

0,4

0,1

-

-

125,0

-

- Blu-ray Discs - Other supports (UMDs, HD-DVDs)

0,1

0,5

0,1

0,1

0,04

-80,0

150,0

- VHS

-

*

1,2

2,9

6,8

-

-100,0

-

*

1

2,6

4,7

-

-100,0

(of which Normal Trade)

-

0,1

0,2

0,3

2,1

-100,0

-100,0

(Total Normal Trade)

(of which Newsagents)

30,5

33,2

38,8

39,6

38,2

-8,1

-20,2

(Total Newsagents)

23,8

31,3

36,9

36,7

32,0

-24,0

-25,6

(Total DVDs)

96,1

118,8

149,4

155,2

150,2

-19,1

-36,0

(Total VHS)

-

0,2

1,4

7,3

14,2

-100,0

-100,0

(Total Other Supports)

1,1

0,9

0,2

0,1

0,1

22,2

1000,0

Total rentals + sales

97,2

119,9

151,1

162,5

154,4

-18,9

-37,0

Note: data in millions of sales. Source: IEM elaboration of Prometeia and Univideo data.

The shrinking consumption is borne out by the economic figures: in 2009 the home video market reported a decline in market value of 17.9% compared with 2008, dropping from 828 to 680 million euros, the lowest value since 2001 (when it was 615 million). Rentals fell by 22.6%, dropping to roughly 115 million, almost entirely covered by DVD rentals, while Blu-ray accounts for another half a million euros. Sales through various channels declined by 15.3%, falling from 667 to 565 million. The negative trend mainly concerns Newsagents (-23%, to 201 million), compared with the 10.4% drop (to 364 million) for Normal Trade. The drop in the two segments’ market value, which was slightly higher than the fall in volumes, reflects a further decline in average prices (under 12 euros for DVDs, around 24 euros for Blu-ray). Blu-ray sales rose by 113%, from 9.7 to 20.7 million and the format represents 3.7% of the sales. Table 2: The home video market: market value at final prices (in millions of euros), 2005-2009

64

2009

2008

2007

2006

2005

∆ % 09-08

∆ % 09-05

Rentals

114,6

160,6

218,4

272,4

- VHS

-

0,2

0,2

12,0

315,0

-28,6

-63,6

19,8

-100,0

-100,0

- DVDs

114,1

160,3

218,1

- Blu-ray Discs

0,5

0,2

0,1

260,4

295,1

-28,8

-61,3

-

-

150,0

-

Sales

564,9

667,0

780,0

765

738

-15,3

-23,5

- VHS

0,3

(of which Normal Trade)

0,3

1,3

2,7

12

39

-76,9

-99,2

1,2

2,4

11

33

-75,0

-99,1

(of which Newsagents)

-

0,1

0,3

1

7

-100,0

-100,0

- DVDs

544,0

654,8

772,9

753

697

-16,9

-22,0

(of which Normal Trade)

343,2

394,3

466,5

453

436

-13,0

-21,3

(of which Newsagents)

200,7

260,5

306,4

300

262

-23,0

-23,4

Home Video


- Blu-ray Discs

20,7

9,7

3,0

-

-

113,4

-

UMDs

-

0,9

0,7

1,2

0,8

-100,0

-100,0

HD-DVDs

-

0,4

0,5

-

-

-100,0

-

(Total Normal Trade)

364,2

406,4

473,4

464

469

-10,4

-22,3

(Total Newsagents)

200,7

260,7

306,7

301

269

-23,0

-25,4

(Total VHS)

0,3

1,5

3,2

24

60

-80,0

-99,5

(Total DVDs)

658,1

815,0

991

1014

993

-19,3

-33,7

(Total Blu-ray Discs)

21,2

9,9

3,0

-

-

114,1

-

(Total other supports)

-

1,3

1,2

-100,0

-

Total market

679,6

827,6

998,4

-17,9

-38,2

1037

1099

Source: IEM elaboration of Prometeia and Univideo data.

In terms of content, films are naturally the main product type, with circa 56% of the market for DVD sales. This share has fallen slightly compared with previous years; it must be remembered, however, that the category includes only live action films, while animated films fall under the category of Animation, which is growing the fastest (from 20 to 26%). Indeed, in the context of a steeply declining market, children’s films and animated television cartoons outperform the other product categories. TV series reported a sizeable decline (in relative terms at least, considering the smaller size of the segment); usually packaged in more expensive cases, this category fell from 10 to 7.7% in two years. As far as the other segments are concerned, 2009 was a growth year for Music; for the record industry DVDs have become a way to fight digital file sharing, putting additional content on the market in addition to the audio content alone, which the industry hopes will have a greater appeal. Fig. 1: DVD sales by type of content (2007-2009, %) Film 100%

TV Series

Music

Specials

Animation

6

6

7

Promos

90% 80%

20 2 3

70% 60%

24

26 2 2

1 4

10

9

58

58

56

2007

2008

2009

8

50% 40% 30% 20% 10% 0%

Source: IEM elaboration of Prometeia and Univideo data.

With films as the leading home video product, and considering the major media groups’ control over the distribution process, the “clout” of the main players active in the sector prevalently reflects the market shares for theatrical exploitation: hence the Italian branches of the US majors top the charts for revenue (with over 60 million euros for Buena Vista). The leading Italian player is Medusa, with over 26 million euros in revenue (estimated home video revenue for the other main Italian player, 01 Distribution, is reported to be around 20 million), followed by Mondo Home Entertainment, with 23 million.

Home Video

65


Table 3: Revenue for some of the leading home video publishers Rank

Year

Revenue

1

Buena Vista Home Entertainment

Publisher

2008

61,2

Disney

Main shareholders

2

Twentieth Century Fox HE Italia

2007

49,0

Newscorp

3

Paramount Home Entertainment Italy

2008

34,2

Viacom

4

Universal Pictures Italy

2008

30,3

Comcast-Nbc Universal

5

Medusa Video

2008

26,6

Mediaset

6

Mondo Home Entertainment

2009

23,4

Mondo Tv

7

Sony Pictures Home Entertainment

2008

20,6

Sony

8

Cecchi Gori Home Video

2009

12,7

amministrazione straordinaria

9

Rai Trade

2008

*8,0

Rai

10

Filmauro

2007

*6,3

De Laurentiis

11

Dolmen Home Video

2009

4,1

De Agostini

Note: (*) only home video revenue. Data in millions of euros. Of the major active companies, data is unavailable for the RAI Group’s 01 Distribution (estimated at roughly 20 million euros), Warner HE, DNC HE. Source: IEM elaboration of data from the European Audiovisual Observatory, Ente dello Spettacolo and companies’ annual reports.

2. The international picture Contrary to most expectations – considering the fact that 2009 was marked by a full-blown recession and that home video, of all major media markets, is one that has been most affected by a structural crisis and a rethinking of business logic along the lines of new media – 2009 was actually not a negative year for all European countries. The figures for Italy were among the worst, second only to Spain (a country in which many media markets were hard hit in 2009, such as television). The Spanish market fell by 37% (as much as 58% for rentals alone), the biggest drop in the 5 major European countries. The UK performed better (with its 2.9 billion market being the strongest of all); its roughly 10% decline was split almost equally between rentals and sales. However, while the French market remained steady to a large extent (-0.2%, but +.6% for sales), in Germany the market actually increased by 5%, thanks to an excellent performance by the sales channel (+6.7%), which boosted values above their 2006 level. Table 4: The home video market in the major European countries, 2005-2009 2009

2008

2007

2006

2005

Italy

680

828

998

1037

1099

-17,9

-38,1

Rentals

115

161

218

272

315

-28,6

-63,5

% rentals out of total market

16,9

19,4

21,8

26,2

28,6

-12,8

-40,9

Sales

565

667

780

765

784

-15,3

-27,9

1411

1414

1543

1737

1889

-0,2

-25,3

France Rentals

20

31

47

78

105

-35,5

-81,0

% rentals out of total market

1,4

2,2

3,0

4,5

5,6

-35,3

-74,5

Sales

1391

1383

1496

1659

1784

0,6

-22,0

Germany

1633

1555

1605

1591

1686

5,0

-3,1

256

264

274

284

320

-3,0

-20,0

Rentals

66

∆ % 09-08 ∆ % 09-05

% rentals out of total market

15,7

17,0

17,1

17,9

19,0

-7,7

-17,4

Sales

1377

1291

1331

1307

1366

6,7

0,8

UK

2877

3196

3305

3256

3489

-10,0

-17,5

Rentals

223

246

334

382

448

-9,1

-50,1

% rentals out of total market

7,8

7,7

10,1

11,7

12,8

0,9

-39,5

Home Video


Sales

2654

2950

2971

2874

3041

Spain

125

198

272

276

292

-36,9

-57,2

16

38

52

76

93

-57,9

-82,8

% rentals out of total market

12,8

19,2

19,1

27,5

31,8

-33,3

-59,8

Sales

109

160

220

200

199

-31,9

-45,2

Rentals

-10,0

-12,7

Note: data in millions of euros (average exchange rate 2009 UK: 1 € = 0.89049 £). Source: IEM elaboration of Prometeia and Univideo data (Italy), Sevn, CNC-GFK (France), BVV (Germany), BVA, UKFC (UK) and UVE, SGAE, Screen Digest (Spain).

So much for the values. As far as volumes are concerned, France and Germany reported an increase of 9-10% in pieces sold, after years of decline (France) or stability (Germany). The Italian figures are troubling because the numbers (for both 2008 and 2005) are much more negative than those for the other major countries (barring Spain) and suggest a downward spiral in consumption. In France, by contrast, the shortening of the release window to 4 months revitalised Christmas sales and thus contributed to a particularly strong result, also due to price deregulation. In Germany, Blu-ray caught on much more quickly than in other countries. Table 5: Pieces sold in the major European countries, 2005-2009 2009

2008

2007

2006

2005

∆ % 09-08

∆ % 09-05

Italy

54

64

76

76

70

-16.3

-23.6

France

141

128

131

136

143

10

-1.7

Germany

113

104

104

103

104

9

8.1

UK

243

258

250

229

222

-5.8

9.5

Spain

16

21

28

30

34

-23.8

-52.9

Note: data in millions of pieces. Source: IEM elaboration of Prometeia, Univideo (Italy), CNC-GFK(France), BVV (Germany) and BVA (UK).

There is no doubt that file sharing has had dire effects on the home video market. In Italy and elsewhere, the debate concerns just how much damage has been done. In many cases, these calculations tend to quantify the damage by assigning market value to films shared or downloaded online, as well as physical copies that are counterfeited and sold. Another approach is to measure the actual substitution rate, which thus reduces the incidence of damage to the market. In any case, a comparison between the extent of illegal downloading and counterfeiting and the market trend shows that among major European countries there is a direct relationship between the number of copyright infringements and the decline of “legal” consumption over time. Spain is a perfect example, with the highest number of infringements (568 million in 2009, of which 539 million were downloads of films and TV series and 209 million were counterfeit pieces), and the biggest drop in sales/rentals between 2005 and 2009 (-57.9%). Italy follows close behind with, on one hand, 327 million infringements (228 million downloads and 99 million counterfeit pieces, the highest number of all countries studied with respect to “physical piracy”) and a 36.5% decrease in sales/rentals on the other. The country with the lowest number of infringements (Germany, with 164 million) is also the country with the lowest drop in the market (-1.8% in sales/rentals over the five-year period). Indeed, Germany and the UK are the only countries in which the number of infringements (in 2008) is less than the number of sales/rentals (in 2009) and where the market has been least affected (in the UK down 11.5%). This figure is higher than those for sales/rentals in France, Italy and Spain, where the market decline is greater.

Home Video

67


Fig. 2: Relationship between sales/rentals and file sharing/counterfeiting in the home video market

UK

DE

FR

IT

ES 29

539 314

71

162

9

152

99

6

224

228

252

153

97 16

-1,8% -11,5% -19,4%

-36,5%

-57,9% Download of film and TV series (millions of files) Physical counterfeits of films and TV series (millions of pieces)

Rentals/sales (in millions) Variation in rentals/sales 05-09 (%)

Note: data on downloads and counterfeiting refer to 2008, rentals/sales to 2009. Source. IEM elaboration of BVA, UKFC, CNC, BVV, Prometeia, Univideo, SGAE, and Tera Consultants data.

As an alternative to physical rental, the video-on-demand market is expanding at a fast pace in the leading European markets. In France (+54% last year, to 83 million euros) it has surpassed rental. And in Germany, although the figures are much lower (13 million euros in 2009), the increase, in any case, was over 45%. The UK is an exception to some extent; it is the strongest market, worth 139 million euros, though its growth was more modest (3.8%), due to an unexpected drop in TV-based VOD, which reported a decrease of nearly 5% (due to the decline in revenues for NVOD services, in favour of true VOD services such as Fetch TV and iTunes, which alone generates 55% of VOD online revenues in the UK). In the absence of accurate data for VOD revenues in Italy, we may rely on the most conservative estimates (Univideo, E-media, in previous versions of this Report), which put the online market at 4-5 million euros (while Confindustria estimates it as high as 40 million, including advertising). Table 6: The video-on-demand market in the UK and France, 2006-2009

68

2009

2008

2007

2006

â&#x2C6;&#x2020; % 09-08

United Kingdom

139,2

134,1

103,5

80,5

3,8

of which TV-based

121,3

127,1

97,7

nd

-4,6

of which online

16,8

7,0

6,2

nd

140,0

Home Video


France

82,3

53,3

29,1

14,0

54,4

of which TV-based

75,2

46,9

23,7

nd

60,3

of which online

7,1

6,4

5,4

nd

10,9

Germany

13,1

9,0

3,0

nd

45,6

Note: data in millions of euros (average exchange rate 2009 UK: 1 € = 0.89049 £). Source: Screen Digest, UKFC, CNC, BVV.

The shrinking home video market continues to penalise television production, further reducing the revenue sources for TV series beyond their primary exploitation on the domestic market (the export figures are not very strong either, little more than 10 million euros). This holds for Italian TV series, at least (after the category peaked at 10% in 2007, TV series’ counted for just 7.7% of DVD sales in 2009, only a small part of which were Italian). In France, as well, the figures for TV series continue to decline (272 million euros), as well as the proportion of French TV series out of total TV series available on home video (9.3%). Once again, for this indicator as well, Germany represents an exception to the negative trend; the sales value of TV series grew from 205 to 233 million euros, returning to 2004 levels. Table 7: TV series in the home video market in Italy, France and Germany (2004-2009) 2009

2008

2007

2006

2005

2004

564,9

654,8

772,9

753

697

616

value for TV series (in millions of euros)

42

59

77

63,1

46

41,2

TV series’ share of total market (%)

7,7

9

10

8,3

6,5

6,6

Italy market value: sales (in millions of euros)

France market value: sales (in millions of euros)

1390

1382

1481

1658

1786

1959

value for TV series (in millions of euros)

272

283

317

317

247

196

TV series’ share of total market (%)

19,6

20,5

21,2

19,1

13,8

9,9

Domestic TV series’ share of total TV series (%)

9,3

9,5

9,9

14,3

16,9

15,2

Germany market value: sales (in millions of euros)

1377

1291

1331

1307

1366

1440

value for TV series (in millions of euros)

233

205

222

183

177

233

TV series’ share of total market (%)

16,9

15,9

16,7

14,0

13,0

16,9

Source: IEM elaboration of data from Prometeia, Univideo (Italy), CNC-GFK (France) and BVV (Germany).

Home Video

69


Books

70

Libri


Books by Daniela Ciavarelli

1. Book production and reading habits Italy’s publishing industry had a difficult year in 2008, but it was hardly critical1. Compared with the previous year, book production held steady, with just a slight decrease, on the order of 0.5% (all editions), offset by a quite positive bottom line (11.5%) with respect to 2004. Overall, the number of titles published was just under 59,000, thanks to the recovery seen for first editions (see below). Accompanying this slight drop in the number of titles, however, was the ongoing negative trend for the overall print run, which fell to just over 213 million copies in 2008, a steep decline compared to both the previous year and the trend for the last five-year period.. In fact, the decrease respect to 2004 was 12.1%, while the circulation from 2007 to 2008 alone dropped by 9.4%. Consequently, the average print run per work plunged as well, by 21.2% compared to 2004 (that is, by 1,000 copies), and by 9% from 2007. Table 1: Book production in Italy (titles and print runs), 2004-2008 2008

2007

2006

2005

2004

Total (first editions, reprints and subsequent editions)

58.829

59.129

61.440

59.743

52.760

-0,5

11,5

Print run (in thousands)

213.163

235.389

268.097

261.054

242.639

-9,4

-12,1

3.623

3.981

4.364

4.373

4.599

-9,0

-21,2

Average print run per work

Δ % 08-07 Δ % 08-04

Source: IEM elaboration of ISTATand AIE data.

The fact that the market held steady was largely due to the increase in first editions, reaching nearly 38,000 titles, roughly 1,000 more than the previous year. First editions thus make up 64.3% of books published, in the face of a steady decline of reprints and subsequent editions. The figures for reprints reflect the ongoing negative trend that started in 2006, levelling off at just under 18,000 copies (30.6% of books published), while subsequent editions reversed the positive trend for 2007 and once more declined, from 6.6% to 5.1%. As Table 2 shows, this third and final type of edition always fluctuated over the six-year period, without delineating a clear trend.

1 When this chapter was written, 2008 was the last year for which figures for book production were available. The economic data in the rest of the chapter refer to the year 2009.

Books

71


Table 2: Book production in Italy by type of edition, 2002-2008 2008

2007

2006

2005

2004

2003

2002

Absolute values First edition

37.845

36.819

37.991

37.694

33.641

34.496

32.781

Reprint

17.991

18.431

19.999

18.596

16.440

16.417

19.083

Subsequent edition

2.993

3.879

3.450

3.453

2.679

3.353

2.760

Total

58.829

59.129

61.440

59.743

52.760

54.266

54.624

Percentage values First edition

64,3

62,27

61,83

63,09

63,76

63,57

60,01

Reprint

30,6

31,17

32,55

31,13

31,16

30,25

34,94

Subsequent edition

5,1

6,56

5,61

5,78

5,08

6,18

5,05

Total

100

100

100

100

100

100

100

Source: IEM elaboration of ISTAT and AIE data.

First editions showed nearly identical growth for the various genres: +257 titles in the scholastic segment, +230 in the children’s books segment and +539 in the miscellaneous segment, which includes manuals, essays, guides, illustrated books and art books, travel guides, university textbooks, specialised scientific and medical publications, reference books and encyclopaedias as well as narrative. In the miscellaneous and children’s books segments, first editions make up 67% and 72% respectively of the titles published, whereas for scholastic editions, this figure drops to 32.8%, given a lower turnover in this segment. Unlike first editions, which increased their share of all genres of work, reprints and subsequent editions witnessed a sharp parallel decline: in the miscellaneous segment in 2008, reprints accounted for 28.1% of the titles and subsequent editions for 5.1%. In the children and young adults segment as well, the share of reprints fell from 64% in 2007 to just over 60% in 2008; similarly, subsequent editions went from 7% to 3.3%, over a 50% drop. Reprints of scholastic books fell to 60.6% and subsequent editions to 6.6%. Table 3: Book production in Italy by edition type and genre, 2008 Edition type by genre

First edition

Subsequent edition

Reprint

Total

1.636

331

3.024

4.991

Absolute values Scholastic Children’s

2.939

136

996

4.071

Miscellaneous

33.270

2.526

13.971

49.767

Total

37.845

2.993

17.991

58.829

Scholastic

4,3

11

16,8

8,5

Children’s

7,8

4,6

5,5

6,9

Miscellaneous

87,9

84,4

77,7

84,6

Total

100

100

100

100

Percentage values

Genre of work by edition type (percentage values) Scholastic

32,8

6,6

60,6

100

Children’s

72,2

3,3

24,5

100

Miscellaneous

66,9

5,1

28,1

100

Total

64,3

5,1

30,6

100

Source: IEM elaboration of ISTAT data.

72

Books


In 2009, according to ISTAT’s multi-purpose survey “Aspects of Daily Life”, Italy’s reading population aged 6 and over climbed to 45.1% from 44% the previous year. It’s important to note that this increase is related to the so-called “heavy readers” (12 or more books a year), whose numbers grew by two percentage points to represent 15.2% of the reading population (calculated as those who had read at least one book in the past year); and is partially due to average readers as well (4-11 books). Consequently, the percentage of those who read up to three books a year declined (as we shall see below). The largest share of readers is to be found in the 11-17 age group (over 58%), with a peak between ages 11 and 14 (64.7%), which falls as readers get older. By the age of 35 the share of readers has dipped below 50%, dropping sharply from 65 upwards to an all-time low of 22.8% in the population aged 75 and over. Women read more than men do; in fact, the share of female readers is 51.6%, compared with 38.2% of men. This gender gap is present at all ages and is most pronounced between ages 20 and 24, when the share of female readers is over 66%, while male readers account for only 39.2%. The only age group for which the gender gap disappears is that of persons 75 and over, an age group in which reading as a leisure activity is reported by 23.3% of men and 22.5% of women. Educational level is a decisive factor in reading habits, which range from 80.6% of those who hold university degrees to a minimum of 28.4% of those who only have a primary school leaving certificate or no qualification at all. If, on the other hand, employment status is taken into account, above-average reading rates for ages 15 and older may be found among executives, businessmen and self-employed professionals (62.7%), students (65.2%), managerial staff and employees (68.1%). By contrast, the lowest reading levels are reported among manual workers (30.6%), individuals who have withdrawn from the workforce (33.2%) and housewives (35.9%). In terms of geographical distribution, the largest share of readers is found in Northern Italy, where nearly 52% of the population aged 6 and over has read at least one book in the 12 months prior to the survey, and in Central Italy (48%). In Southern Italy and the islands, by contrast, the reading population respectively falls to 34.2% and 35.4%,l.. Moreover, the Italian regions exhibit significant variations in reading habits; while Trentino-Alto Adige (60%) and Friuli-Venezia Giulia (56.7%) report the strongest reading figures, Marche, Umbria and all the southern regions are well under the national average. In particular, four regions come in last place: Sicily (31.5%), Campania (32.9%), Puglia (33.1%) and Calabria (34.3%). In terms of the size of their town or city, more readers are to be found in urban centres and highly urbanised areas, while their number declines the smaller the town they live in; in fact, from 51.3% in cities forming the hubs of a greater metropolitan area, the reading population falls to 40.5% in towns with just 2,001 to 10,000 inhabitants. The lightest readers (one to four books a year) are predominantly male (48.1%), children up to age 14 (over 48%), persons 75 and over (49.5%), persons with a secondary school diploma or a lower qualification (over 50%), manual workers (55.3%), first-time job seekers and housewives (over 51%), as well as residents in the Southern regions (57.6%) By contrast, the highest numbers of heavy readers (over twelve books a year) may be found among persons aged 65-74 (19.8%), women (16%), with a peak among women aged 65-74 (22.1%); holders of university degrees (24.4%), executives, businessmen and self-employed professionals (19.8%), as well as those who have left the workforce (18.7%) Geographically speaking, the largest shares of heavy readers are to be found in the Northwest (19.5%) and in the Northeast (1.3%).

Books

73


Table 4: Breakdown of reading habits in Italy, 1997-2009 Have read at least one book over the last 12 months (%)

per 100 readers 1-3 books

4-11 books

12+ books

1997

41,6

47,1

1998

41,9

47,8

1999

38,3

48,2

2000

38,6

49,5

2001

40,9

48,1

2002

41,4

48,3

2003

41,3

48,8

2005

42,3

47,5

2006

44,1

47,3

2007

43,1

46,2

2008

44,0

47,7

2009

45,1

44,9

39,9 40,5 38,9 38,4 39,0 39,1 38,8 39,0 39,8 40,8 39,1 39,9

13,0 11,7 12,9 12,1 12,9 12,6 12,4 13,5 12,9 13,3 13,2 15,2

Note: per 100 persons aged 6 and over. Source: ISTAT.

2. The value of the market For the second year in a row, the book publishing industry declined in value, to a total of 3.407 billion euros, a 4.3% drop compared with 2008. In spite of this, healthy sales were reported for the trade channels: Internet (+12%), large-scale retail and traditional bookshops (+2.5%), which accounted for 1.430 billion euros altogether. The bookshop channel is undergoing a profound transformation, which may explain why sales are holding steady. And after dipping by 2.9% in 2008, large-scale retail (book aisles in superstores and department stores) is back in the black again (+4%), clearly benefitting from the growing trend seeing families turning to large-scale retail outlets for their shopping needs. Indeed, the “chains” grew by over 4% in 2009, while “family run” bookstores saw almost no change (+0.6%). Online bookshops continue to boom, with sales up by 26.8% (the highest percentage for all trade channels), helped by the debut of new players on the market. Newsstands reported a slight upswing (+2.6%) in book sales, thanks to the rethinking of the channel along the lines of the franchise formula adopted by several large groups, and also to an assortment of books that go beyond paperbacks and super-cheap editions. This increase leaves out add-ons, which fell again in 2009 (by almost 4%), making for a drop of over 50% since 2005. Sales of collectibles also plunged by 31.5%, to 161 million euros. The scholastic market also slowed, with a further 1.4% slump in sales, most likely due to a greater adoption of used books as well as the effects of the Ministry of Education reform actually coming on stream, freezing textbook adoption for five years in primary schools and six years in secondary schools, with the requirement, coming into effect in 2012, that only textbooks available for downloading online may be used. The e-book market is still in its infancy. Despite the media roll-out that brought it to the readers’ attention and led to the growing adoption of e-readers (actually this was more in 2010 than in 2009), the e-book market was still worth just over 1 million euros, or 0.03% of the market in 2009.

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Table 5: The book publishing industry in Italy, 2005-2009 (in millions of euros) Large-scale retail (1)

2009

2008

2007

2006

2005

Δ% 09-08

Δ% 09-05

261

251

258,4

246,1

226,8

4,0

15,1

Newsstands (2)

19,5

19

18,5

16,5

20,5

2,6

-4,9

Other retail (3)

21,9

20,8

19,8

19,3

18,4

5,3

19,0

Internet (4)

101,2

90,4

71,3

52,1

40,1

11,9

152,4

Bookshops (5)

1068

1042

1048

1043,3

1034

2,5

3,3

E-books (estimated)

1,1

-

-

-

-

-

-

Scholastic

667

676,8

716,3

705,5

669

-1,4

-0,3

Museum Bookshops

23,6

26,2

28,4

25,4

21,9

-9,9

7,8

Instalment sales

213,4

268,1

311,8

308,4

315

-20,4

-32,3

Mail order

120

128,9

143,2

140,6

145

-6,9

-17,2

Book clubs

75

78,9

83,3

82,5

81,5

-4,9

-8,0

Direct sales to libraries

45

48

50,2

54,3

65,5

-6,3

-31,3

Exports

42

41,1

40,7

39,9

39,5

2,2

6,3

Collectibles and serialised books

161,1

235,2

293,2

307

342,3

-31,5

-52,9

Electronic publishing (CD ROM, DVD ROM)

264,5

348

330,5

336,9

326,5

-24,0

-19,0

Electronic (databanks)

97,8

75,2

70

60,5

51

30,1

91,8

95

84,6

79,8

78,1

76,5

12,3

24,2

50,5

40,7

38,2

35,4

33

24,1

53,0

publishing

Used books and remainders Non-book Special initiatives

80

85,8

101

118

115

-6,8

-30,4

3407,5

3560,7

3702,6

3670

3621,4

-4,3

-5,9

Add-ons (books) (6)

250,6

260,6

453,3

489

537,5

-3,8

-53,4

Total books and book addons

3658,2

3821,3

4155,9

4159

4158,9

-4,3

-12,0

TOTAL

Note: (1) book aisles in supermarkets, department stores, motorway restaurants, excluding bookshops in shopping centres; (2) excluding inserts, works published in instalments and collectibles: (3) on the occasion of trade fairs, temporary sales, market stalls; (4) sales through Italian websites only; (5) new books, adult and juvenile miscellaneous; (6) figures supplied by FIEG, based on data concerning 53 newspapers. Figures refer to book sales exclusively. Source: IEM elaboration of AIE data.

According to AIE (Associazione Italiana Editori, the Italian Publishers’ Association), there were 10,335 publishing houses registered in 2008, both active and inactive. In 2009, the number of active publishing houses was 7,009, including those with a single title. However, publishers with a stable, organised presence in all bookshops in Italy number 1,600, and the entire sector employs approximately 36,000 people. Compared to the previous year, the major players in the Italian publishing industry – Mondadori, Feltrinelli, RCS Media Group, Gems and Giunti – saw their share of the market increase by 0.2 percentage points, to over 60% of the market’s total value. In spite of a marginal decrease from 28.8% to 28.4%, the Mondadori Group remained the market leader. The reasons for that slight drop may be found in the fact that the Mondadori division fell 3.9% with respect to 2008, while the values for the other divisions held steady or grew slightly: Piemme, Sperling & Kupfer and the other members of the group remained stable, while Einaudi grew by 3.5%. By contrast, RCS (Rizzoli, Bompiani, Fabbri, Marsilio…) saw its share of the market decline Books

75


further to 12.6%, a 1.6% drop, while next on the list, the Mauri Spagnol Publishing Group (Longanesi, Salani, Guanda, Garzanti), as well as Giunti and Feltrinelli, boosted their shares compared with 2008: Gems was up by 4.5%, going from 8.9% to 9.3%; the Giunti Group increased its market share to 5.8%, while the Feltrinelli Group went from 3.9% to 4%, an increase of 2.6%. Table 6: Publishing groups by market share, 2007-2009 2009

2008

2007

The Mondadori Group

28,4

28,8

29,0

- of which Mondadori

14,5

15,1

14,3

- of which Einaudi

5,9

5,7

5,4

- of which Piemme

4,3

4,3

5,1

- of which Sperling & Kupfer

2,4

2,4

2,8

- of which others in The Mondadori Group

1,3

1,3

1,4

The RCS MediaGroup

12,6

12,8

13,6

The Gems - Mauri Spagnol Publishing Group

9,3

8,9

8,2

The Giunti Group

5,8

5,5

5,4

Feltrinelli

4,0

3,9

3,8

Other publishers

39,9

40,1

40,0

TOTAL

100,0

100,0

100,0

Note: figures in percent. 2009 shares calculated out of 1,171 million euros for trade channels (excluding large-scale retail). Source: Nielsen Bookscan.

The Mondadori Group confirmed its leadership role in terms of turnover as well, with sales of nearly 620 million euros, 426 million of which from the book division and 194 from the distribution sector, which manages the bookshop channel. However, both of these figures declined from the previous year, by 2% and 0.3% respectively. The Messaggerie Italiane Holding came in second place, with a turnover of 517 million euros in 2008, if both distribution and publishing are considered, a 2% increase over 2007. The third player in the sector was the Feltrinelli Group, with an overall turnover (retail plus publishing) of 460 million euros, a 21% rise over 2008. This represents the most significant variation compared with 2008, and, considering the fact that in the publishing industry most of Feltrinelliâ&#x20AC;&#x2122;s sales come from the retail channel, this growth could well be a response to the expansion of online sales and the care the group takes in the look and promotion of its bookshops, which customers have come to see as synonymous with quality and value for money. Table 7: Leading Italian publishing groups or book distributors by turnover Group

Activity

Year

Turnover

Mondadori

editoria, retail

2009

619,7

Mondadori Books

editoria

2009

425,7

Mondadori Retail

retail

2009

194,0

Messaggerie Italiane Holding

edit., distrib., retail

2008

*517,0

Feltrinelli

editoria + retail

2009

460,0

Giunti

editoria, retail

2008

190,9

De Agostini Editore

editoria, distrib.

2009

**186,0

Rcs Libri (only Italy miscellaneous)

editoria

2009

145,2

Zanichelli Editore

editoria

2008

135,5

Pearson Paravia Bruno Mondadori

editoria

2008

86,6

Note: (*) of which roughly 25% distribution of periodicals; (**) excluding collectibles and direct marketing, revenue from foreign sales cannot be listed separately. Source: Mbres, company data et al.

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The other active groups report turnovers that do not exceed 200 million euros, and the values are practically identical. According to the most recent corporate reports available (for 2008) Giunti generated a turnover of 191 million euros including retail and publishing, while the figure for De Agostini Editore was 186 milion, if publishing and distribution are considered. RCS Books, for which the figure refers to the “Italy miscellaneous” segment only, had a turnover of 145.2 million euros in 2009; Zanichelli Editore followed with 135.5 (2008); and lastly, the group Pearson Paravia Bruno Mondadori reported 86.6 million euros. For all three, only revenues from the publishing divisions are considered here.

3. International comparisons Of the five major European countries, Italy comes next-to-last in terms of the overall value of the publishing industry, and is bottom of the list as far as spending per capita is concerned, with little more than 60 euros a year. On the whole, the situation has changed very little compared with 2008, when Germany represented the sole exception - recording progress - coming in first place in terms of the values for revenue and spending per capita, well above the European average, which held steady at 64 euros per capita. In detail, Germans spent 118 euros a head in 2009, followed by the French (67), the Spanish (66), the British (61.6) and Italians (60.8). As mentioned earlier, these positive variations do not concern all five countries; indeed, the figures for sales per capita dropped not only in Italy but also in Spain and the UK in 2008, by 5.3 and 13.5% respectively. In terms of market value for 2009, Italy is the country with the most negative trend (-4.3%), ahead of both Spain and the UK In fact, sales revenue fell from 3,185 million euros to 3,109 million euros in 2008, a 2.4% drop; while in the UK it decreased from 3,936 to 3,821, an even greater 2.9% drop. The figures for France are significant as well; the country saw an increase in sales of nearly 4%, from 4,055 million euros to 4,213. Germany, however, is the undisputed leader of book sales, reporting a slight 0.8% increase that translated into sales approaching 9,700 million euros in 2009. Table 8: Value of book sales in Europe for the years 2006-2009 2009

2008

2007

2006

∆ % 09-08

Population (000)

sales per capita (€ 2009)

France

4.213

4.055

4.100

4.110

3,9

62.793

67,1

Germany

9.691

9.614

9.576

9.261

0,8

81.758

118,5

Italy

3.407

3.561

3.703

3.670

-4,3

60.402

60,8

Spain

3.109

3.185

3.157

3.015

-2,4

46.951

66,2

UK

3.821

3.936

3.950

3.784

-2,9

62.042

61,6

Note: data in millions of euros. UK data reflect average exchange in 2008 (1 euro = 0.89094 pounds). Source: IEM elaboration of GFK (France) Boersenblatt (Germany), AIE and Nielsen data (Italy: 2007 and 2008 AIE, for 2009 Nielsen estimates of growth rate), FGEE (Spain), Publishers Association (UK).

Books

77


Newspapers and Magazines


Newspapers and Magazines by Paola Savini

1. Introduction To a greater extent than in the previous year, over the course of 2009 the Italian newspaper industry grappled with the effects of the general economic crisis, on the one hand, and on the other, the more specific and probably more far-reaching effects of the ongoing transformation in the industrial cycle behind the production, distribution and consumption of news. The first half of 2010 shows no sign of a significant reversal of this trend, suggesting instead that the newspaper and magazine sector is in a state of permanent crisis and has been for the last five years, as the continuing attempts to legislate the sector attest – as partial and even contradictory as they often are – as does the survey by the Italian Antitrust Authority (l’Autorità Garante della Concorrenza e del Mercato, heretofore referred to as AGCM), the second1 in six years. The legislative response to the crisis specifically concerns two decrees, the Ministerial Decree of 21 October 20102, which implements the new agreements between publishers and the Italian Postal Service covering shipping rates for no-profit publications, and the Presidential Decree of 25 November 2010, No. 2233, which enacts the long-awaited regulations concerning direct State contributions to publishers. The latter modifies the criteria for calculating the contributions and introduces a proportional distribution of funds in the event that funding is insufficient, as well as introducing a greater control over the applications for these allowances. With regard to the Italian Antitrust Authority’s report, AGCM completed its survey No. 35 on 23 September 2009 (Survey concerning the Newspaper, Magazine and Multimedia Sector) by publishing the second part (The Distribution of Editorial Products) two years after the first (State Subsidies and the Limits on Media Concentration for Newspapers). By means of this report, AGCM “desired to provide its contribution to a rethinking of the way the press distribution sector operates, in order to highlight the competitive constraints that would seem to place unfair limitations on the ability of the sector to rise to present-day challenges”. In conclusion, AGCM expressed its hope for a total liberalisation of the market from sales to final users, in order to adapt to the changing needs behind the demand for editorial products. Indeed, in Italy newspaper circulation has dropped dramatically, to beneath the historic threshold of 5 million copies, with a drastic reduction in advertising revenues, which hit a record 1 Cf. the 2004 survey no. 20 – Newspaper and Magazine Distribution. Regulation No.13425. 2 Ministry of Economic Development Decree of 21 October 2010 concerning “Shipping rates for editorial products, excluding books sent by package shipment, by parties for which see Article 1 Section 1 of Decree-Law No. 353 of 24 December 2003, No. 353, converted, with modifications, into Law No. 46 of 27 February 2004”, Official Gazette No. 274 of 23 November 2010. 3 “Regulation concerning measures to simplify and reorganise the rules for allocating state contributions to publishers as per Article 44 of Decree-Law No. 112 of 25 June 2008, converted, with modifications, into Law No. 133 of 6 August 2008, Official Gazette No. 299 of 23 December 2010.

80 Newspapers and magazines


low of -16.4% at year’s end4. The attendant collapse in overall revenues was just as serious for the players in the sector: revenues have fallen by 20% in just one decade5. The negative trend is confirmed by the Italian Communications Regulatory Authority (l’Autorità per le Garanzie nelle Comunicazioni, heretofore referred to as AGCOM), whose census-like survey of the sector, aimed at identifying relevant markets in the framework of the Integrated System of Communications6, pegged the 2008 revenues for newspaper and magazine publishing, national press agencies, electronic publishing and directories at around 8.8 billion euros, compared with an estimated 9 billion in 2007 (-2.7% for this sector as a whole, considering that electronic publishing actually saw an increase of 18.5%). The picture that emerges proves that cost-cutting and rationalisation - regarding the number of publications themselves, but also personnel - represent the sole survival strategy for publishers today, operating in an increasingly fragmented newsgathering market, thanks to the wider range of choices available to users/readers7, which in turn allows for a clearer distinction between news analysis and breaking news, more and more often perceived to be commodities8. Moreover, in Italy the crisis in the sector is exacerbated by unfavourable conditions peculiar to the country that are well-known, such as the low penetration of newspapers amongst the population at large, an inefficient distribution network, and the fact that the advertising market is tipped in favour of television. That said, at an international level the Italian newspaper industry is in good company, with a large number of countries sharing the same fate: the outsourcing option for content production9, the vertical disintegration of the production – edition – print process, the rationalisation and concentration of production centres, and the uneasy coexistence between newspapers’ print and online editions, in a frantic search for business models that valorise contents published online, while simultaneously defending intellectual property10. To this list of trends must be added the diffusion of journalism models based on crowdsourcing, which are clearly far from being in a position, as yet, to compete with traditional ad-based publishing, but which are witnessing significant growth in both their adoption and their status, as is amply demonstrated by the case of ProPublica.org, winner of the Pulitzer Prize in Investigative Reporting in February 2010. It should be stressed that despite the abundance of negative indicators for the sector (in terms of readership, circulation, and number of persons employed, journalists and printers combined), in non-OECD countries the sector exhibits a healthy growth, with the global number of newspapers on the upswing even during the economic crisis; in fact, it has almost doubled since the year 200011. 4 Data provided by the Federation of Advertising Agencies (Federazione Concessionarie Pubblicità, heretofore referred to as FCP). 5 Data provided by the Italian Federation of Newspaper Publishers (Federazione Italiana Editori di Giornali, heretofore referred to as FIEG). 6 Cf. Attachment A to Resolution No. 555/10/CONS concerning “Procedure for identifying relevant markets in the framework of the Integrated System of Communications”, Official Gazette No. 267 of 15 November 2010. 7 Due less to the increase in the number of newspapers (not counting free newspapers) than to the boom in new sources, professionalised to a certain degree, in any case available on different devices, and above all via the Internet. 8 Cf. PricewaterhouseCoopers (2010). Global Entertainment & Media Outlook 2010-2014, 15 June 2010. 9 Which has inevitably transformed the journalist’s profession, as repeated interventions to redefine it show, such as the recent overhaul of the National Journalists’ Contract with the agreement signed on 26 March 2009 between FIEG and the National Federation of the Italian Press ( Federazione Nazionale della Stampa Italiana, or FNSI); or the Ministry of Labour Decree No. 47385 of 8 October 2009 concerning “Simplification of administrative procedures and reorganisation of the criteria for access to salary supplementation in favour of employees of companies operating in the publishing sector”. 10 Cf. the Carlo Lombardi Technical Observatory for Newspapers and News Agencies, 2010 Report on the Italian Newspaper Industry. In this regard, it should be noted that in June 2009 FIEG turned to the Italian Antitrust Authority requesting that it investigate a possible abuse of dominant position by the search engine Google concerning its service Google News (with alleged discrimination of non-subscribers in traditional searches) and also concerning the service AdSense (with a demand for greater transparency in its fee structure). 11 Cf. OECD (2010). The evolution of news and the Internet, DSTI/ICCP/IE (2009)14/FINAL. 11 June.

Newspapers and magazines

81


2. Newspapers and magazines in Italy: an analysis of the principal indicators 2.1 Newspaper print runs, circulation and sales Newspapers The indicators concerning the evolution of the circulation of paper editions of Italian daily newspapers are the first sign of the downturn in the sector. In fact, according to ADS figures (Accertamenti Diffusione Stampa – a newspaper circulation report, Table 1), in a sampling of 65 newspapers, print runs12 declined by 6.4% in 2009. The 2009 figure for circulation13 confirms the negative trend as well, dropping to 6,252,467 copies (-6.6%), while sales14 took even more of a beating, down 7% from 2008. Figure 1 shows the breakdown of printed copies: the yield for newspapers in 2009 amounted to 25.9% of the overall circulation. The yield-circulation ratio was 35%. Table 1: ADS- Newspaper print runs, circulation and sales, 2005-2009* 2005

2006

2007

2008

2009

∆% 09-08

∆% 09-05

Print run

8.910.045

9.266.232

9.278.070

9.053.245

8.466.674

-6,48%

-4,98%

Circulation

6.507.581

6.774.847

6.844.908

6.695.909

6.254.467

-6,59%

-3,89%

Sales

5.632.191

5.695.715

5.563.256

5.353.961

4.978.547

-7,01%

-11,61%

Note: (*) 12-month average. No. of certified newspapers not constant over the years. Source: IEM elaboration of ADS data.

Fig. 1: Breakdown of daily newspaper print run figures, 2009 Bulk sales 0.7% Paid subscriptions 5.7%

Free (free subs., gift copies, coupons) 7.2% Foreign circulation (pay + free.) 1.5% Yield (Italy + Abroad) 25.9%

Sales 59.0%

Source: IEM elaboration of ADS data. 12 By which is meant the total number of copies printed, except printing discards. Cf. www.adsnotizie.it/ glossario/index.php 13 By which is meant the total number of copies distributed in Italy and abroad, divided as follows: paid circulation (newsagency sales, paid subscriptions); bulk sales, membership fee subscriptions; free distribution (free coupons, free subscriptions, gift copies). Ibid. 14 The expression refers to the total number of copies sold.

82

Newspapers and magazines


A FIEG analysis of the evolution of newspaper print runs and sales in Italy, involving member companies15, also reports a downturn for both indicators: -5.9% for print runs and sales in 2009 compared with 2008. Indeed, for the five-year period under examination, with the exception of a mild recovery in 2006 (+1.1%), the findings for a non-homogeneous number of companies show a dramatic decrease of -9.12% for printed copies and as much as -11.35% for copies sold. Table 2: FIEG – Newspaper print unit runs and sales, 2005-2009* 2005

2006

2007

2008

2009

∆% 09-08

∆% 09-05

Print run

7.823.333

7.960.559

7.805.914

7.555.256

7.109.496

-5,90%

-9,12%

Sales**

5.461.811

5.510.325

5.399.837

5.145.647

4.842.054

-5,90%

-11,35%

Note: (*) daily average; (**) number of newspapers in 2009: 57; 2008=58; 2007 & 2006 = 54; 2005= 59. Source: IEM elaboration of FIEG data.

As far as the indicators presented herewith are concerned, the free newspaper segment deserves a separate discussion. In fact, 2009 was an extremely difficult year for the newspapers distributed free-of -charge in Italy, both in terms of advertising spending (which plunged 26.6% between 2008 and 2009) and in terms of the stability of the publishing companies (which faced daunting problems with day-to-day management and attracting advertising, in the case of virtually all papers). In Italy, the sector mainly consists of the free dailies Leggo, City, DNews, EPolis and Metro, which come out in some of the country’s major cities; with the addition of a few other papers with a local print run, this makes for a total of approximately 3.5 million copies distributed roughly 270 days a year16, a slight drop from 2008, when the Carlo Lombardi Technical Observatory Report estimated their number at circa 4 million copies.

Magazines As with newspapers, a marked decline was also seen for the indicators for magazine sales, print runs and circulation in 2009, proof that the recession affected the print media across the board. Compared with the newspaper segment, on the one hand magazines reported a sharp drop in sales of weeklies in the three-year period 2007-2009 (-10.15%) and a drastic decline for monthlies (-33.14%); while on the other hand there was certain evidence of rationalisation. Indeed, although print runs were not as adversely affected as sales, in this regard optimisation efforts appear to be significant, as shown by the 26% decrease in print runs for monthlies over the three-year period. As far as circulation is concerned, weeklies saw a drop of 1.9% in 2009, while monthlies were hit much harder, with a 3.9% decrease from 2008 to 2009. Hence the overall picture is that of a shrinking magazine market in general, considering the number of magazines published and their circulation. In fact, while the 55 weekly publications covered by the ADS report in 2000 accounted for nearly 15 million copies, in 2009 a survey extended to 62 publications indicated an average circulation well under 13 million; and as for monthlies, while the ADS publications (129) reported a circulation of 15 million copies in the year 2000, in 2009 131 publications accounted for 14.2 million. Table 3: Magazine print runs, circulation and sales, 2007-2009 2009

2008

2007

∆ % 09-08

∆ % 09-07

Weeklies Print runs

16.573.140

17.843.417

18.346.526

-7,12%

-9,67%

Circulation

12.350.040

12.599.736

13.684.164

-1,98%

-9,75%

Sales

9.953.470

10.186.984

11.078.393

-2,29%

-10,15%

Monthlies 15 16

Figures provided by the associated businesses. According to figures released by the publishers themselves, since only one paper, EPolis, is ADS-certified.

Newspapers and magazines

83


Print runs

20.154.730

25.571.857

27.269.639

-21,18%

-26,09%

Circulation

14.194.368

14.771.047

16.064.005

-3,90%

-11,64%

Sales

9.165.239

9.475.336

13.708.048

-3,27%

-33,14%

Note: (*) 12-month average. No. certified magazines not constant over the years. Source: IEM elaboration of ADS data.

2.2 Readership Newspapers If we turn our attention to readership, starting with the figures for autumn 2009, the circulation auditor Audipress felt the need to adjust the analysis of this key indicator to reflect both the quantity and quality of the readers’ contacts with newspapers, bearing in mind the shift in the demand towards online editions. Audipress thus adopted a new survey structure. The innovations introduced – which make comparison with previous years unworkable – include the extension of the survey time frame (to roughly 10 months), the four-monthly publication of the figures, and the reporting of findings regarding the duplication between print readership and visits to the papers’ websites. For the newspaper survey, the size of the annual sample rose to 33,000 interviews, while the survey base for the magazine survey consisted of 21,000 interviews. Moreover, to avoid releasing figures that did not correspond to users’ real experience of the editorial product, in both its print and online editions, Audipress decided against publishing the figures related to the newspaper readership trend for the second half of 2008 as well as the first three quarters of 2009, while the 2010/I edition derives from the cumulation of the samples for autumn 2009 (21 September – 20 December 2009) and the 1st cycle of 2010 (11 January – 28 March 2010). In any case, within the limitations of non-comparability mentioned above, the overall trend indicates that, over the course of the decade, newspaper readership on an average day nevertheless grew to over 24 million, or 46% of the population. Table 4: Newspapaer readership, 2010* 2003

2004

2005

2006

2007

2008 (I)

2010 (I)**

Average daily readership

20.439

20.534

21.410

22.494

22.798

23.278

24.108

- Men

12.458

12.450

12.965

13.440

13.651

13.940

//

- Women

7.981

8.084

8.445

9.055

9.147

9.337

//

Penetration

40,79

41,29

42,64

44,3

44,66

45,3

46,2

Note: (*) Readers on an average day; adults aged 14 and over; figures in thousands.(**) Figures not comparable with previous years. Source: IEM elaboration of Audipress data.

Table 5: Newspaper readership, print and online editions, 2010* Readers on an average day

Of which those who

(Absolute valuesi per 1,000)

(Absolute values per 1,000)

Total

Men

Women

Purchasing decision-makers

Population

52.179

25.107

27.072

24.641

Total readership per newspaper copy

24.108

14.232

9.876

9.695

3.076

Total newspaper readership

40.553

25.610

14.945

15.146

4.716

Total

Men

Women

3.438

1.278

Note: (*) Readers on an average day; adults aged 14 and over; figures in thousands. (**) Figures not comparable with previous years. Source: IEM elaboration of Audipress data.

84

Newspapers and magazines


Generally speaking, if the Audipress figures are compared with those provided by Audiweb, the survey that measures online audiences and provides quali-quantitative analysis concerning the use of online media, it emerges that every day 3-4 million Internet users, roughly 36% of the total, access newspaper websites. Moreover, these findings on the importance of the news obtained from newspapers, but also on the Web, are borne out by another survey carried out by GFK Eurisko for AGCOM17, in March 2010, which shows that although television remains the medium of choice for the active Italian population when it comes to obtaining news (89.1% of the population, in fact, turns to television for news, 86% for international news and 90% for national news), daily newspapers are the news medium chosen by 61.6% of the active population, and they serve a special role when it comes to local news. Newspapers are followed by the Internet, which, vice versa, tends to be used for gathering information concerning international news (20% of the active population), while radio trails behind all the other media.

Magazines The approach chosen by Audipress for the newspaper segment, as described above, also holds true for the magazine segment, at least as far as the methodology is concerned. What should be emphasised, however â&#x20AC;&#x201C; and this is intuitively obvious, no doubt â&#x20AC;&#x201C; is that the impact of the digital revolution has had a different effect on this editorial product (cf. Table 7), due to the type and frequency of the news provided by magazines. The Audipress figures indicate that in the first half of 2010 magazine readership essentially held steady, compared to the last few years under study. This is confirmed by magazine penetration amongst the population, although, again, it must be remembered that the sampled data over the years are not comparable. If the focus shifts to gender, the female population continues to be the main target audience for magazines, both weeklies and monthlies. Table 6: Magazine readership 2010* 2005

2006

2007

2008 I

2010 I**

Readership of weeklies

25.409

23.930

24.019

23.634

23.723

- Men

10.634

9.571

9.514

9.420

9.230

- Women

14.775

14.358

14.505

14.214

14.493

50,6

47,13

47,05

46,0

45,0

Penetration (%) Readership of monthlies

24.014

22.462

21.537

21.554

21.957

- Men

11.720

10.958

10.428

10.700

10.697

- Women

12.294

11.503

11.109

10.854

11.260

Penetration (%)

47,83

44,24

42,19

41,9

42,0

Total magazine readership

34.207

32.689

32.483

32.352

32.763

- Men

15.650

14.691

14.471

14.586

14.592

- Women

18.557

17.999

18.012

17.766

18.171

Penetration (%)

68,13

64,38

63,63

62,9

62,9

Note: (*) Average number of readers; adults aged 14 and over; figures in thousands (**). Figures not comparable with previous years. Source: IEM elaboration of Audipress data.

17

Cf. Attachment B to Resolution No. 555/10/CONS, op. cit.

Newspapers and magazines

85


Table 7: Magazine readership 2010* Readership in the most recent period

Of which also those who visited the paper’s corresponding website

(Absolute Values Per 1,000)

(Absolute Values Per 1,000)

Total

Men

Women

Purchasing decision-makers

Population

52.179

25.107

27.072

24.641

Total weeklies readership per copy

23.723

9.230

14.493

12.188

Total

Men

Women

656

262

729

Total readership weeklies

46.799

16.074

30.724

24.958

916

Total monthlies readership per copy

21.957

10.697

11.260

9.740

1.772

Total readership monthlies

51.441

24.162

27.277

23.083

2.773

Total Magazine Readership

32.763

14.592

18.171

15.681

2.260

2.016

762 242

Note: (*) Average number of readers; adults aged 14 and over; figures in thousands.(**) Figures not comparable with previous years. Source: IEM elaboration of Audipress data.

3. Publishing companies: sources of revenue and profitability Newspapers While in 2000 advertising revenues represented 58% of newspapers’ total revenue, nine years later that share had fallen to 41.8%, or practically the same level as 2004. Driving the downward trend was the troubled advertising market (and the economic crisis in general). Figure 2 shows the uneven trend for the ratio between advertising revenue and total sales revenue (including sales of secondary products as well) in the Italian newspaper industry, in a survey of the entire membership of publishers belonging to FIEG. This fluctuating trend clearly illustrates the publishers’ need to be able to accurately appraise both the sale of advertising space and copy sales, which are still the main revenue sources for the ad-based publishing model, since no publishing model to date has ever been shown to be successful without relying on one of these two revenue components (indeed, the recent decline, on a European scale, in readership of free newspapers is emblematic in this regard)18. And while the demand for news is more and more unpredictable and in a state of flux (due to structural reasons19 as well as the changing consumer habits of a new generation of readers), the manoeuvres surrounding advertising space (raising the number of pages and ad spaces, and the increase/decrease in the rates for both) represent the basic lever of corporate success: which is why, in just ten years, the average rates for advertising space in a newspaper fell from 42.29 euros in 2000 to 21.05 euros (at 2009 prices) in 200920. In 2009, falling sales and shrinking advertising spending were behind a striking decline in sales revenues: from 3.35 billion euros in 2008 to 3.05 billion in 2009. Moreover, besides the fact that advertising rates were in free fall and sales-per-copy dropped, sales of secondary products, which had previously represented a significant share of corporate revenue (as much as 15%, for example, in 2006) now reached the saturation point (-23.3% in 2007 and -42.9% in 2008, equal to 10.3% of total revenues; the figures for 2009 are not available).

18 19 20

86

Cf. the section “The international picture”. Due to the fact that subscriptions make up a very low share of the total, amounting to roughly 9% of sales. Source: ASIG Service elaboration of FCP Press Observatory data.

Newspapers and magazines


Fig. 2: Newspaper revenues – Advertising to sales ratio 2000-2009 Advertising revenues Ricavi pubblicitari

Revenue fromesales and subscriptions Ricavi da vendite abbonamenti 58,88%

58,02%

56,94% 56,06%

53,74%

54,25%

53,78%

52,66% 51,05%

49,28% 47,34% 46,26%

46,56%

2005

2006

51,28%

49,20% 45,75%

43,06% 43,94%

41,12%

41,98%

2000

2001

2002

2003

2004

2007

2008

2009

Source: IEM elaboration of FIEG data.

If we now turn our attention to the trend for advertising spending (1.510 billion in 2009, down 16.8% from 2008, at current prices, or -17.4% at 2009 prices), Table 8 shows not only the negative trend for the indicator (at current prices, -9.9% at 2008 prices); it also underscores the fact that certain types of spending have declined significantly (as is the case for national commercial advertising, which, exactly as in 2008, fell by 17.8%!) Again, as mentioned above, the case of free newspapers is emblematic: down 26.6% in 2009 from 2008’s figures. Table 8: Newspaper advertising spending* 2005-2009 2005

2006

2007

2008

2009

∆% 09-08

∆% 09-05

Newspapers (Total)

1.741.746 1.747.620 1.901.359 1.816.448 1.510.912

-16,8%

-13,3%

Paid newspapers (Total)

1.713.705 1.716.413 1.773.073 1.676.234 1.407.988

-16,0%

-17,8%

-17,8%

-22,7%

National commercial

923.686

947.956

972.438

868.350

714.007

Local

451.673

443.254

465.861

482.019

416.374

-13,6%

-7,8%

Classifieds +other

338.346

325.203

334.774

325.865

277.607

-14,8%

-18,0%

Free newspapers (total)**

28.041

31.207

128.286

140.214

102.924

-26,6%

National commercial

28.041

30.163

95.597

103.705

73.998

-28,6%

Local

0

0

28.900

33.913

27.280

-19,6%

Classifieds +other

0

1.044

3.789

2.596

1.646

-36,6%

163,9%

Note: figures in thousands of euros; (*) at current prices; (**) the free newspaper delta percentage for the different survey areas over the years under study is not provided (from 2003 to 2006 survey included only City/Metro/Leggo— Milan edition; as of January 2007 all editions of City/Metro/Leggo/24 Minuti; as of May 2007 EPolis). Source: IEM elaboration of Nielsen AdEx data.

Moreover, according to FCP-Assoquotidiani data21, 2009 saw an increase of 15.7% in national commercial advertising space sold in paid newspapers (with total sales stable), against a 16.4% decrease in revenues deriving from those sales. The latter figure indicates just how far newspaper publishers have gone in pursuing a low-rate policy for advertising space in the effort to keep their clients and attract new ones, as the 50% drop in the average cost-per-advertising space over 10 years makes abundantly clear. In just one year, the rates for advertising space fell by an average of 18%. Indeed, for FIEG member companies in 2009, the aggregate gross operating margin – derived from the difference between revenues and industrial costs – fell drastically (-89.7%, an estimated 21

FCP groups together both Agencies and Direct Handlers working in the advertising space sales sector.

Newspapers and magazines

87


16.2 million euros), further proof of the truly critical overall situation in which the publishers surveyed find themselves. And the alarm is just as great for ongoing operations as it is for more extraordinary expenditure; the companies surveyed in the FIEG study demonstrated a GOM to sales ratio as low as 0.5%. As far as operating costs are concerned, while they grew at a steady pace over the last three-year period (+1.1% in 2005, +3.1% in 2006, +6.1% in 2007), 2008 was the first year when costs fell sharply instead (-6.9%), with the 2009 figures in line with this decrease (-5%). Table 9: Newspaper industry – revenues and operating costos 2005-2009 2005

2006

2007

2008

2009*

∆% 09-08

∆% 09-05

Publishing revenues

3.462.402

3.556.655

3.507.632

3.348.300

3.046.953

-9,00%

-12,00%

Operating costs

3.174.984

3.273.251

3.246.065

3.190.205

3.030.695

-5,00%

-4,54%

287.418

283.404

261.567

158.095

16.258

-89,72%

-94,34%

8,30%

7,97%

7,46%

4,72%

0,53%

-88,70%

-93,57%

GOM GOM/sales

Note: figures in millions of euros on a sample of 66 newspapers; (*) estimated. Source: IEM elaboration of FIEG data.

Magazines The figure of 3.359 billion euros that represents the revenues (sales + advertising) for the magazine publishing sector indicates, in this case as well, a highly significant downward trend compared with the previous year (-14%). Specifically, the decrease corresponds to -29.5% for advertising and -9% for copy sales. Figure 3 shows that over the nine-year period, the advertising revenues-to-sales ratio was far more constant for the monthly and weekly sector than it was for newspapers. However, it also shows that the ongoing crisis in the advertising market pegged the 2009 revenues for the sector to copy sales (with attempts at increasing sales and cover price), which accounted for 78.5% of total revenues. Table 10: Magazines – evolution of publishing revenues, 2003-2009* Year

Advertising

∆% YoY

Sales

2003 2004 2005

∆% YoY

Total

∆% YoY

964.422

-

3.214.740

-

4.179.162

-

968.254

0,4%

3.260.114

1,4%

4.228.368

1,2%

1.004.611

3,8%

3.117.207

-4,4%

4.121.818

-2,5%

2006

1.056.695

5,2%

3.077.303

-1,3%

4.133.998

0,3%

2007

1.083.188

2,5%

3.015.757

-2,0%

4.098.945

-0,8%

2008

1.024.006

-5,5%

2.898.539

-3,9%

3.912.092

-4,6%

2009**

721.924

-29,5%

2.637.670

-9,0%

3.359.594

-14,1%

Note: figures in thousands of euros; (**) estimated. Source: IEM elaboration of FCP-FIEG Press Observatory and Tradelab data.

Table 11: Evolution of net advertising spending, 2005-2009 Magazines

2005

2006

2007

2008

2009

∆% 09-08

∆% 09-05

1.222.562

1.296.024

1.328.475

1.231.481

877.572

-28,74%

-28,22%

Note: Figures in thousands of euros. Source: IEM elaboration of Nielsen AdEx data.

88

Newspapers and magazines


Fig. 3: Magazine revenues – advertising to sales ratio, 2000-2009 Totalcomplessivi sales revenue Ricavi da vendita 72,51% 65,90%

65,82%

34,10%

34,18% 27,49%

2000

2001

2002

Advertising revenues Ricavi pubblicitari 78,51%

75,44%

77,22%

75,63%

74,44%

73,57%

73,70%

24,56%

22,78%

24,37%

25,56%

26,43%

26,30%

2003

2004

2005

2006

2007

21,49%

2008

2009

Note: FIEG estimate for 2009. Source: IEM elaboration of FIEG data.

In line with the general economic trend, advertising spending in the sector had risen in the years 2003-2007 (Table 10), stemming the decline in sales revenue to a certain extent. However, in 2008 the first major slump in the five-year-period occurred, leading to a 28.7% drop in spending in the sector in 2009. Of the two macro-typologies of magazines, it is evident that monthlies were harder hit in 2009; in a reversal of the previous trend, monthlies’ ad revenues fell by 32.3% compared with a figure of -25.8% for the cession of advertising space, whereas weeklies saw their revenues fall by 27.5%, against a 15.1% decline in ad spaces.

4. The international picture A comparative analysis of the indicators for the newspapers publishing sector – bearing in mind the limitations of a comparison based on survey methods that are not homogeneous – reveals that the negative trend in Italy holds true for many other European countries and nonEuropean countries as well. Free newspapers, for example, which have seen their circulation decline in Italy, as we have seen above, have experienced the same decline in the rest of Europe22, where their (estimated) circulation fell by 19% in 2009, dropping from 26.2 to 21.3 million copies, with an overall decrease in the number of newspapers as well: just 82 were registered in 2010, in 29 European countries, compared with a total of 115 active in 32 countries in 2008. This substantial decline is also confirmed by the circulation figures (updated for 2008) for the countries analysed by the World Association of Newspapers, with the only increases seen in Luxembourg, where the free newspaper boom started in 2008 (+72.8% overall); Portugal (+2-4%, also driven by free newspapers); and Austria (+6.4%, significantly boosted by free newspapers). Paid newspaper circulation, by contrast, fell in every country. Table 12: Average daily newspaper circulation in European countries, 2006-2008 Countries

Paid

Free

Total

∆% 08-07

2006

2007

2008

2006

2007

2008

2006

2007

2008

Luxembourg*

304,8

304,8

297

0

53,5

322,3

304,8

358,3

619,3

72,8%

Sweden

466,2

449

436,4

158,8

152,5

138,7

Norway

601,2

580,3

570,6

0

0

Finland

514,7

491

482,8

46,3

45,7

22

37,9

625

601,5

575,1

-4,4%

601,2

580,3

570,6

-1,7%

561

536,7

520,7

-3,0%

Cf. the monthly newsletters available at www.newspaperinnovation.com

Newspapers and magazines

89


Denmark

287,3

279,8

262,6

478,8

367,5

222,4

766,1

647,3

485

Austria

340,7

344,8

331,7

Holland

287

267,9

270,1

-25,1%

95,2

83,4

124,1

435,9

428,2

455,8

6,4%

70,3

129,5

124,1

357,3

397,4

394,2

-0,8%

51,4

385,3

358,5

358,7

0,1%

300,2

292,2

283,1

-3,1%

United Kingdom*

335,4

308

307,3

49,9

50,5

Germany

297,9

290,5

283,1

2,3

1,7

Ireland

245,2

236,1

236,3

50,6

46,5

41,4

295,8

282,6

277,7

-1,7%

Spain

109,8

109,5

106,4

132,5

120,2

108,2

242,3

229,7

214,6

-6,6%

USA

241,2

212,6

200,3

18,2

13,1

11,5

259,4

225,7

211,8

-6,2%

France

155,8

153,9

152

42,9

51,6

53,8

198,7

205,6

205,8

0,1%

Belgium*

163,4

161,3

160,9

25,9

28,2

29

189,3

189

189,9

0,5%

116

112,4

86

77,8

81

85,6

193,8

193,4

171,6

-11,3%

144,6

135,2

133

32,3

34,4

32,5

176,9

169,6

165,5

-2,4%

Italy* Hungary Portugal

74,7

74,7

67,1

39,2

62,7

73,6

113,9

137,4

140,7

2,4%

Poland

138,9

123,3

114,5

39,9

15,7

15,4

178,8

139

129,9

-6,5%

Note: circulation per 1,000 adult inhabitants (aged 16 and over, with certain exceptions marked with*). Source: IEM elaboration of FIEG/WAN data.

Italy continues to distinguish itself from the rest of the European countries in the ratio between sales of subscription copies and newsagency sales. The fact that subscriptions are relegated to an utterly marginal position in Italy remains one of the greatest obstacles to market growth. By contrast, in those countries where subscriptions largely represent the most common vehicle for newspaper circulation (in Northern Europe above all), the newspaper industry benefits from the substantial advantage of a demand whose dimensions are much better understood, making it easier to devise production plans that are less vulnerable to fluctuations (Tables 13 and 14). Table 13: Newspaper circulation channels in major countries (2008) Countries

Subscription

Newsagents

Table 14: Magazine circulation channels in major countries (2008) Countries

Subscription

Newsagents

Holland

90

8

Finland

95

5

Finland

88

12

Sweden

90

10

Denmark

84

16

USA

87

13

Norway

78

22

Denmark

85

15

Sweden

76

19

Austria (2006)

68

32

Luxembourg

70

10

Hungary

60

40

Austria

67

12

Holland

58

42

Germany

65

35

Germany

49

51

Hungary

65

33

France

36

64

Belgium

49

51

Italy

36

64

France

31

69

Norway

30

70

8

92

Spain

23

72

Spain

Poland

19

79

Source: IEM elaboration of FIEG/WAN data.

Ireland

9

91

Italy

9

91

Source: IEM elaboration of FIEG/WAN data

In any case, the crisis is being keenly felt in foreign countries as well, and shows no signs of being a passing phenomenon23. The United States may serve as a case study, in its general outlines, for 23 Total expenditure for consumer magazines fell by 10.6% in 2009, according to PricewaterhouseCoopersâ&#x20AC;&#x2122; estimates. Cf. PricewaterhouseCoopers (2010), op. cit. The same source has estimated the global publishing market at 164 billion dollars.

90

Newspapers and magazines


signs of possible evolutions in the European market, and its indicator for advertising spending appears emblematic (Figure 5). Indeed, the indicator suggests that the crisis has spread to include online editions as well as the print media (-11.8% from 2009 to 2008). Fig. 4: USA - Newspaper advertising spending 2000-2009 Print TOT

On-line TOT

% YoY print

% YoY on-line

60.000

40% 31,48%

31,46%

30%

26,70%

-0,50%

30.000

3,90%

1,90%

18,80%

3.166

20% -1,80%

3.109

5,10%

2.664

1.541

1.216

40.000

2.027

50.000

1,51% -1,68%

-9,00%

10% -11,80%

20.000

0%

2.743

-9,40% -17,70%

-10% -20%

-28,60%

44.305

44.102

44.939

46.703

47.408

46.611

42.209

34.740

24.821

-30%

48.670

10.000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

0

-40%

Note: figures in millions of US$. Source: IEM elaboration of NAA data.

Moreover, the figures show a plunge in newspaper circulation in the US that started in the ’90s; indeed, in a survey of the leading 25 American newspapers, only the Wall Street Journal’s circulation, to all extents and purposes, held steady (0.7%) at the year’s end. Other legendary papers paid a heavier price for the shift in news consumption habits to other media supplying editorial content (primarly cable TV and Internet), a shift that translated into an overall decline of 6.1% on 2008’s performance. Fig. 5: Newspaper circulation* and number of newspapers published - USA 1940-2009

40.000

1387

1408

1422

1437

1452

1457

1456

1457

1468

1480 62.328

1400

1000 800 600 400 45.653

50.742

52.329

53.345

54.626

55.185

55.186

62.202

62.108

1600

1200

48.597

41.132

45.000

1800

55.578

50.000

2000

55.773

53.829

55.000

1745

1748

1763 58.882

60.000

1611

Titles 1772

65.000

1878

000 copies

1940 1950 1960 1970 1980 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

200 0

Note: * excluding Sunday editions. Source: IEM elaboration of Editor and Publisher International Yearbook.

And in spite of the fact that the total number of newspapers whose circulation at end-December 2009 was tallied (Figure 5) appears to be very nearly in line with the slight downward trend typical of the last decade, the figures for newspaper closures in the US paint a far darker picture: Newspapers and magazines

91


there were 21 fewer in 2009 compared with 2008, according to Editor and Publisher data; while 143 print newspapers folded in 2009, as per a survey by the blog www.newspaperlayoffs.com, 13 of which replaced their print version with an exclusively online version. Most recently, 40 folded in 2010. Not even the UK is immune from the negative trend, which has hit local newspapers in particular, while total circulation of paid newspapers fell by 2.2% in 2009 (in March 2010, according to ABC data, the Daily Telegraph and The Independent saw their circulations fall by 10%; The Times and The Guardian by 16%; with The Financial Times least affected at -6.4%).

92

Newspapers and magazines


Directory

93


Directory by Luca Murrau

1. The Italian market In 2010, the Italian market had to face the negative effects of the financial crisis, which led to reductions in revenues. To counteract the crisis, the large Italian directories sought new forms of strategic integration for their activities, with the aim of creating new synergies. The main Italian directory group, Seat Pagine Gialle, tried to contain the effects of the economic crisis on its turnover through the increase of revenues coming from its internet-based activities, seeking an increase in the rate of penetration in its existing online client base and in the number of newly acquired clients. In particular, such a strategy was supported by the launch of new online marketing products and services as well as by the sale of multimedia packages. At the same time, the group carried out structural changes to reduce operational costs, based on containing current expenses and redesigning some of the main operational processes. The difficult economic situation, which had negative repercussions on the traditional advertising market (which also continued to contract in 2009), nevertheless allowed a strong expansion of advertising and online services that led to consumers using new tools and new ways of searching for information. Consequently, in the second half of 2009, Seat Pagine Gialle adopted a new vision of its market of reference, including, in addition to the traditional off-line and online divisions, on-line marketing services (through the creation of websites according to the strategies of positioning Seat clients inside the Internet â&#x20AC;&#x2DC;ecosystemâ&#x20AC;&#x2122; with the aim of improving visibility, the measurement and analysis of the contacts generated through the web, etc.). In Italy, Seat Pagine Gialleâ&#x20AC;&#x2122;s share in the advertising market of printed and on-line directories is estimated at approximately 84%. In 2009, the group continued the process of strategic restructuring of its portfolio of subsidiaries that it had started in 2008. Such a process led to the decision, in June 2009, to leave the Turkish joint-venture Katalog Yayin ve Tanitim Hizmetleri A.S. and, in September, to leave the French market of directory assistance with the sale of the French company 118 000 SAS through the German subsidiary Telegate AG. As far as the most recent economic-financial results of the group are concerned, in the first half of 2010, the consolidated revenues decreased by 8.7% compared with the same period the previous year (463.22 million euros against the 507.325 million euros in the first half of 2009), partially compensated by the growth of online revenues in Italy (which showed an increase of approximately 60%). Year-on-year, however, in 2009 the sales revenues and performance reached 952.2 million euros: a drop compared to 2008, where the consolidated revenues were 1.0587 billion euros, with the performance of the online activities in Italy limiting losses. In the financial markets, Seat Pagine Gialle shares closed at the end of December 2009 at a price of 0.16 euros, approximately a 65.9% decrease compared with the price of 0.48 euros on January 1st 2009. The drop in price mainly occurred in the first months of the year; during the second half of 2009, the share price actually increased slightly (+1.2%), like other companies

94 Directory


in the directory sector (in Europe, the performance of Yell and Pages Jaunes shares were particularly positive). Seat Pagine Gialle shares reached their yearly peak (1.13 euros) around the days when a capital increase became operational, concluded on April 30th 2009 with the total subscription of shares offered. The negative performance of the shares, especially significant if compared to the performance of shares in the media market, was influenced by the structure of the Enterprise Value of the company, mainly constituted by the ‘indebtedness’ component. Slight reductions in the Enterprise Value of the company (decreased by 14.8% in 2009) are translated into more and more significant reductions of its market value represented by the stock-prices. This value was also penalised by the de-rating of the company and by the crisis in the financial markets. Table 1: Core products % incidence on total revenues, 2009 Paper

Quota

PAGINEGIALLE

Directory of Italian businesses

PAGINEBIANCHE

Residential telephone directory

27,8

Other paper products

37,1

Internet

0,1

PAGINEGIALLE.IT

Search engine specialised in commercial searches

Other Internet products

20,4

Telephone 89.24.24 Pronto PAGINEGIALLE

Provides value-added directory assistance services

12.40 Pronto PAGINEBIANCHE

Provides information about numbers in the directory

4,8

Total core revenues Totale ricavi core

90,2

Source: IEM elaboration of SEAT Pagine Gialle data

To respond to the objective of creating synergies that allow the use of new strategies to combat the restrictions in the market caused by the crisis, in 2010, Seat Pagine Gialle started a strategic partnership with SKY Italia. The first result of this partnership was the stipulation of a commercial agreement between the two companies that allowed small businesses to advertise on SKY during football matches. In the context of an evolution of the offer provided by Seat Pagine Gialle, from a multichannel perspective, this deal put the television channel (as well as printed, web and telephone directories) at the disposition of the SMEs, to guarantee maximum support and effectiveness to its clients’ communication and marketing strategies. The resulting synergy created by the partnership did allow the promotion of the local businesses to television audiences that are strongly localised, and at the same time, characterised by socio-demographic profiles that are very appealing to advertising investors. In virtue of the agreement, Seat Pagine Gialle thus became the first directory in the world to sell television advertising to its own core clients, constituted by small and medium-sized businesses. A further change in the structure of the directories market was - following the liquidation of Pagine Italia in 2008 - the progressive growth of Pagine Sì: the Umbrian company, operational since the end of 1996 in the multimedia advertising publishing and telephone directories sector, which recorded revenues of over 21 million euros in 2009, a higher figure than the 18 million euros recorded in 2008. But the really extraordinary thing is that this company has seen non-stop growth for thirteen years and has obtained an average increase in revenues of 20% since 2005.

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Table 2: Economic results of the main Italian operators Revenue

2009

2008

2007

2006

2005

2004

2003

% 09-08

% 09-03

Total SEAT – Pagine Gialle

952,2

1058,7

1090,2

1077,6

1061,9

1060,4

1056,7

-10,06

-9,89

21

18

nd

nd

nd

nd

nd

16,67

-

Pagine Sì

Note: data in millions of euros. Source: IEM elaboration of SEAT Pagine Gialle and Pagine Sì data.

Since 1996, the company has increasingly focused on offering services and information, both in printed form and through PagineSi online, free-of-charge, as is the delivery of telephone directories. The ElencoSì has been distributed in new provinces of the Centre and the North, thus expanding the company’s area of operations. Another significant player active in business information is Guida Monaci, the company working in the B2B sector founded by Tito Monaci in 1870. In the last few years, the group has succeeded in keeping pace with innovation optimising the use of its website, which has not only become a full-blown portal but also a point of reference for companies thanks to tools like the area “Information services for companies”, the publication of promotional videos directly on the home page and the sections “Bulletins”, “Case History” and “Articles” whose contents concern the commercial products sold by the different companies to be found in the database, thus becoming an additional further promotional vehicle. Following a 2008 agreement with Siseco, a company specialised in creating personalised computer solutions in CRM, CIM & IP Contact Management, has meant that its databank is easier to consult by companies. In 2010, Guida Monaci came onto the market with a new business model organised into two areas: Multimedia Publishing and Business Intelligence.

2. The European market The leading players on the directories markets abroad have also had to deal with the effects of the international financial crisis, which has led to a reduction in revenues. Companies have responded to this mainly through strategies that strengthen their products and the services they offer on Internet, which continues to offer competitors prospects and opportunities of growth. One of the main European directories, the French group Pages Jaunes, saw its revenues decrease by 2.4% in 2009 compared with the previous year. The French group’s operations are organised in two sectors: 1. Pages Jaunes in France: which are the activities of the group in France related to the publication and the distribution of directories and the sale of advertising space both in printed directories (Pages Jaunes, L’Annuaire) and online (“pagesjaunes.fr”). They also include the creation and hosting of Internet sites, telephone and text message helplines, the activity of online Small Ads (“annoncesjaunes.fr”) and several other activities like the publication of PagesPro and QuiDonc directories. 2. International & Subsidiaries: the subsidiary activities of the group, which mainly comprise the publication of directories for consumers and which operate outside France (Spain, Luxemburg and Morocco) and the development of complementary activities related to the publication of directories, like the Mappy geographical services and the direct marketing activities of Pages Jaunes Marketing Services. This sector also includes the Internet advertising activities of Horyzon Média. The overall turnover of the group amounted to 1.1639 billion euros in 2009, compared with 1.1928 billion euros in 2008. In a market that is under great pressure because of the crisis, the size of the reduction in revenues was considerably lessened by the growth of Internet services, whose turnover rose in 2009 to represent 42.3% of overall revenues (39.5% in 2008). The group’s websites in France, “pagesjanues.fr”, “mapping.com”, “annoncesjaunes.fr” and “pagespro.com”, recorded 7% growth in terms of the number of hits on the figures for 2008 and, taken together, they are the sixth most visited site in France. Both of the group’s activity sectors saw a contraction in revenues, but it was the Pages Jaunes

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sector aimed at the foreign market (nevertheless constituting a small part - 5% - of overall revenues) that performed particularly negatively. Between 2008 and 2009 it saw a 17.2% drop in revenues, compared with the reduction of 1.2% in the national sector, which actually represents nearly all of the group’s business. During 2009, the Pages Jaunes group continued to optimise costs in its various sectors of activity. It completed the reorganisation of QDQ Media in Spain and the recapitalisation of Pages Jaunes Petites Annonces, carrying out actions to cut and optimise costs. At the same time, the group continued its investment in the technology, commercial and marketing sectors, which are crucial activities in the group’s strategy. The biggest British directory, Yell Group, after an increase in revenues in 2009, recorded a decrease in proceeds in 2010, dropping 11.5% on the previous year. Yell Group is one of the main international directories that operates in printed, online and telephone activities in the advertising market in the UK, United States, Spain and Latin America. A partial counterbalance to the reduction in revenues of the group - entirely due to the negative performance of the UK group’s printed directories – came from the positive performance of its Internet activities, which saw their share of total revenue increase to 20% in 2010, compared with 15% in 2009. The initiatives aimed at producing savings in costs have, on the one hand, reduced the negative impact of the fall in revenues and, on the other, compensated for the greater resources devoted to additional investments aimed at recovery. Table 3: Overall revenues of the main foreign directories (millions of euros) Directory Pages Jaunes Group Yell Group*

2010

2009

2008

Var. % 10/09

Var. % 08/09

-

1.164,00

2.450,84

2.768,58

1.192,90

-

-2,42

2561,68

-11,48

8,07

Note: (*) the financial year of the group ends on 31 March each year. Source: IEM elaboration of data from the financial statements of Pages Jaunes and Yell Group

In 2009 Yell Group completed the refinancing process that had started following the signing of an agreement on 27 April 2006 (“Old Facilities Agreement”) with Citigroup Global Markets Limited, Deutsche Bank AG, Goldman Sachs International, HSBC Bank and other financial institutions, which allowed Yell Group to obtain long-term loans and favourable conditions of access to credit. This was replaced by the “New Facilities Agreement” that came into effect on 30 November 2009. Again, in the year 2009 Yell Group launched an online video channel, provided by VideoJug, one of the most important experts in the production of short video contents. In addition, Yell stipulated a strategic alliance with Google with the aim of furnishing advanced and sophisticated marketing services to more than 450,000 SMEs in the UK. In 2010, Yell Group launched a series of dynamic services for small businesses available online through the new Yellowbook360 Business Center, which helps companies to grow their business, increase their visibility, and offers them a variety of marketing products and support services on the portal yellowbook.com.

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Recorded music

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Recorded music by William Ricci

1. The Italian market High hopes for the digital music markets were sadly dashed over the course of 2009, a year which saw Italy, Europe and the World register a new drop in revenues due to a complex mix of factors, one of the major causes being undoubtedly file sharing. Before taking a closer look at the reasons that make a trend reversal so problematic, we shall start by describing the current situation in Italy based on sales numbers. As in previous years, the trends based on different industry data sources tend to vary quite considerably, with SIAE1 (Italian Society of Authors and Publishers) and FIMI2 (Italian Music Industry Federation), in particular, reporting sales figures that are often at odds3. SIAE reported an approx. 10% increase in recorded music sales between 2007 and 2008 in contrast to FIMI, which recorded a 22% drop, a figure essentially in line with the fall in value. The drop in quantity continued through 2009 with a further contraction, which FIMI estimated at around 18% with just over 15 million units sold. Fig. 1: The Italian record market, 2003-2009-millions of units (album or equivalent) 120 102,7

Fimi

99,7

100

91,5

40

M&D

Siae

88,4 80,3

80 60

Ifpi

93,5

50,08 38,9 38,3

52,1 33,6 37

51,1

40,5

37,5 31,9 27,5

24,1

20

18,8

15,3

0 2003

2004

2005

2006

2007

2008

2009

Source: IEM elaboration of FIMI, IFPI, M&D and SIAE data.

If the data is subdivided into categories, several positive elements come to light, such as the excellent results posted for sales of singles, up by 100%, driven by the sale of CDs which, with 1 Italian Society of Authors and Publishers, Dati di vendita dei supporti fonografici per il 2008, 2010. 2 Italian Music Industry Federation, Dati di mercato – anno 2009, 2010. 3 The enormous different between the FIMI figures and those from SIAE can be partially interpreted from a look at the nature of the information. As the only national society collecting artists’ copyright fees, it has a detailed breakdown of the sales’ licences granted. FIMI monitors the main companies’ “sell-in” figures.

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99


as many as 550 thousand copies sold, rose by as much as 99%. This does in part reflect a change in tastes of the average music listener as well as in music company strategies, which today tend to revolve around the exploitation of the single rather than promoting the more organic and complex music listening experience provided by the album. Performance in value terms has sadly not reversed the decline that has been affecting the recording industry ever since 2003. The downward slide in 2009 was constant and registered both by FIMI and its international counterpart IFPI (International Federation of the Phonographic Industry) respectively reporting drops of 19% and 17%. Analysis of the FIMI data, which provides more detailed components, shows that almost all physical units register a big drop in turnover. This is particularly true of the CD album sector, the biggest earner in the physical support market with revenues of 114.1 million euros, which dragged the entire sector down by approximately 24% and total turnover figures of almost 124 million euros. Some encouragement was however to be gained from the 7% growth posted by CD singles, which meant a 5% increase for the entire singles market and almost 2 million euros in total generated turnover. Fig. 2: The Italian recorded music industry, 2003-2009, millions of euros* 700 Fimi 535

M&D

Ifpi (retail)

535 478

500 400

Ifpi (trade)

574

600

402 370 333

392 344 306

390

300

392

364

343 305

306 274

301 266 222

260 219 178

200

226 181 144

100 0 2003

2004

2005

2006

2007

2008

2009

Note: The IFPI (trade) information for 2009 was calculated based on the average 2009 dollar/euro exchange rate of 0.72. Source: Italian Exchange Office. IFPI original amount: 252 million dollars and IEM elaboration and estimates based on FIMI, IFPI and M&D data.

Fig. 3: The Italian digital & physical recorded music market, 2005-2009, millions of euros 450

450 400

12 24

350 300

Musica & Dischi digital

27

200 150

340 276

100

14

197

14

200 150

233

12

250 29

378

Fimi physical

350 300

25

250

400

16 293

208

162

50

50

124

0

0 2005

2006

2007

2008

2009

The Italian recorded music market based on FIMI figures: 144 million euros in 2009 (124 physical & 20 digital)

2005

Recorded music

2006

2007

2008

2009

The recorded music market in Italy based on Musica & Dischi figures: 226 million euros in 2009 (197 physical & 29 digital).

Source: IEM elaboration and estimates based on FIMI and M&D data

100

20

258

100


The figure above is of course inclusive of the digital market which, despite its ongoing growth since 2005, cannot yet compensate for the serious economic losses that its physical counterpart registers every year. The FIMI data clearly shows how the physical market fall off is getting progressively worse, dropping by â&#x20AC;&#x201C;22% between 2008 and 2007 and then by â&#x20AC;&#x201C;23% between 2008 and 2009, and while the total volume of physical and digital sales combined manages to stem the haemorrhage slightly (-20% in 2008 and -19% in 2009) it is certainly unable to reverse the overall market trend. It would appear, therefore, that a difficult future lies ahead for the recording industry in Italy and the only hope for the market lies not so much in a levelling off of the physical sectorâ&#x20AC;&#x2122;s downward spiral, which is instead only likely to get worse, but rather in a substantial growth in the various forms of digital exploitation that could reverse the market trend and ultimately take over the entire recorded music sector. However, this very complex digital world does also have its problems. In spite of an overall growth in 2009 of 27% compared to 2008 with over 20 million euros in turnover, digital distribution via mobile platforms has not taken off. From 2006 onwards, sales of music via smartphone have constantly decreased, dropping from over 9.6 million euro to just under 4 million euros, (-30% in 2008 alone). This performance undermines the commonly held belief that the Italian market is extremely open and receptive to the new products and opportunities offered by mobile platforms, while instead providing ample proof of the strong attraction for PC and Notebook-based platforms, which have seen a 34% increase in music sales through online purchases and subscriptions to web service providers. This trend can probably be accounted for by a shift in consumer behaviour that has favoured online home downloading of music, which is subsequently transferred onto the increasingly popular mobile devices such as iPods and Mp3 players. Fig. 4: Value of the digital, mobile and internet music market in Italy 2006-2009, millions of euros 25 internet

mobile

advertising

Total digital

20,4

20 16,1 14,6

14,5

15

12,1 9,6

10 5

8,0

5,6

5,4

4,2

9

3,9 0,7

0 2006

2007

2008*

2009*

Note: The total also includes other revenue streams: the 2008/9 internet and mobile data also includes service subscriptions. Source: IEM elaboration of FIMI data

Another factor that needs to be taken into consideration is the growing importance of advertising (and copyright) revenue produced by distributing content via streaming. For the first time in 2009 these previously unconsidered business models generated over 700,000 euros (about 0.7% of the total). This process can partly be attributed to the recent agreements reached between YouTube and SIAE on an online streaming distribution model that generates profits for every single copyright-protected product accessed. The agreement envisages a model for the allocation of advertising revenues that includes the content owners4 and guarantees them a minimum return. These new business models based on the exploitation of the opportunities provided by the Internet could in the future lead to a stabilisation of a market that is still 4 Claudio Tamburrino, Youtube e SIAE, licenza di monetizzare (Youtube and SIAE, a license to cash in), Punto Informatico, 2010.

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101


fairly unexplored thanks to the possibility of generating income through systems of copyright protection, despite the fact that the enjoyment of the protected content remains free. Indeed, the remarkable 27% growth in music streaming via computers in 2009 certainly deserves to be stressed, along with the excellent performance recorded by music album downloads (+32%), in stark contrast to traditional album market, but most significant of all is the vast and constantly growing number of potential consumers, numbers that are partly whittled away by the practice of illegal file sharing (approx. 23% of internet users), which is however seeing harder times since the 2009 Italian High Court ruling, which has enabled magistrates to block internet access when there is evidence of illegal practices5. The Pirate Bay6 case in particular, made it clear that the providersâ&#x20AC;&#x2122; full collaboration is urgently required to contrast and block the growth of music exploitation models which are both illegal and damaging to the market. Table 1: Digital Market, Italy, euros

Mobile Downloads

Online Downloads

Euro 4.749.625

4.083.239

666.386

16%

4.512.826

3.417.218

1.095.608

32%

33.875

14.413

19.462

135%

Music videos

153

328

-175

-53%

Streaming

Other

1.915.970

1.510.830

405.140

27%

TOTAL

11.212.449

9.026.028

2.186.421

24%

Master Ringtones

1.569.705

2.754.518

-1.184.813

-43%

Singles

1.944.567

1.925.662

18.905

1%

Ringback Tunes

108.357

121.409

-13.052

-11%

Music videos

77.489

150.917

-73.428

-49%

Other products

27.085

310.357

-283.272

-91%

Streaming

87.731

148.249

-60.518

-41%

3.814.934

5.411.112

-1.596.178

-29%

Subscriptions (independent services) - Online

978.619

30.454

948.165

3113%

Subscriptions (independent services) - Mobile

158.954

208.151

-49.197

-24%

Subscriptions (dependent services )

411.640

0

411.640

100%

1.549.213

238.605

1.310.608

549%

734.722

0

734.722

100%

2.168.260

346.433

1.821.827

526%

Advertising

Subscriptions Uncashed down payments & one-off payments

Uncashed down payments & one-off payments

Other

Other digital music content

TOTAL Value of Digital Market

966.534

1.109.659

-143.125

-13%

20.446.113

16.131.837

4.314.276

27%

Source: IEM elaboration of FIMI data.

102

Difference %

Album

TOTAL

5 6

Difference

Single

TOTAL

Advertising

Euro

IFPI, IFPI Digital Music Report 2010, 2010. Italian version. Swedish torrent file search engine.

Recorded music


2. The European market According to the IFPI7, markets throughout Europe registered a negative downturn, with the exception of the United Kingdom which, with its 1.570 billion dollars in turnover, improved its performance by 1.9% compared with 2008. The British situation is a very particular one. It’s historically prominent role both in Europe and worldwide (market leader in Europe and ranked third behind the US and Japan on a global scale) have also enabled it to maintain its position as one of the main sources of musical inspiration and music production. As in Asia last year8, the UK has tested the digital market’s ability to compensate for economic loss in the physical support sector. The traditional market (including copyright revenues) dropped by approx. 1% compared to a 17% increase in digital sales, adding further credence to the notion that the future for the music industry currently lies in the ability to satisfy the demand for digital content and a readiness to boost sales and electronic access in this area. It is also worthwhile pointing out how the British social fabric manages to support the production of music in line with worldwide tastes and the discovery and fostering of artistic talent, a case in point being Susan Boyle whose debut album I Dreamed a Dream (Syco – Columbia) was the highest selling album in the world in 20099.

1.574

Italy

Spain

1.533

1.580

France

1.212

246

252

305

287

948

974 328

393

327

383

369

428

1.000 500

Germany 1.544

1.893 1.126

1.411

1.248

1.500

1.457

2.000

UK 1.698

2.054

2.500

2.162

Fig. 5: European music recording industry turnover, 2005-2009. Millions of dollars. Trade.

0 2005

2006

2007

2008

2009

Source: IEM elaboration of IFPI data.

Other European markets, however, confirmed the negative trend that has been afflicting them since 2007. Italy experienced one of the worst downturns of all (-17% over 2008) with Spain being the only country to post even worse figures for 2009. More specifically, the German and French markets managed to cut their losses, falling back by just 3% and 2.7% respectively compared with 2008. Spain however, with its mere 246 million dollars’ worth of turnover, down 14% on the previous year, ranked a distant last in terms of value among the five main European markets. Even though the digital markets did not entirely compensate for the losses in the traditional markets (except in the UK), they did provide some good news, with consistently positive trends since 2005. The only drop was registered by the French market, down 2% from 2008 with 131 million dollars in turnover. Growth in Germany and Spain was instead very positive, up 27% and 23% respectively with Germany, in particular leading the pack, with over 40 different 7 International Federation of the Phonographic Industry, L’économie de la production musicale – edition 2010, 2010. 8 William Ricci, “Musica Registrata”, in Barca F. (edited by), L’Industria della Comunicazione in Italia. Dodicesimo Rapporto (The Communication Industry in Italy, Twelfth IEM Report), Guerini, Milano. 9 The British Recorded Music Industry, The Market – Useful facts. Source: http://www.bpi.co.uk/musicbusiness/article/the-market.aspx.

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103


digital music download service providers including Amazon Mp3 and iTunes Germany10. The UK and Italy also showed good growth, both up 17% compared to 2008, but whereas in Italy this by no means compensated for the serious losses incurred in the physical sector, in Britain the digital sales revenue managed to compensate for loss in physical sales revenue, albeit by a slim margin. Fig. 6: European digital music sales, 2005-2009. Millions of dollars. Trade 350 UK

Germany

France

Italy

Spain

300 252

250 200

163

150 100

295

156 131

133 122

123 94 39

50

76

70 67

69 28

16

33 32

28 26

25 24

23 16

3

0 2005

2006

2007

2008

2009

Note: Italy 2008: information based on the growth trend shown by FIMI data for 2008 as applied to IFPI figures for 2007; Spain 2008: information based on the growth trend shown by Promusicae in 2008 as applied to the IFPI figures for 2007. Source: IEM elaboration of IFPI data.

The liquid market is composed of online and mobile components. There is, unfortunately, no detailed information available for the UK and German markets, although in the past these have seen the online digital sector gain a clear advantage over the mobile service sector. Between 2005 and 2007, there has been progressive growth in the online quota, which has reached 69% in Germany and 71% in the UK. Given the strong digital connotations of these markets and their considerable impact on turnover totals, they should be taken as virtuous models, whose visions and strategies it is worthwhile copying, which would seem to indicate that it is advisable to favour online service provision models seeing as they have proven to be more profitable than the mobile ones. Table 2: Digital Music Market, Europe, 2005-2009, Online and Mobile quotas Online Mobile

2009

2008

2007I

2006I

2005

online

mobile

online

mobile

online

mobile

online

mobile

UK

N/A

N/A

N/A

N/A

71%

29%

70%

30%

62%

38%

GERMANY

N/A

N/A

N/A

N/A

69%

31%

69%

31%

66%

34%

58%**

42%**

39%

61%

38%

62%

47%

53%

FRANCE

50.5%** 37.9%**

ITALY

59.3*** 19.1%*** 59%***

SPAIN

53%****

41%***

47%**** 37%**** 63%****

online

mobile

44%

56%

24%

76%

31%

69%

N/A

N/A

22%

78%

N/A

N/A

Note: The sum of the mobile and online share for the French and Italian 2009 data is less than 100 because the total of the respective digital markets includes revenues generated by other sources. (Italy: Ad-Supported Income, Unearned Advances & One-Off Payments, Other Digital Music Content; France: Streaming). Source: IFPI, * IFPI data refers to the first six months of the year; **Syndicat National de lâ&#x20AC;&#x2122;Edition Phonograpique; ***FIMI; ****Promusicae;

By way of confirmation of the above observations we think it is important to report the drop in online share posted in France, which for 2009 coincides perfectly with the decrease in value recorded for that digital market (-2%). Both Italy and Spain also see their online business overtake mobile in volume terms and the latter particularly, as a component part of its 23% growth in digital sales, saw its online business rise from 37% to 53% in 2009, further proof 10

104

IFPI, IFPI Digital Music Report 2010, 2010. Italian version.

Recorded music


of how strategically important good management of digital web service provision can be, particularly if it goes hand-in-hand with effective measures against illegal file sharing practices. In conclusion, we would like to point out how the slight growth of the online share in Italy, +0.3% between 2008 and 2009 over mobile, is mostly ascribable to the bad performance of the mobile sector, which as previously mentioned shrunk by 30% between 2008 and 2009.

3. The world market The global market recession in this field has not let up either. In 2009, recorded music generated turnover worth just over 17 billion dollars, a 7% drop on 2008. Unfortunately this is the most serious fall off since 2006 and demonstrates the international markets’ difficulty in properly managing the new digital distribution opportunities. In 2009, the two largest world markets, USA and Japan, saw their revenues fall by almost 11%. This accounted for 80% of the overall world drop in sales, which without these specific losses in revenue would only have fallen back by approx. 3.2%11. Among the reasons for this we must certainly include the repercussions of the serious economic crisis and the consequent drop in consumer spending, particularly in the US. If one looks at the shares of the world music industry owned by the various recording companies, the Universal Music Group still holds a leading position with over 27% of overall turnover followed by Sony Music Entertainment with almost 21%, Warner Music Group with 15% and EMI with 12.2%. Independent labels’ share of the market is suffering a relentless contraction, dropping from the 27.1% of the market share earned in 2007 to the 24.7% figure posted in 200912. Table 3: Record industry, worldwide, 2005-2009, millions of dollars. Trade. Value

2009

var%

2008

var%

2007

var%

2006

var%

2005

17.026

-7,2%

18.347

-5,4%

19.398

-0,9%

19.587

-5%

20.795

Source: IEM elaboration of IFPI data.

As might be expected, the global digital market is still rising in value, although its growth trends are decreasing considerably. Compared to the previous years (+ 107% in 2006, +35% in 2007 & 2008) total digital revenues in 2009 ‘only’ increased by 9.2%, with turnover climbing to just over 4.3 billion dollars. This is partly explained by the lacklustre performance of North America, a continent which is both strategically and economically crucial (and which recorded an increase of just 1.1%), despite an overall increase in digital distribution services and greater level of penetration in the country’s many markets. Revenues from the digital market in the first half of 2009 break down as follows: 61.9% went to the uncontested leader iTunes, aided by a shrewd industrial policy that links the download system to the copyrighted reproduction system used on iPods. Trailing far behind are its other competitors: Amazon Mp3, Rhapsody, Zune Marketplace and Napster with market shares of 7.6%, 3.7%, 2.6%, 1.5%13 respectively. Table 4: Worldwide digital music revenue, 2005 -2009, millions of dollars. Trade. Value

2009

var%

2008

var%

2007

var%

2006

var%

2005

4.307

9,2%

3.944

35,5%

2.909

35%

2.154

107%

1.039

Source: IEM elaboration of IFPI data.

The only truly positive note in the global situation is the growing incidence of the digital market on total market value. From 2005 onwards the revenue share attributable to digital use 11 Robert Andrews, ’09 Music Sales Shed $1 Billion; U.S. Downloads Stagnant, paid Content: UK, 2010. 12 Editorial, Sony Music makes gain on dominant Universal in 2009, Music & Copyright’s Blog, 2010. Source: http://musicandcopyright.wordpress.com/ 13 Editorial ( NPD data), NPD Musica Market Share – Report For The First Half 2009, RouteNote Blog, 2009. Source: http://routenote.com/blog/npd-group-music-marketshare-report-for-the-first-half-of-2009/

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105


and exploitation has grown from 5% to 25%. However, it should be noted that the 2009 results are mainly due to a drastic decrease in the physical market (-12.7% over 2008, net of copyright revenue), rather than an increase in digital, which has shown much more substantial growth in the past. Fig.7: Music industry worldwide, physical - digital, 2005-2009, %. Trade. 25.000 Physical and performing rights

5%

20.000

11%

15% 21%

15.000 10.000

Digital

25%

95%

89%

85%

79%

5.000

75%

2005

2006

2007

2008

2009

Source: IEM elaboration of IFPI data.

Hope, therefore, remains that digital revenue may compensate for the losses suffered by the physical market sector in the future. Various countries have seen an increase in total market value thanks to excellent performance shown by components of the digital market in 2009, not only in the UK (the only European example) but also in Mexico, Thailand, Australia and South Korea14. Of course, the widespread growth of the digital market is clearly hindered by illegal forms of digital exploitation, as well as the contraction in consumer spending owing to the recession. Not surprisingly, John Kennedy, CEO of IFPI has often expressed his approval of the introduction of drastic measures against those responsible for fostering a climate of impunity towards those engaging in illegal practices, citing as examples the legislation introduced in Taiwan, South Korea and France and the process by which these countries are attempting to make ISPs take responsibility for these practices, while at the same time calling for help from the State15. We can, therefore, report the positive increase in general revenues generated by the exploitation of copyright which, taking advantage of web technologies and products in other entertainment sectors (e.g. videogames such as Guitar hero and Rock Band), have increased turnover by 7.6%, generating approximately 785 million dollars in 2009 and almost a 5% share of the entire recording industry.

14 15

106

Robert Andrews, â&#x20AC;&#x2122;09 Music Sales Shed $1 Billion; U.S. Downloads Stagnant, paid Content: UK, 2010. IFPI, IFPI Digital Music Report 2010, 2010. Italian version.

Recorded music


Advertising

Musica registrata

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Advertising 1. Advertising: overview 2009-2010 The economic downturn that characterised late 2008 and 2009 very slowly began to loosen its grip in the first half of 2010, when the first signs of positive growth were shown in the international economy and on the advertising market. However, at the current rate of recovery it is likely that it will be close to 5 years before the market rises to return to the levels of 2008. In this context, advertising proved – once again - to be extremely sensitive to the general economic situation. In Italy, as in the rest of the world, the drop was far sharper than the country’s GDP wealth marker yet while the economic recovery is particularly sluggish, the advertising market is finding its feet more rapidly. What’s however without doubt is that where the drop in GDP in 2009 was around 5%, in advertising it was over 13 percentage points. The scenario was different for below-the-line communication, which continued to show a positive performance and has partially compensated for the overall loss in the market, settling at just under (though almost in line with) the sloping GDP curve. Fig. 1: Advertising investment and GDP curves, Italy (1990-2009) 25,0 GDP 20,0 ADVERTISING SPENDING (CLASSIC COMMUNICATION METHODS)

15,0

ADVERTISING & RELATIONAL (MARKETING SPENDING)

10,0 5,0 0,0 1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

-5,0 -10,0 -15,0

Source: IEM elaboration of data from FMI (GDP at present prices); Nielsen Media Research; IAB, Interactive Advertising Bureau; UPA.

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If we take into consideration the investments in the traditional advertising media alone (press, television, radio, billboards, cinema and Internet), the worldwide market, according to Zenith Optimedia figures, has dropped by 10.2%, with an overall market turnover of 443.7 billion dollars compared to the 494 billion of 2008. Zenith Optimedia forecast a very slow recovery over 2010, ending in a final turnover increase of 0.9%. Growth should become more robust in the next two years with increases of close to 4% in 2011 and 5% in 2012, although even then, the expected results in 2012 results will not overtake 2008 levels. Fig. 2: Advertising investment worldwide (2005-2012F) 600,0

15 Global advertising (bn $)

492,7 12,6

500,0

Var. % yoy

494,0

437,5

443,7

487,4

465,1

447,7

10

409,8 6,8

400,0

5 4,8

3,9

300,0

0

0,9

0,3

200,0

-5

100,0

-10 -10,2

0,0

-15 2005

2006

2007

2008

2009

2010E

2011F

2012F

Note: billions of US$ at current prices (average exchange rate for 2008). Source: IEM elaboration of Zenith Optimedia data.

Fig. 3: Advertising investment worldwide, by macro areas (2007-2011F) North America Central-Eastern Europe

2011F

156

2010E

153

2009

157

2008

180

2007

Western Europe Latin America

20%

114

109

108

106

107

121

40%

60%

30

35

21

28

33

19

104

28

31

18

107

35

30

20

31

105

125

188

0%

Asia-Pacific Africa-Middle East-RoW

80%

27 17

100%

Note: billions of US$ at current prices (average exchange rate for 2008). Source: IEM elaboration of Zenith Optimedia data.

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In the more mature world markets, such as North America and Western Europe, the fall was particularly intense and 2010 spending is still forecast at below 2009 levels with slow recovery over the two subsequent years. This also holds true for Central and Eastern Europe. The Latin American and Asia-Pacific markets will be more dynamic, driven by the good performances of Brazil and China (which could even be termed excellent considering the world economic context). In particular, the Asian market should, for the first time ever, end ahead of Western Europe in 2010 in value terms. While mass media communication on the Italian market registered a poor performance in 2009, dropping 13.3% according to a mix of Nielsen, UPA and Assocomunicazione data, the below-the-line performance was actually up by 1.5% (UPA estimate). Italyâ&#x20AC;&#x2122;s national economy fell by 5%, while the market share of above-the-line advertising investment dropped further, by another 0.6% of the GDP, below the bottom line. The market share of non-media communication, such as direct marketing, promotions, P.R., sponsorships and events, which was estimated to account for over 50% of commercial communication investment overall by Assocomunicazione and UPA (Table 1), grew to 0.77% of GDP, creating an aggregate advertising communications total equal to 1.36% of GDP in 2009 (Fig. 4), dropping slightly compared to 2008. Fig. 4: Advertising investment, above & below-the-line/GDP - Italy (1999-2009) 1,80%

Above-the-line investments/GDP

1,60%

Below-the-line investments/GDP

1,40% 1,20%

0,83%

0,84%

1,00%

0,85%

0,81%

0,78%

0,76%

0,68%

0,64%

0,64%

0,65%

2001

2002

2003

2004

0,73%

0,73%

0,72%

0,77%

0,66%

0,67%

0,67%

0,65%

0,59%

2005

2006

2007

2008

2009

0,74%

0,80% 0,60% 0,66%

0,70%

0,40% 0,20% 0,00% 1999

2000

Source: IEM elaboration of FMI (GDP at current prices); Nielsen Media Research; IAB, Interactive Advertising Bureau; UPA data.

The market evolution, as the solid performance of the below-the-line component demonstrates, essentially revolves around the cross contamination of the different sectors of the advertising business (the key word here being â&#x20AC;&#x153;integration), and its ability to react to market changes with increasing speed, without jeopardising certain fundamental strategic aspects such as the increasing engagement with the consumer. Direct response, or below-the-line communication, such as direct marketing, events, sponsorships, promotions and P.R., provide excellent ways of fulfilling this demand and have registered a 1.5% increase in 2009, accounting for 54% of overall communications spending (almost 10.5 billion euros). Even though it is difficult to identify and analyse such fragmented and diverse segments, Assocomunicazione expects an overall growth of 2.5% in this area for 20101.

1 Ref. Assocomunicazione, Comunicare Domani, 2010. It should be noted that Assocomunicazione estimates the direct marketing sector to be worth almost double the UPA forecast. UPAâ&#x20AC;&#x2122;s more conservative estimate has been used for these analyses.

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Tab. 1: Allocation of above and below-the-line investments, Italy (2005-2009) 2009

2008

% Share

M€

2007

% Share

M€

2006

2005

M€

% Share

M€

% Share

M€

% Share

Δ% Δ% 09-08 09-05

8.843

45,8

10.196

49,8

10.178

50,3

9.567

49,6

9.250

49,5

Total BTL 10.445

54,2

10.293

50,2

10.042

49,7

9.709

50,4

9.419

50,5

1,48

10,89

TOTAL

100,0

20.489

100,0

20.220

100,0

19.276

100,0

18.669

100,0

-5,86

3,32

Total ATL

19.288

-13,27 -4,40

Source: IEM elaboration of Nielsen Media Research, IAB, UPA, Assocomunicazione data.

Tab. 2: - Relational marketing investment in Italy (2005-2009) 2009

2008

2007

2006

2005

Δ% Δ% 09-08 09-05

M€

% Share

M€

% Share

M€

% Share

M€

% Share

M€

% Share

Direct Response

2.425

23,22

2.425

23,56

2.372

23,62

2.314

23,83

2.271

24,11

0,00

6,78

Promotions

4.350

41,65

4.300

41,78

4.185

41,67

4.059

41,81

3.937

41,80

1,16

10,49

P.R.

2.150

20,58

2.103

20,43

2.040

20,31

1.927

19,85

1.842

19,56

2,23

16,72

Sponsorship/ 1.520 Events

14,55

1.465

14,23

1.445

14,39

1.409

14,51

1.369

14,53

3,75

11,03

100

10.293

100

10.042

100

9.709

100

9.419

100

1,48

10,89

TOTAL

10.445

Source: IEM elaboration of UPA, Assocomunicazione data.

2. The Italian media mix The hardest hit by the 2009 economic crisis among the traditional forms of media advertising was undoubtedly press advertising which, according to Nielsen data (Table 4), dropped by 21.6% on its 2008 performance, the result of a 16% fall in daily newspaper advertising and 28.7% for magazines. The seemingly irreversible negative trend in press advertising (for the most ascribable to changes in news consumption habits, digital content distribution and the difficulty in cashing in on access to daily news websites and an even steeper drop in printed copies sold), was compounded by the economic downturn and the drop in investments, with available resources being mostly siphoned off towards media that guaranteed a higher level of coverage such as television, which only dipped by 10%. The same argument holds true for magazines, which are financed by lower spending advertisers and therefore more sensitive to negative economic factors. Nielsen reported that press advertising accounted for 29.9% of above-the-line (ATL) advertising by end 2009, down from 34.4% in 2008. If these figures are then combined with those recorded by other institutes, these same indicators become 31.8% for 2008 and 27% for 2009. With reduced advertising in other media, television’s share of ATL investment according to Nielsen rose to 54.5%. As UPA and Assocomunicazione data elaboration assigns higher values to radio and billboard investment and also takes into consideration IAB (Interactive Advertising Bureau) data on web based advertising, these institutes estimate the television share to amount to 49.2% of the market. Whereas the impact of 3D programming added to the efforts to improve cinema advertising in this format have bolstered investment in this marginal market, which has limited its losses to 4% and, besides the Internet, was the highest performing media in 2009, with a total investment of 55.7 million euros, which according to Nielsen accounts for 0.7% of total advertising investments. UPA and Assocomunicazione estimate that external advertising (billboards, posters, urban Advertising

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decor, airports, signs etc.) was worth 619 million, equivalent to a -19% difference. Nielsen data, limited to billboards2, reported a greater loss of -25%, which was partially compensated for statistically with revenues of 99 million euros from so called “out of home” or transit advertising: dynamic communication on public transport and in airports. However, the most important figure was undoubtedly the one posted by advertising promoted via the new digital technologies, which seem capable of breathing a new lease of life into the sector. The only advertising medium to post a positive result, albeit down compared to previous years, was the Internet, a term used here to embrace display advertising, paid search, directory on line and mobile advertising. IAB reported the total value of these investments to equal 849 million euros, an increase of 6.4% on 2008, while Nielsen registered a 7.3% increase up to 585 million euros. Tab. 3: Media mix Italy, 2005-2009 (%) 2009

2008

2007

2006

2005

% 09-08

% 09-05

Press daily newspapers

17,09

17,82

18,78

18,27

18,83

-0,73

-1,74

Press magazines

9,92

12,08

13,05

13,55

13,22

-2,15

-3,29

Television

49,29

47,58

46,38

48,07

50,47

1,71

-1,18

Radio

6,48

6,65

6,53

6,17

6,02

-0,17

0,46

Billboards etc.

6,99

7,47

7,89

8,05

8,21

-0,48

-1,22

Cinema

0,63

0,57

0,69

0,80

0,90

0,06

-0,27

Internet

9,60

7,83

6,68

5,10

2,36

1,77

7,24

Source: IEM elaboration of Nielsen, UPA and Assocomunicazione data.

Tab. 4: Traditional media advertising investment in Italy (2005-2009) 2009 Media

2008

2007

2006

2005

∆% ∆% 09-08 09-05

M€

% Share

M€

% Share

35,97

3.043,64

35,58

2.964,31

35,04

-21,64

-19,43

1.773,07

19,75

1.716,41

20,07

1.713,71

20,26

-16,00

-17,84

1,59

128,29

1,43

31,21

0,36

28,04

0,33

-26,60 267,03

1.231,48

13,98

1.328,48

14,80

1.296,02

15,15

1.222,56

14,45

-28,74

-28,22

54,53

4.687,40

53,19

4.720,29

52,57

4.598,78

53,76

4.668,74

55,18

-10,15

-6,64

5,46

487,66

5,53

476,08

5,30

440,67

5,15

408,60

4,83

-7,74

6,78

169,60

2,12

227,20

2,58

200,65

2,23

196,96

2,30

198,70

2,35

-25,35

-14,64

55,75

0,70

58,32

0,66

69,79

0,78

76,19

0,89

83,04

0,98

-4,41

-32,86

585,19

7,32

321,19

3,64

281,93

3,14

197,58

2,31

137,06

1,62

5,15

326,96

7.994,28

100

8.811,81

100

8.978,58

100

8.553,83

100

8.460,44

100

-9,28

-5,51

M€

% Share

34,39

3.229,83

1.658,34

18,82

1,29

140,21

10,98

4.358,94 436,32

M€

M€

% Share

29,88

3.030,03

17,61

% Share

Total Printed press 2.388,49

Daily newspapers 1.407,99

Free press 102,92

Magazines 877,57

Television Radio Billboards etc. Cinema Internet TOTAL

2 Since May 2009, the Nielsen AdEx databank has been monitoring information on transit advertising managed by IGPDecaux on public transport vehicles, metros, airports and buses. The separate data for this item is included in Table 4.

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Main variations compared to Nielsen data Radio (Assocomunicazione) 573

-

678

-

665

-

590

-

557

-

-15,49

2,87

-

803

-

770

-

759

-

-18,90

-18,58

-

680

-

488

-

218

-

6,39

289,45

Billboards (Assocomunicazione) 618

-

762

Internet + Mobile (IAB Italia) 849

-

798

Note: Information for Internet, supplied by Assointernet and IAB Italia, includes display, search and other types of advertising; The number of cinema screens reported in 2008 is not comparable with the number of screens from previous years.; data on billboard advertising reflects new monitoring methods adopted in the range of years; the total investment in Table 3 does not correspond to the total in Table 1 because Table 3 uses Nielsen data only. Research data from other institutes has been inserted to reflect the highest differences in results.

The negative curve for print media continued over the first six months of 2010, resulting in a further loss of 3.5% on the already steep drop recorded in the first half of the previous year. Paid circulation daily newspapers essentially maintained their standing with a positive performance of + 0.5%, though one canâ&#x20AC;&#x2122;t avoid pointing to significant differences within the sector (national advertising in the press kept its head above water, but advertising in the local press was down, even though it lost less the previous year compared to nationwide dailies, while the classifieds dropped by 5% continuing their migration towards the Internet). In contrast, the free press recorded a drop of 8%, with nationwide advertising faring worst, and magazines continued their unstoppable decline, losing a further 9%. Tab 5: Traditional Advertising media investment in Italy (1st H 2010 vs 1st H 2009) Jan.-June. 2010

Jan.-June. 2009

1.173,94

1.216,45

-3,5

Paid circulation daily newspapers

712,26

708,83

0,5

Nationwide advertising

366,30

352,54

3,9

Local advertising

209,15

211,76

-1,2

Classified & service ads

Total Print press

Î&#x201D;% 1H 10 â&#x20AC;&#x201C; 1H 09

136,81

144,53

-5,3

Free/Pay press

48,99

53,38

-8,2

Nationwide advertising

35,93

39,50

-9,1

Local advertising

12,35

13,14

-6,0

0,72

0,74

-2,4

412,69

454,24

-9,1

Classified & service ads Magazines TV

2.558,15

2.385,19

7,3

Radio

249,61

217,43

14,8

Commercials

231,10

200,20

15,4

18,51

17,23

7,5

175,40

153,11

14,6

Billboards etc.

74,63

68,40

9,1

Cinema

23,29

23,21

0,3

Cards*

3,50

3,49

0,3

Other advertising Internet (excluding search)

Direct Mail*

258,18

247,03

Out Of Home TV*

4,92

4,59

7,3

Transit*

58,42

56,23

3,8

4.580,04

4.375,19

4,7

Total

4,5

Note: millions of euros; (*) new results from Nielsen regarding below-the-line communication. Source: IEM elaboration of Nielsen Media Research data.

Positive signs of recovery were instead to be found in radio advertising (+15%) and billboards (+9%) and the same can be said for web display advertising (+14.6%) and television, which posted a 7% recovery spread over various sectors: 5% in major network advertising and over Advertising

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40% from satellite channels. All the principal commodity producers reduced their above-the-line advertising investments in 2009, though there were some significant exceptions in the minor advertisers for leisure time and travel. The first half of 2010 however registered positive signs across the board, in particular for primary consumer areas such as food, distribution, household and toiletries. Tab. 6: Above-the-line Advertising investment by commodity sector (2006 â&#x20AC;&#x201C; 1st H 2010) Settori Merceologici

2006

% 07-06

2007

% 08-07

2008

% 09-08

2009

1H10

Î&#x201D;% 1H101H09

Foods 1.062,16

3,76 1.103,67

928,69

8,55 1.015,57

1,59 1.121,27

-6,50

1.052,79

600,62

10,0

Cars -4,38

971,05

-19,28

814,09

476,85

1,1

Telecoms 648,94

13,69

751,83

3,28

776,52

-7,16

724,65

411,31

2,3

462,05

21,93

591,81

2,00

603,63

-29,07

467,68

238,62

5,1

458,44

1,30

464,49

-3,36

448,86

-16,34

385,83

228,38

9,2

362,79

15,02

426,90

21,61

519,14

-20,65

430,27

217,05

-0,7

282,57

11,96

320,93

49,69

480,42

-16,77

411,44

213,70

17,6

441,58

6,57

472,65

20,65

570,23

-25,80

453,29

208,21

-4,2

305,04

3,88

317,36

8,22

343,44

-3,90

330,56

196,41

11,6

317,73

16,23

379,27

-4,22

363,26

-16,83

310,92

174,87

7,5

8,60

306,62

-7,93

282,29

-7,92

261,58

164,11

16,9

217,25

16,04

258,73

8,96

281,92

-4,61

269,50

161,88

-3,1

279,98

11,46

316,22

12,71

356,40

-14,01

312,61

155,87

-1,4

161,15

10,88

180,82

22,77

221,99

9,58

245,52

99,11

-16,0

134,99

2,12

137,92

67,34

230,79

10,07

256,62

98,68

2,4

106,58

3,48

110,42

26,10

139,24

1,76

141,73

91,24

6,9

100,59

35,58

156,14

25,67

196,22

-40,81

139,35

87,78

20,5

154,36

10,98

173,41

26,48

219,32

-24,35

176,38

79,17

-1,6

88,34

43,80

157,18

-7,39

145,57

-21,56

119,75

71,92

27,7

148,22

27,28

203,81

-12,71

177,90

-35,65

131,15

57,59

25,7

Clothing Drinks/Alcohol Financial/Insurance Distribution Media/Publishing Toiletries Personal care Household management 280,25 Pharmaceutical/Hygiene Home Tourism/Travel Institutions Leisure time Industry/Building Professional Services Household electrical appliances Personal objects Motorbikes/vehicles

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60,01

11,23

67,60

6,60

72,06

-19,38

60,36

35,52

-0,4

60,43

37,43

96,58

25,80

121,50

-16,48

104,31

35,46

7,6

83,21

11,89

94,44

11,65

105,44

-18,86

88,71

28,71

28,6

57,52

14,02

66,90

185,49

190,99

-19,68

159,59

56,89

13,2

Toys/School related articles IT /Photography Various Note: millions of euros; Categories ranked by 1st H 2010 results. Source: IEM elaboration of Nielsen Media Research data.

3. International comparisons For benchmark purposes, comparisons with advertising investments in the other major European countries reveal that France, the United Kingdom and Germany also fell by approximately 10% overall in 2009, the only exception being Spain which lost over 20%. In all these countries press advertising dropped more than television (except in Spain where television fared worse than daily newspapers), and magazines suffered heavier losses than daily newspapers, (with the exception of France). Internet is the only media to register a positive, albeit single-digit increase in all these countries (between 7 and 8%). While each country has a traditionally different media mix with specific local tendencies such as the strong daily press in Germany and, to a lesser degree, in the UK and the predominance of television in Italy, advertising in broadcasting generally outshone the performance of press communication while the Internet performed better across the board. In the United Kingdom, where the economic pinch was particularly painful, the Internet has in fact overtaken both broadcasting and press advertising and now represents almost 30% of spending with 4 billion euros in turnover. In Germany, the Internet represents 19% of the mass media advertising market, in third place behind television and daily newspapers, and is worth 2.7 billion euros in net revenues. In France, Internet advertising is worth almost 2 billion euros holds an 18% share of the market. Investment in the Internet is decidedly lower in Italy (849 million) and Spain (654 million) with market quotas of 9.6% and 11.6% respectively. Tab. 7: Traditional media advertising investment in the Big 5 European countries (2009) Media

Germany M€

United Kingdom

% Share

M €*

% Share

France M€

Italy

% Share

M€

Spain

% Share

M€

% Share

Press

6.245

44,4

4.941

35,3

3.750

35,0

2.389

27,0

1.645

29,3

Daily

3.694

26,3

3.652

26,1

2.043

19,1

1.511

17,1

1.174

20,9

Magazines

2.551

18,1

1.289

9,2

1.707

15,9

878

9,9

471

8,4

Television

3.640

25,9

3.520

25,2

3.094

28,9

4.359

49,3

2.368

42,1

Radio

679

4,8

485

3,5

710

6,6

573

6,5

537

9,6

Billboards

738

5,2

878

6,3

1.127

10,5

618

7,0

401

7,1

Cinema

72

0,5

199

1,4

77

0,7

56

0,6

15

0,3

Internet

2.696

19,2

3.967

28,4

1.966

18,3

849

9,6

654

11,6

14.068

100

13.989

100

10.724

100

8.843

100

5.621

100

Total

Note: millions of euros; supplements and Sunday editions included in Magazines; (*) average exchange rate for 2009 (1€=0,89094£), source Bank of Italy Exchange office. Source: IEM elaboration of WARC, IREP/France Pub, Infoadex, ZAW, Nielsen, Assocomunicazione, IAB data.

The recession and the fluctuation of the euro-sterling exchange rate allowed Germany to bump the United Kingdom from its leading position in the mass media advertising market. The German market dropped to just below 14 billion euros, approx. 100 million euros more than the UK. This is particularly due to the entrenched position of German press advertising, which registered considerably lower losses: over the course of the last two years German daily Advertising

115


newspapers lost about 1/5 of their advertising revenue while their British counterparts suffered a turnover contraction of 1/3 (figures which are matched by the inversely proportional increase in the distribution of Internet advertising in the two countries). Across all the European countries, the decline of print media, the rise of the Internet and the challenge to televisionâ&#x20AC;&#x2122;s leading position are the main shifts recorded in the composition of internal spending in the traditional media (nominally including the Internet). Other relevant factors to consider are the role of radio, the need for new advertising strategies for cinema and the relevance of billboard advertising in changing urban landscapes. What one can certainly say is that the strong position now occupied by the Internet is an undeniable indicator of the ability of advertising investors to respond to new challenges and opportunities, while in contrast one can see that investments in Southern European are still sluggish. Tab. 8: Traditional media advertising in France, (2005-2009) Television

2009

2008

2007

2006

2005

% 09-08

% 09-05

3094

3476

3617

3495

3313

-11,0

-6,6

710

779

805

848

836

-8,9

-15,1

Radio Daily newspapers

2043

2527

2629

2636

2537

-19,2

-19,5

Magazines

1707

2071

2162

2236

2243

-17,6

-23,9

Billboards etc.

1127

1265

1237

1221

1223

-10,9

-7,8

Cinema

77

75

89

82

78

2,7

-1,3

Internet

1966

1821

1537

729

382

8,0

414,7

10724

12014

12076

11247

10612

-10,7

1,1

Total

Note: millions of euros. Source: IEM elaboration of IREP/France Pub. data.

Tab. 9: Traditional media advertising in Germany, (2005-2009) Television Radio

2009

2008

2007

2006

2005

% 09-08

% 09-05

3640

4036

4156

4114

3930

-9,8

-7,4

679

720

743

681

664

-5,7

2,2

Daily newspapers

3694

4373

4567

4533

4477

-15,5

-17,5

Magazines

2551

3077

3198

3162

3037

-17,1

-16,0

Billboards etc.

738

805

820

787

769

-8,4

-4,1

Cinema

72

77

106

118

132

-6,5

-45,9

Internet

2696

2498

2093

1500

682

7,9

295,3

14068

15585

15684

14895

13691

-9,7

2,8

T