The report

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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by the Fondazione Rosselli
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 Tivù 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. Radio’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
Δ%
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 – Advertising investment in the major European markets (2005-2009)
2005
2006
2007
2008
2009
Δ%
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 “film produced” 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%.
Cinema
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
50
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%.
Cinema
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.
Cinema
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
∆ % 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.
74
Books
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 Feltrinelli’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.
76
Books
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 – and this is intuitively obvious, no doubt – 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 PricewaterhouseCoopers’
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 ‘ecosystem’ with the aim of improving
visibility, the measurement and analysis of the contacts generated through the web, etc.). In
Italy, Seat Pagine Gialle’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.
Directory
95
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
96 Directory
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.
Directory
97
Recorded music
98
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.
Recorded music
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 –22% between 2008 and 2007 and then by –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 sector’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.
Recorded music
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 providers’ 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.
Recorded music
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 l’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/
Recorded music
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, ’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
107
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.
108
Advertising
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.
Advertising
109
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).
Italy’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 “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. UPA’s more conservative estimate
has been used for these analyses.
110
Advertising
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
111
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.
112
Advertising
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 can’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
Δ% 1H 10 – 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
113
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 – 1st H 2010)
Settori
Merceologici
2006
% 07-06
2007
% 08-07
2008
% 09-08
2009
1H10
Δ% 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
114
Advertising
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 television’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
Total
Note: millions of euros; Sunday editions and supplements included in magazines. Source: IEM elaboration of Zaw
data.
Tab. 10: Traditional media advertising in the United Kingdom, (2005-2009)
2009
2008
2007
2006
2005
3520
3895
4014
3886
4058
-9,6
-13,3
485
548
586
575
595
-11,5
-18,5
Daily newspapers
3652
4509
5247
5271
5507
-19,0
-33,7
Magazines
1289
1779
1974
2052
2122
-27,6
-39,3
878
1054
1095
1217
1171
-16,7
-25,0
Television
Radio
Billboards etc.
% 09-08
Cinema
199
229
231
211
211
-13,2
-5,9
Internet
3967
3703
3156
2263
1533
7,1
158,7
13989
15716
16304
15474
15196
-11,0
-7,9
Total
Note: millions of average exchange rate in 2009: 1€ = 0,89094£. Source: IEM elaboration of Warc. data.
116
% 09-05
Advertising
Fig. 5: Pro capita media advertising investment (2005-2009)
2005
2006
2007
2008
2009
251,4
255,3
UK
268,3
257,9
228,9
166,1
180,7
Germany
190,3
189,2
170,9
175,0
184,8
France
189,5
187,5
167,4
166,6
180,9
Spain
197,4
175,4
138,7
145,6
147,1
Italy
154,4
151,6
137,5
0,0
50,0
100,0
150,0
200,0
250,0
300,0
Note: euros. Source: IEM elaboration of data from previous tables and CIA World Factbook.
Advertising
117
Tab. 11: Traditional media advertising in Spain, (2005-2009)
Television
Radio
Daily newspapers
2009
2008
2007
2006
2005
% 09-08
% 09-05
2368
3082
3469
3188
2951
-23,2
-19,8
537
642
678
637
610
-16,3
-11,9
1174
1508
1894
1791
1666
-22,1
-29,5
Magazines
471
721
855
811
794
-34,7
-40,7
Billboards etc.
401
518
568
529
494
-22,6
-18,7
Cinema
15
21
38
41
43
-26,7
-64,1
Internet
654
610
482
310
162
7,2
302,8
5621
7103
7985
7307
6721
-20,9
-16,4
Total
Note: dati in milioni di euro. Domenicali inclusi in Periodici. Fonte: elaborazioni IEM su dati Infoadex.
Of course the pro capita investment indicator fell for all European countries in 2009, with the
United Kingdom - the past and present leader - spending 229 euros a head for the year, down
from 268 in 2007, followed by France and Germany at roughly 170 euros, Italy and Spain at just
below 140, in spite of Spain’s 2007 growth to 197 euros, which at the time had earned it second
place behind the UK.
118
Advertising
Fixed Telecommunications and
broadband
Musica registrata
119
Fixed telecommunications
and broadband
By Lorenzo Principali
1. The market in fixed network and broadband services
The trends observed in recent years continue to become more marked in the telecommunications
market: together with a gradual decrease in the weighting of fixed telephony and, in parallel with
an increase in mobile services, the spread of broadband (either fixed or wireless), the resulting
reduction in the digital divide either on a regional basis or regarding the ICT capabilities of the
population and the policies regarding the creation of a new generation network are assuming
an ever-increasing importance.
Fixed telecommunications have also felt the effects of the financial crisis, seeing volumes
decrease by around 2.3% compared with 2008. As reported in previous years, the market
in fixed telecoms has the least positive performance (dropping by 3.3%), whereas greater
resistance is noted in the mobile sector (down 1.54%).
Table 1: The telecommunications market in Italy
2009
2008
2007
2006
2005
∆ % 09-08
Cagr 09-05
Fixed telephony
19.070
19.730
20.130
20.398
20.490
-3,35
-1,78%
Mobile telephony
24.015
24.390
24.070
23.642
22.625
-1,54
1,50%
Total
telecommunications
43.085
44.120
44.200
44.040
43.115
-2,35
-0,02%
Note: Figures in millions of euros. Source: IEM elaboration of Assinform/Net Consulting data.
With regard to network services (Table 2) the downward trend in the fixed sector over the fiveyear period 2005-2009 was exacerbated in the past year and, even though there was constant
growth in the mobile segment in the same 2009 period, it was not in a position to offset the
decrease in the services market as whole.
Table 2: The market in fixed and mobile network services, 2005 – 2009
2009
2008
2007
2006
2005
Fixed
15.390
15.770
16.070
16.310
16.545
∆ % 09-08
-2,41
-1,79%
Mobile
18.825
18.760
18.510
18.040
17.170
0,35
2,33%
Total
34.215
34.530
34.580
34.350
33.635
-0,91
0,43%
Note: Figures in millions of euros. Source: IEM elaboration of Assinform/Net Consulting data.
120
Fixed telecommunications and broadband
Cagr 09-05
The figures for the past five-year period (Fig.1) illustrate how the total fixed network services
market has progressively decreased in importance, whilst a parallel growth in the mobile
segment has been recorded, with the gap between the two sectors amounting to around 3.5
billion euros annually in 2009.
Fig. 1: The market in fixed and mobile network services, 2005 - 2009
20.000
fix network
mobile network
19.000
18.825
18.760
18.510
18.040
18.000
17.170
17.000
16.465
16.310
16.070
15.770
16.000
15.390
15.000
14.000
2005
2006
2007
2008
2009
Note: Figures in millions of euros. Source: IEM elaboration of Assinform/Net Consulting data
In further detail (Tab.3), the negative trend for fixed network services is due to three factors:
firstly, the collapse of the classic telephony market (down 7.3% on 2008 and dropping almost
6% on average annually over the last five-year period), which results from the gradual spread of
flat-rate tariffs; secondly the sudden drop in prices thanks to increasing competition between
operators; and finally the predictable slow-down of growth in subscribers to broadband
Internet services. While this area has recorded consistent expansion (up 4.5% on 2008), it has
not succeeded in off-setting the downturn in fixed telephony since it saw distinctly lower rates
of growth in 2009 than the average rate recorded in the past five-year period (7.9% between
2005 and 2009).
In addition, if on the one hand the data transmission market appears to be in crisis, now
amounting to 1.1 billion euros (down 5% on 2008, in line with the average annual drop recorded
in the five-year period), on the other hand, the increase in value-added services continues,
recording a year-on-year rise of 3% to 4.8%, mainly due to business clients.
Table 3: The market in fixed network telecommunications services 2005-2009
Telephony
2009
2008
2007
2006
2005
7.780
8.390
9.010
9.490
9.950
∆ % 09-08
-7,27
Cagr 09-05
-5,97%
Value Added Services*
3.270
3.120
3.030
2.920
2.745
4,81
4,47%
Internet Access
3.240
3.100
2.780
2.570
2.390
4,52
7,90%
Data Transmission
1.100
1.160
1.250
1.330
1.380
-5,17
-5,51%
15.390
15.770
16.070
16.310
16.645
-2,41
-1,94%
Total
Note: Figures in millions of euros; (*) includes ‘infotainment’ and personalised services, games and communications
services. Source: IEM elaboration of Assinform/Net Consulting data.
Analysing the fixed network voice services by destination (Table 4), the general drop in vocal
telephony is highly evident, however, there are marked declines in some areas: in addition to
the collapse in dial-up connections to the Internet (progressively superseded by broadband
connections) international calls have also fallen by nearly one-fifth, probably the result of lower
roaming tariffs and the spreading use of VoIP, via users’ broadband connections. There has
been a consistent drop in calls from fixed-lines-to-mobiles. Figures over the five-year period
highlight the progressive evolution in people’s call patterns. Users are becoming more and
Fixed telecommunications and broadband
121
more careful in their search for the most convenient pricing packages and so try to ensure
that where they are calling from matches where they are calling to (fixed-line-to-fixed-line and
mobile-to-mobile).
Table 4: Traffic in fixed network voice services by destination 2005-2009
2009
2008
2007
2006
2005
∆ % 09- 08
Cagr 09-05
Local
48,0
50,0
52,0
54,3
52,3
-4,08
-2,14%
National
30,7
30,5
29,5
27,0
40,2
0,72
-6,52%
Fixed-to-mobile
13,4
14,9
15,8
16,8
20,1
-10,33
-9,69%
Internet dial-up
7,8
12,0
17,4
31,9
n.d.
-34,72
-
International
3,8
4,7
4,7
5,1
3,6
-19,11
1,43%
103,7
112,1
119,4
135,1
116,2
-7,52
-2,81%
Total
Note: figures in thousands of minutes. Source: IEM elaboration of AGCOM data.
Looking in detail at the spread of broadband across the population (Fig. 2), it can be observed
that, following a period of double-digit growth, broadband access numbers are tending to
stabilise, falling from a 46% rise in 2006 to a 10.9% increase in 2008. Nonetheless, in 2009,
broadband connections grew by 9.8%, reaching a 12.3 million share, and showing a better
tenure than could have been expected by looking at the 2005-2009 trend.
Fig. 2: Access to broadband in Italy by fixed network 2005 – 2010
50%
14
Million of accesses
12
Var. %
12,3
11,2
44,6%
40%
10,1
10
35%
8,5
8
6
45%
30%
6,8
25%
25,0%
20%
4,7
18,8%
4
15%
10,9%
2
10%
9,8%
0
5%
0%
gen-05
gen-06
gen-07
gen-08
gen-09
gen-10
Source: IEM elaboration of AGCOM data.
When considering the good performance of broadband, in any event, it should be stressed that
the rate of broadband subscribers in Italy and the relative rate of growth are not satisfactory
compared to some other European countries1.
The data on broadband penetration in Italian households produces rather different values
depending on which sources are analysed (Table 5): if, according to AGCOM, broadband
achieved a 43% share of households (up 2.7% over 2008), the percentages supplied by Between
(39%)2 and above all from ISTAT (34.5%)3 are lower. Regarding the other two sources, these
variances are due to diverse sampling methods (the first uses a 4,000-household sample, the
second a 19,000 sample), both as regards reporting timelines (June 2010 versus February
2009) and the reporting or otherwise of the connections through mobile devices (Between
estimates these to be around one-and-a-half million units, separating them from fixed network
connections, whilst AGCOM does not seem to take that into account).
1
Cf. paragraph 3.
2
Between Report “La domanda di connettività e servizi a Banda Larga nelle famiglie italiane” (The demand
for broadband services and connectivity in Italian households), June 2010.
3
ISTAT Report “Cittadini e nuove tecnologie” (Citizens and new technologies), December 2009.
122
Fixed telecommunications and broadband
Table 5: Comparison of figures for fixed network broadband penetration in Italian households
(%)
Broadband penetration in Italian households
Source
2009
2008
AGCOM
43
40,3
Between
39
36
34,5
27,6
ISTAT
Elaboration by IEM from various sources.
To avoid the variances that arise from calculating in terms of households, European authorities
use data on penetration-per-inhabitant, even though this methodology overestimates the degree
to which Italy lags behind other European countries due to the very substantial percentage
of over 65 year-olds in the total population. Setting aside such considerations, in terms of
penetration-per-inhabitant as of April 2010 Italian broadband shows a spread equivalent to
20.6% of the population (Table 6), a long way behind the values in other major European
countries and above all those in Scandinavian countries4.
Table 6: Comparison of fixed network broadband penetration in Italian households
Year
Penetration (%)
Broadband access (in millions)
Population (no. of inhabitants)
Jan 2006
11,6
6,8
58.751.711
Jan 2007
14,4
8,5
59.131.287
Jan 2008
17,0
10,1
59.619.290
Jan 2009
18,7
11,2
60.045.068
Jan 2010
20,4
12,3
60.340.328
Apr 2010
20,6
12,5
60.418.559
Source: IEM elaboration of AGCOM data (broadband access) and ISTAT (individuals residing in Italy).
A review of the other variables connected to broadband development, namely the spread of
Internet and PCs across the country, again produces different results according to the sources
being examined. Between estimates Internet and PC growth at rates of 1% and 2% respectively
per year, which would create a serious risk of saturation in the broadband market when
broadband reaches the whole of the digitally literate populace (or, to be precise, those having
at least a computer).
The ISTAT data are more encouraging, revealing a noticeable increase in all areas, and
actually higher than the expectations created by the trend in past years: the spread of personal
computers, having reached its lowest level of growth in 2008 (up 2.3%) made a turnaround and
recorded an upward leap of over 4%. In a similar fashion the spread of Internet would appear
to have seen a rise of over five percentage points, thus helping to spur on the critical mass for
broadband penetration, growing by nearly seven percentage points compared to the 5% in
20085.
4
Cf. paragraph 3.
5
The category “connections to the internet” includes both broadband and narrowband connections and
dial-up mode. Currently neither Italy nor Europe has a fixed and universally recognised threshold for transmission
capacity above which a connection can be defined as “broadband”. The European institutions, in the Recommendation by the Commission regarding the market in electronic communications products and services subject to ex
ante regulation under directive 2002/21/EC state that “Internet services at higher or broadband level are distinguished by allowing an entry-level digital capacity for final users greater than 128 kbit/s.”, for this reason broadband
tends to be defined as all connections with a greater capacity than this threshold, which is that of ISDN. In any event,
considering that the value appears extremely low in the light of rapid technological advances, the new threshold
could be inferred from the Digital Agenda, which set an objective to cover the entire population by 2013, considering as basic broadband capacity connections ≥2Mb/s (cf. IP/10/581, 19 May 2010).
Fixed telecommunications and broadband
123
Table 7: Households with PCs, Internet and broadband (%)
Source
Technology
Istat
Between
2009
2008
2007
2006
Bb
34,5
27,6
22,6
11,6
Internet
47,3
42
38,8
34,5
Pc
54,3
50,2
47,8
43,9
Bb
39
36
32
25
Internet
42
42
40
39
Pc
52
50
48
46
Elaboration by IEM from various sources.
Even if one takes the most positive outlook, the comparison (Eurostat data) between frequent
use of the Internet and digital illiteracy (individuals who have never used a computer), if on the
one hand there is a steady spread of digital competence throughout the population (over 40%
of Italians log on to the Internet at least once a week), on the other hand it can clearly be seen
that the percentage of those excluded from the e-society is certainly still too high.
Fig. 3: *Use of Internet and computers in Italy 2006 – 2009 (%)
60
54
49
50
Individuals who connect to the Internet at least once a week
Individuals who never use a computer
45
43
42
40
37
34
31
30
20
10
0
2006
2007
2008
2009
Source: IEM elaboration of Eurostat data.
On the ground, Between and Epitiro estimate fixed network coverage for Italy as equivalent to
96% of the population, reaching nearly 99% in urban areas (areas with more than 500 inhabitants
per km2) and dropping below 85% in rural areas (those with fewer than 100 inhabitants per
km2). The overall coverage drops to 92% taking into consideration the inhabitants who, in
addition to being recorded as falling within the radius of an Internet service-enabled telephone
exchange, do not face any additional technical obstacles6. An even lower value, equivalent to
87% of the population emerges when excluding users linked to lines that are too far from
exchanges, connected to obsolete equipment or to telephone exchanges that do not supply
services with a nominal bandwidth higher than 2 Mbps. There are 6,500 Municipalities where
the coverage amounts to over 95% of the population, whilst 750 have coverage ranging between
95% and 5%. Finally, around 850 Municipalities remain firmly on the wrong side of the digital
divide (less than 5% of inhabitants have broadband connections).
6
124
Broadband Quality Index Report, Between and Epitiro, January 2010.
Fixed telecommunications and broadband
Table 8: Overall coverage of broadband in relation to population (% by residential area)
Overall coverage (% of population)
Located in urban
areas *
Located in suburban
areas *
Located in rural areas*
96%
99%
95%
85%
Note:*urban areas: > 500 inhabitants per km2; suburban areas: 100-500 inhabitants/km2; rural areas: <100 inhabitants/km2. Source: IEM elaboration of Between – Epitiro data (January 2010).
Table 9: Overall broadband coverage in relation to population (% by place of residence –
municipalities)
Overall coverage (% of population)
Coverage >95%
Coverage between 6 and
95%
Coverage <5%
Municipalities covered
6500
750
850
Source: IEM elaboration of Between – Epitiro data (January 2010).
With regard to regional rates of broadband adoption, AGCOM estimates penetration rates
that still tend to differ on a case-by-case basis: Lazio, Campania and Lombardy can lay claim
to the best results - reaching nearly 50% of households, whilst in Calabria and Basilicata fewer
than one-in-three households are broadband subscribers. Molise lags behind with a rate which
scarcely reaches more than one–household-in-four.
Table 10: Spread of broadband access (March 2010, % of households)
Piedmont
39,9
Molise
26,7
Valle d’Aosta
36,5
Campania
48,3
Lombardy
47,7
Puglia
39,7
Trentino-Alto Adige
36,9
Basilicata
31,8
Veneto
39,9
Calabria
31,6
Friuli-Venezia Giulia
39,4
Sicily
40,4
Liguria
42,8
Sardinia
39,6
Emilia-Romagna
41,9
ITALY
Tuscany
42,4
Major municipalities
54,6
Umbria
36,5
Northwest
44,9
Marche
42,2
Northeast
40,4
Lazio
51,5
Centre
46,3
Abruzzo
37,0
South and Islands
40,7
43
Source: AGCOM.
As regards bandwidth capacity, average speed of broadband lines is still rather ineffective:
nearly 23% travels at less than two megabits per second (Mb/s), while high-speed broadband
subscribers (above nominal 10 Mb/s7) do not amount to even 7% of the total connections. Even
if alternative operators to the incumbent service provider show higher percentages of basic
broadband speed connections (only 13% of subscribers are for speeds less than 2Mb/s), the
percentages for high capacity connections appear decidedly modest (less than 3%).
7
The data supplied by AGCOM refers to the operators’ declared bandwidth capacity. Since these appear in
many cases to be lower than the actual capacity, AGCOM has created a certified software for ADSL with the support
of the Fondazione Ugo Bordoni and the Istituto superiore delle communicazioni (ISCTI) – the Italian institute for
communications and information technology - which is freely distributed over the Internet to allow subscribers to
check the actual connection speed offered by operators. Moreover, thanks to a tie-up with supermoney.eu, users can
compare ADSL prices on the market by means of a fixed benchmark by profile and location. If by using these tools
users discover that there are failings in what they are being promised in ADSL offers, they are able to exercise their
right of recall since results obtained using the certified software have a legal standing.
Fixed telecommunications and broadband
125
Fig. 4: Broadband line capacity in Italy (2009)
≥ 10 Mbps
100%
≥ 2 Mbps and <10 Mbps
7,7
5,8
69,5
71
22,8
23,2
Total accesses
DSL lines
≥ 144 Kbps and < 2 Mbps
2,9
90%
80%
70%
60%
83,7
50%
40%
30%
20%
10%
13,4
0%
New entrants
Source: IEM elaboration of AGCOM data.
2. Operators, investments and ultra broadband
The incumbent’s market share increased again in 2009, though with different values in the
various segments considered. The lowest value is found in the market share for fixed vocal
telephony (switched networks and broadband) where Telecom Italia dropped below 55% (with
a peak of 54.6% for the residential sector). The operators who benefit from this fall are Fastweb,
Wind and Vodafone: the first succeeded in holding 16.5% of the sector (up 12% on 2008)
whilst Wind strengthened its own third place with an 8.4% share. Vodafone, with a year-onyear growth of over 12% snapped at the heels of British Telecom, which specialises in business
clients and holds a 13% market share for this type of user, making it the third overall operator
in the business segment.
The total value of the fixed telephony market fell to 8.16 billion euros (down 300 million euros
compared with 2008). This drop was entirely due to the business division: the residential sector
was not in a position to make up for the shortfall, even though it rose from 4.14 to 4.16 billion
euros annually.
Table 11: Market share in fixed vocal telephony (% volume), 2005-2008
2009
2008
2007
2006
2005
∆ % 09-08
Cagr 09-05
Telecom Italia
54,9
57,3
59,6
59,6
63,9
-4,19
-3,72%
Fastweb
16,5
14,7
12,3
9,5
5,8
12,24
29,87%
8,4
7,7
7,4
9,4
9,2
9,09
-2,25%
Wind
BT Italia
6,4
6,7
6,9
6,7
6,1
-4,48
1,21%
Vodafone Italia
6,2
5,5
5,8
5,9
6,3
12,73
-0,40%
Tiscali
2,8
3
2,6
2
1,1
-6,67
26,31%
Other
4,7
5,2
5,4
6,9
7,6
-9,62
-11,32%
Total
100
100
100
100
100
-
-
Source: IEM elaboration of AGCOM data.
If you look at the overall figure for residential and business costs in fixed-line telecoms services,
the Telecom Italia share is higher, standing at 64.1% in 2009, though that was a drop of 2
percentage points over the previous year. The annual figures for the whole sector dropped from
16.6 to 16.2 billion euros, however, Fastweb, Wind and Vodafone gained ground: the first in the
list was up by 1.5% and had the best annual performance, almost reaching 10% overall share.
126
Fixed telecommunications and broadband
Wind’s share was 7.7% whilst Vodafone gains ground on British Telecom, which nevertheless
saw a rise of 0.1% in its reference segment. In the business sector, the competition of other
licensed operators appears overall fiercer, as can be shown by the drop in the incumbent’s share
from 63.7% to 61.5%: Fastweb has overtaken BT to gain second place (11.7% as against 11.6%).
Table 12: Final user costs per operator (%)
User costs
Telecom Italia
Fastweb
Residential segment
Business segment
2009
2008
2009
2008
2009
2008
64,1
66,1
66,7
68,8
61,5
63,6
9,9
8,4
8,1
7,1
11,7
9,6
Wind
7,7
7,0
12,4
11,2
3,2
3,1
BT Italia
5,8
6,0
0
0
11,6
11,5
Vodafone Italia
4,3
3,4
7,7
6,4
0,8
0,6
Tiscali
1,8
1,7
3,3
2,8
0,5
0,6
Others
7,3
6,5
3,2
2,3
11,1
10,6
Total %
Total (billions of euros)
100
100
100
100
100
100
16,66
16,2
7,96
8,05
8,7
8,15
Source: AGCOM
Nevertheless, it is in the broadband sector where competition is highest: overall turnover rose
to 3.94 million euros in 2009 (up 7.7% on the previous year), Telecom Italia’s market share
dropped to 45.6% of broadband revenue Wind gained more than one percentage point, taking
it close to 10% overall, whilst Vodafone, which gained nearly two percentage points in market
share, overtook British Telecom. The latter was down 0.4%, while for Tiscali the drop was
0.2%. Fastweb strengthened its second place: as well as achieving its highest level of business
customers (32.3%), it narrowed the gap with Telecom Italia by nearly seven percentage points
in 2009 alone and achieved a 28.4% share of the broadband market.
Table 13: Revenues from final services on broadband networks (%)
Total
2009
Of which Residential
2008
2009
2008
Of which Business
2009
2008
Telecom Italia
45,6
48,3
42,6
43,5
48,7
52,6
Fastweb
28,4
27,8
24,7
25,6
32,3
29,8
9,8
8,7
15,5
14,1
3,8
3,8
Wind
Vodafone Italia
4,7
2,8
6,9
5
2,3
0,8
Tiscali
4,6
4,8
7,7
9,1
1,2
0,9
BT Italia
3,4
3,8
0
0
6,9
7,2
Others
3,6
3,8
2,5
2,6
4,7
4,8
Total
100
100
100
100
100
100
3,94
3,68
2,02
1,76
1,92
1,92
Total (billions of euros)
Source: AGCOM
Analysis of physical access to the network show that Telecom Italia’s market share has decreased
perceptibly: it dropped by over five percentage points in scarcely 15 months and now holds a
73.5% market share. Conversely, the other licensed operators have made steady progress – in
just over a year they have increased their share to nearly 6 million – an increase of more than
one million units. In addition, access in full unbundling has grown, increasing by more than
700 thousand units, with a decrease in overall access (total lines including telephony). This
confirms the progressive move to the use of mobile connections.
Fixed telecommunications and broadband
127
Table 14: Physical access to fixed network (in thousands)
Dic 08
Dic 09
Mar 10
17.372
16.116
15.931
OLO Access
4.667
5.583
5.730
Full Unbundling
Telecom Italia Access
3.664
4.273
4.366
Virtual ULL
183
102
97
Fibre
248
269
271
Naked DSL
Overall Access
Telecom Italia Share(%)
572
939
996
22.039
21.699
21.661
78,8
74,3
73,5
Fonte: Agcom.
The fixed network segment has increased noticeably for investments in fixed assets, a clear
countertrend to the mobile market and the whole Italian economy: Telecom Italia maintains
its primacy in absolute terms, marking a 1.8% increase over 2008, but in percentage terms the
other operators are growing to a greater degree, their volumes have increased more than 12%
and are now worth nearly 1.5 billion euros.
Table 15: Investment in fixed assets 2005 – 2009
Incumbent
OLO
Total fixed
%OLO of total
network
Increase Incumbent
Year-on-Year
Increase % OLO Yearon-Year
2009
2.356
1.435
3.791
37,9
1,82
12,11
2008
2.314
1.280
3.594
35,6
-11,91
13,78
2007
2.627
1.125
3.752
30,0
14,17
-12,66
2006
2.301
1.288
3.589
35,9
-1,58
3,29
2005
2.338
1.247
3.585
34,8
-
-
Note: figures expressed in millions of euros. Source: IEM elaboration of AGCOM data.
Part of such investments by operators is for trials in ultra broadband: after Telecom Italia
completed its Alicefibra trials in Milan (50 Mb/s), it began testing 100 Mb/s bandwidth in May
on some one-thousand users in Rome, whilst Fastweb launched the ‘Fibra100’ connection in
the capital last September as well as in other major Italian cities8.
Ultra broadband is distinguished from basic broadband and extended broadband by the means
of the greater capacity for data transmission, rising from 30 to 100 Mb/s, for the quality of
the service and the symmetry of data transmission (in upload and download), as well as the
pre-eminent use of fibre optic infrastructure (even if wireless connections are possible)9. It is
useful to note that whilst the definition of basic broadband means an asymmetric connection
capacity of 2 Mb/s (the download capacity is greater than for upload) based on the connections
in copper wire or wireless and on the principle of best effort (the quality of service is not
guaranteed), useful for ensuring services such as basic e-government, e-banking, e-learning
and e-health, extended broadband includes links between 7 and 20 Mb/s, which guarantees
neither symmetry nor speed but does allow all file transfers (audio, video and a reasonable
transmission capacity for television signals) from Web 2.0.
8
The Telecom scheme plans to extend 100Mb/s coverage from Rome’s Prati district to around 80,000
homes in the capital by the end of 2010 and to around 350,000 homes by the end of 2012, according to the standards/
norms introduced by the Municipality of Rome’s new regulations on the digging up of roads, ( Regolamento Scavi
Ris. 105 of 23 November 2009). On a national level, the project aims to reach 1,3000,000 users located in 13 cities
by 2012 and 10 million customers by 2014. During the hearing, Telecom CEO Franco Barnabè officially requested
authorisation to proceed with the launch of its 100MB/s offering to Rome, Milan, Catania, Bari, Venice and Turin by
the end of 2010, with complete coverage for some 520,000 homes. The Fastweb offering supplies users with 100Mb/s
download capacity and 10Mb/s upload and is available to homes already connected to fibre optics in Rome, Genoa,
Turin, Bologna, Naples and Bari. The cost varies between 10 to 15 euros extra in relation to normal broadband subscription, according to the basic type of subscription.
9
Elaboration by F. Ananasso, Broadband Summit – Rome, 31 March 2010
128
Fixed telecommunications and broadband
In Italy fibre optic coverage is still relatively limited at regional level and concentrated in
large urban centres, which means it covers a relatively high percentage of the population and
there are a reasonable number of subscribers for this technology (above all compared to other
countries, cf. Table 17).
At the same time many initiatives arose to create local fibre optic networks, at a regional level
(Emilia, Friuli, Piedmont, Sardinia and Sicily) and provincial or municipal level (Modena,
Bologna, Imola, Forlì, Cesena, Rimini, Riccione, Ravenna, Ferrara, Parma, Piacenza, Reggio
Emilia, Genoa and Milan). These are now deployed over a total of 18,600 km, added to which
is Lombardy’s ultra broadband scheme (which aims to connect 167 municipalities, excluding
Milan), the UniCasNet scheme (connected to 5 University di Cassino sites), the Valle d’Aosta
NGN regional development scheme and the ultra broadband connections of the industrial
districts in the Province of Lucca and the Mantua Citizens’ Network (TEANET).
Table 16: Local fibre optic networks (2009)
Region
Manager
LEPIDA
ACANTHO
EMILIA ROMAGNA (HERA)
BT ENIA TEL
Infrastructure
(km)
Note
3000
Regional network (mainly for public authorities)
2000
Provinces of Modena, Bologna, Imola, Forlì,
Cesena,Rimini, Riccione, Ravenna and Ferrara
850
Provinces of Parma, Piacenza, and Reggio Emilia
DELTA WEB
250
Ferrara and province
FRIULI VENEZIA
G. INSIEL (ex
MERCURIO)
1200
LIGURIA
SASTERNET
250
METROWEB
2255
LOMBARDY
PIEDMONT
Regional Network
Genoa Municipality
MAN and neighbourhood networks (Province of
Milan) Long-distance networks
ABM ICT
400
Bergamo and province
AEMCOM
235
Cremona (city and hinterland)
Areas at risk of digital exclusion
"WI-PIE" Project
1670
Patti Territoriali
Project
430
Province of Turin
AEMnet
140
Turin
SARDINIA
RETE TELEMATICAREGIONALE
1190
Network to connect various public authority
offices.
SICILY
SICILIA
e-INNOVAZIONE
3100
Regional and regional capital network
TUSCANY
TERRE CABLATE
650
Siena and province
NETSPRING
100
Grosseto and province (P.A.)
TRENTINO ALTO
ADIGE
TRENTINO
NETWORK
800
Trento and province
VENETO
AGSM
150
Verona
Source: ISBUL.
In any event, the local nature of these initiatives makes centralised coordination of regional
cabling difficult, even though this may be required to optimise allocation of resources to
disadvantaged areas. To close this gap, in the light of results emerging from the ISBUL
programm10, AGCOM appears to intend to create a benchmark for regional initiatives linked
10
The ISBUL (Infrastructure and services for broadband and ultra broadband) research programme, which
began in December 2008 and was completed in May 2010, was launched by AGCOM and managed by its Studies, Research and Training directorate in collaboration with some of the leading Italian Universities. Sub-divided
into three ‘macro-areas’ the project analysed the possibility to complete a NGN network in Italy in relation to the
frameworks covering infrastructure and technical, economic and regulatory and also regulatory and legal issues,
establishing accurate modelling of costs and performance of workable technological solutions, of the sustainability
of the stakeholders’ business models, the competitive impact and the consequences that achieving infrastructure of
this nature might have on regulation. Estimates and projections of the macroeconomic impact of investments and
Fixed telecommunications and broadband
129
to ultra broadband, to initiate an “Inventory Mapping” (IMAP) process to obtain detailed
knowledge of the redeployment of the fibre optic access networks and to set down the basis for
the competent authorities to create a New Generation Infrastructure Register (RING).
Italy enjoys a relatively advantageous position compared to other European countries with
regard to fibre optic cabling of the country, both as regards the number of people it reaches
and subscriber numbers: in this category Fastweb is in the top three operators in Europe and
among the world’s top ten.
Table 17: The spread of fibre optic networks in Europe: top ten European countries
Country
2008
Residences
covered June
2009
Subscribers
Subscribers
at December
at June 2009
% growth
Residences
Ratio of residences
between
covered
covered/non
December 2008
December 2008
subscribers
- June 2009
Russia
724.000
630.000
7.500.000
6.300.000
9,7
14,92
Sweden
478.900
401.310
1.000.000
910.000
47,9
19,33
Italy
324.500
305.980
2.133.000
2.110.200
15,2
6,05
France
252.900
182.660
5.389.000
4.455.200
4,7
38,45
Norway
204.550
180.070
332.000
274.500
61,6
13,59
Netherlands
174.500
166.170
455.500
385.500
38,3
5,01
Denmark
143.700
90.190
629.000
622.000
22,8
59,33
Germany
66.000
60.590
418.000
281.800
15,8
8,93
Slovenia
62.000
50.000
370.000
282.000
16,8
24,00
Spain
33.000
29.000
258.000
298.000
12,8
13,79
Source: IEM elaboration of AGCOM (Studies and Research Centre), ISBUL, Beeline and Idate data.
As regards the correlation between home passed (premises connected to ultra broadband)
and actual subscribers, Italy shows a higher percentage in relation to other major European
countries (15.2%), excluding Germany (15.8%), which however has a much lower number of
connections (66,000 as against 320,000). However, the share of Italian subscribers to ‘fibre’ has
not grown noticeably in recent years (up 6% for 2008, but in real terms barely 19,000 units),
whilst the plan to create a new generation network in a jerky manner between hard braking
and rapid acceleration has not yet been defined.
From a regulatory perspective, the NGN Technical Committee for Italy has approved guidelines
for the fibre optic network infrastructure model. In this context it has led to discussions between
OLO and the incumbent operator: the former prefer P2P (point-to-point) technology, which
in their opinion is more efficient, in order to stimulate competition in unbundling the fibre
optic and services sector. This seems to be the direction being taken by the European Union
in light of the Commission Recommendation regarding regulated access to new generation
networks (NGA)11. This accentuates the Fibre To The Home (FTTH) networks’ capacity to
further open up competition regarding services, on the limit of deregulation, on the need to
make investments on a regional basis only after close analysis of the market and the requirement
for a cost-oriented bitstream offer. Telecom Italia’s vision, which prefers GPON12 technology, is
inspired however by the principles on which the recent regulatory decisions by France, Spain
and the United Kingdom are based, and considers both the coexistence phase between the
copper wire and fibre networks and the phase when copper will be progressively disabled. The
the effects of the NGN public policies were also supplied.
11
European Commission Recommendation of 20 November 2010.
12
The GPON (Gigabit PON) network categories can be “applied both to the FTTH (Fibre To The Home), in
which the individual ONT (individual open network terminal) for individual customers, and to architecture with a
high degree of sharing of the optical terminal (ONU, Optical Network Unit), namely FTTB (Fibre To The Building),
FTTC (Fibre To The Curb) or FTTCab (Fibre To The Cabinet): the network access for the latter two can provide for
deployment of the copper wire network, thus benefiting extensive coverage of the final stretch of the network and
considerably reducing the need to lay new fibre” Source: R. Mercinelli, P. Solina, Notiziario Tecnico Telecom Italia,
pages 64-65, April 2007.
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Fixed telecommunications and broadband
incumbent proposes to adopt different solutions according to different demands recorded in
different parts of the country, suggesting that, because of the access obligation to all operators,
if joint investment has not been possible with more subjects in fixed areas, the network should
be opened to price competition regulated by AGCOM, but not necessarily correlated to costs.
A mechanism of this kind would tie up the wholesale price not only with the operating costs
but also with the business risk and thus maintain competition whilst at the same time ensuring
investments are profitable.
AGCOM plans to publish the NGN rules by December 2010. The documents being drawn
up will be submitted to public consultation prior to forwarding to the offices of the European
Commission.
In the meanwhile at the so-called ‘Tavolo Romani’, a summit held in Rome, agreement was
reached between the operators on the network architecture: the basic infrastructure allows
for a conduit to be developed to transport the fibre, which will allow GPON technology to
be used (the technology of choice for Telecom Italia) and point-to-point (favoured by OLO),
thus ensuring maximum harmonisation with existing infrastructure. The new network should
be developed jointly with the operators together with the government and local authorities.
To harmonise operations, the communications department of the Ministry for Economic
Development has made a census of existing fibre optic infrastructure in Italy and investment
plans to develop this in the next three years, with the aim of identifying and developing the new
generation networks across the country13.
The investment node remains open: whilst the OLO continue to propose an allocation of 2.5
billion euros to cover 15 cities by 2015, Telecom Italia has revised its own allocation upwards to
around 2.65 billion euros for the three-year period 2010-201214.
According to ISBUL the investments to be made for the NGN networks are extensive –
between three and 15 billion euros according to the technology (or technology mix) used and
the population covered.
Table 18: NGN Impact on the national economy
Direct effect
Type of network
Investments
mixed P2P/GPON
15,5
FTTH P2P
FTTB GPON
Population
and
coverage
Indirect effect
Total effect
Potential
Aggregate
employment Minimum Maximum Minimum Minimum
demand €
(individ.
€ bn.
€ bn.
€ bn.
€ bn.
bn.
Units)
91%
20,25
311.087
89,6
765,5
109,9
785,7
13,3
50%
17,38
248.121
49,2
420,6
66,6
438
3
20%
3,92
57.131
19,7
168,2
23,6
172,2
Fonte: Isbul.
All three hypotheses allow for an increase in the fee and as a result the cost of the broadband
service bills for users’, a factor which might create problems in sustaining such investments. For
this reason a specific analysis would be required to evaluate the willingness of subscribers to
pay more for a better service. It can be seen at present (Fig. 5) that the price of the subscription
is not a major obstacle to taking up broadband, whereas a large proportion of the public who do
not have broadband connections perceive it as pointless. These results confirm the real necessity
of promoting computer literacy by means of policies to stimulate demand and improvement
in the quality of e-government services. The economic returns estimated by ISBUL in terms of
demand, jobs (an overall increase of between 57,000 and 310,000 posts) and related industries
(the forecasts estimate growth between 23 and 700 billion euros) confirm that the Italy can not
relinquish investment in the next generation network.
13
Source: Communications Department of the Economic Development Ministry, 29 September 2010
14
The annual spending in the segment of access to the fixed network, both in copper wire and fibre optic, has
increased, going from the current figure of 817 million euros (2009) to around 900 million euros for 2012, making
a total investment in 2012, equal to 2.65 billion euros.
Fixed telecommunications and broadband
131
Fig. 5: Obstacles to broadband adoption (%)
70
60
60
50
40
30
21
20
16
10
6
3
0
Pointless
Coverage
Cost
Complexity
Other
Note: Family not possessing a broadband connection. Source: IEM elaboration of Between data (2008)
3. The international picture
The fixed network services market of the European big five dropped around 2% in 2009, a
slightly more negative trend in regard of the sector’s performance in the preceding five years
(down 1.7%). Thanks to the robustness of its domestic market, France is the country that has
suffered least from the crisis, confirming its long-term performance (the amounts are almost
identical to the previous five-year period), whilst all the others present negative values over the
five-year period from 2005-2009: Germany, which has the largest market in Europe, lost over
4 billion euros, with 1 billion being lost in 2009 alone, whilst Italy, although it consolidated its
third-place ranking, decreased at a slightly higher rate than during the previous five years. It
lost nearly 2.5 percentage points against an average drop of 1.9%.
In the United Kingdom, in line with the trend of recent years, there has also been a clear
drop (down 2.9%), whilst Spain has suffered greatly from the 2009 crisis, with a fall of 8.5%
compared with the 5.9% average decrease over the preceding five years.
Table 19: Fixed network telecoms services market 2005-2009
France
2009
2008
2007
2006
2005
20,0
20,1
20,1
20,0
20,0
∆ % 08-09
-0,2
Cagr 09-05
0,0%
Germany
34,2
35,3
36,8
38,3
38,5
-3,1
-2,9%
Italy
15,4
15,8
16,1
16,3
16,6
-2,4
-1,9%
9,9
10,2
10,4
10,7
11,1
-2,9
-2,8%
United Kingdom
Spain
6,5
7,1
7,2
7,5
8,3
-8,5
-5,9%
Total
87,2
89,0
90,6
92,3
93,3
-1,9
-1,7%
Note: Figures in millions of euros. Source: IEM elaboration of ARCEP, VATM, AGCOM, OFCOM and CMT data.
With regard to the market share held by the European incumbents, Telecom Italia is still the
major player to hold the greatest number of broadband lines in percentage terms, even if at
the same time it recorded the greatest rate of reduction (nearly 10 percentage points down on
January 2007). The performance of both France Telecom and Deutsche Telekom has fluctuated,
currently expressed in respective market shares of 46.2% and 46.8%, whilst Telefonica, after
years of slight growth which peaked at 56.7%, recorded 55.6% in 2009. Apart from British
Telecom, which only gained 4 percentage points over 2007 (rising from 23.7% to 27.2%), as
regards total active lines, the incumbents in the five major countries enjoyed a higher rate of
growth in their own countries of origin overall than the average rate for European incumbents
(45.2%).
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Fixed telecommunications and broadband
Table 20: Market Share of broadband access held by the incumbent (07-09)
Country
lug-09
gen-09
France
46.2%
47.2%
lug-08
47.2%
gen-08
47.7%
lug-07
46.8%
gen-07
46.2%
Germany
46.8%
47.0%
46.0%
46.1%
46.4%
48.0%
Italy
57.8%
59.8%
61.3%
63.6%
64.8%
66.6%
United Kingdom
27.2%
25.4%
25.6%
25.8%
25.7%
23.7%
Spain
55.6%
56.7%
56.3%
56.1%
55.8%
55.9%
EU27
45.2%
45.5%
45.7%
46.1%
46.8%
46.9%
Note: Amounts given are of percentages held by the incumbent in relation to all total active lines. Source: IEM elaboration of European Commission data, July 2009.
On the other hand, Italy is the only country that has not suffered the crisis in fixed network
infrastructure investments: in the face of a drop in French and German funds of around 10%
(9.76% and 9.23% respectively) and the Spanish collapse (-17%), Italy’s investments grew 5.5%
in 2008. It is the only country showing positive progress over the past five years (up 1.41%).
Table 21: Investments in fixed network infrastructure 2005-2009
2009
2008
2007
2006
2005
∆ % 08-09
Cagr 09-05
France
3,70
4,10
3,80
3,80
3,70
-9,76
0,00%
Germany
5,90
6,50
6,50
6,60
6,40
-9,23
-2,01%
Italy
3,79
3,59
3,75
3,59
3,59
5,48
1,41%
Spain
4,28
5,17
5,79
5,69
5,51
-17,31
-6,16%
Total
17,67
19,37
19,84
19,67
19,20
-8,77
-2,06%
Note: Figures in millions of euros. Source: IEM elaboration of ARCEP, VATM, AGCOM and CMT data.
In any event, from the point of view of broadband infrastructure capacity, an international
comparison shows various gaps in Italy: more than 22% of subscribers have broadband with
a threshhold of less than 2Mb/s compared with 15% in Germany, 12% in Spain and 3% in
the United Kingdom, which is finalising its scheme to give all UK citizens a basic broadband
connection.
Fig. 6: Broadband line capacity in major European countries (2009)
≥ 10 Mbps
100%
90%
≥ 2 Mbps and <10 Mbps
7,7
≥ 144 Kbps and < 2 Mbps
6,1
13,3
22,9
80%
70%
60%
50%
69,5
90,8
62,1
74,5
40%
30%
20%
10%
14,9
22,8
3,2
0%
Germany
Italy
UK
12,2
Spain
Fonte: elaborazione Iem su dati Eurostat e Agcom. Note: dati in milioni di euro.
In addition, Italy does not have a particularly positive presence in high speed connections
(scarcely 7.7% are connected to extended broadband), only just beating the UK (6.1%, but it
does have a very high rate of access for 2-10 Mb/s capacity, accessed by over 90% of users in
Fixed telecommunications and broadband
133
the United Kingdom), but less than Spain (13.3%) and Germany (22.9%) which benefits from
widespread digital cable connections.
It is very clear that Italy lags behind in the use of new technologies by members of the public
(Table 21). According to Eurostat, the share of individuals who can be counted as Internet
users15 scarcely exceeds 42%, as against 54% in Spain, which is now 12 points ahead (it was 8
points in 2006). France has done decidedly better in the last three years; cybernauts have risen
from 39% to 65% of the population (up 26% since 2006 compared with an 11-point Italian
increase in the same period). Germany and the United Kingdom appear to be ahead – with
nearly ¾ of the population computer literate (71% and 76%) whilst the average percentage in
Europe of those regularly surfing the web is 60%, nearly 20% above Italy.
Table 22: Individuals using the Internet at least once a week in major European countries (%)
Country
2009
2008
2007
2006
2005
France
65
63
57
39
n.d.
Germany
71
68
64
59
54
Italy
42
37
34
31
28
UK
76
70
65
57
54
Spain
54
49
44
39
35
EU27
60
56
51
45
43
Source: IEM elaboration of Eurostat data.
The distance appears greater still when taking into account individuals who have never used a
PC: in Italy the figure is 43%, in France 20%, 14% in Germany and 11% in the UK. This means
that Italy is clearly divided between frequent web users and individuals to whom this is totally
foreign. This makes computer literacy even more difficult and thus clearly illustrates the need
to develop policies to stimulate demand for ICT services. The limited spread of broadband
in other countries is the manifest consequence of this state of affairs: according to Eurostat,
broadband in Italy does not reach 40% of households, over 30 points below the UK average
(69.5%) and 17 points below the European average (56%). Considering that these percentages
only include nuclear households with at least one member aged between 16 and 64 years of
age, a criteria that excludes households composed solely of retired people, it is even more clear
that the gap may be due to cultural reasons (individuals who don’t perceive the added value
of the Internet or do not know how to overcome their own ICT illiteracy) and to the dearth of
initiatives to raise awareness of the benefits of information technology and of network services.
Finally, according to the European methodology, a comparison of net access numbers in
relation to total population ranks Italy lowest among the major European countries: although
only slightly behind Spain, it is nonetheless 3.5 points below the European average and 10
percentage points removed from the more technically-skilled northern European countries.
Table 23: Individuals who have never used a PC (%)
Country
France
2009
2008
2007
2006
20
20
23
n.d.
Germany
14
14
16
17
Italy
43
45
49
54
UK
11
13
14
18
Spain
31
33
36
39
Source: IEM elaboration of Eurostat data.
15
The Eurostat definition is used here: it considered Internet Users to be those individuals who access the
Internet at least once a week.
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Fixed telecommunications and broadband
Table 24: Households possessing broadband connections in the major European countries (%)
2009
2008
2007
2006
2005
UK
69,5
61,5
56,7
43,9
31,5
Germany
64,6
54,9
49,6
33,5
23,2
France
57,5
57,1
42,9
30,3
n.d.
EU 27
56,0
48,6
41,6
30,4
23,0
Spain
51,3
44,6
39,2
29,3
20,8
Italy
39,0
30,8
25,3
16,2
12,9
Note: Households with at least one member aged between 16 and 64 years. Source: IEM elaboration of Eurostat data.
Fig. 7: Broadband penetration by number of individuals
40
35
30
37,9
37,2
32,5
30,5
29,4
29,2
28,8
23,9
25
20,7
20,4
20
15
10
5
0
Note: Italian data is valid as of January 2010, whilst figures for other countries date from June 2009. Source: IEM
elaboration of Eurostat, ISTAT and AGCOM data.
4. The functional separation of the networks
The functional separation of networks and services was created to solve the problem of ensuring
telecoms’ competition within a single structure of national networks, controlled by the historic
operators in different countries (the national telecoms companies). In principle these were
public monopolies, later privatised. At present these companies are in the position of being in
the dual role of competitor with new entrants to the market and managers of the network on
which the services supplied by the other telecoms players are routed.
Such a complex situation has given rise to major international debate on the measures necessary
to ensure competition between the incumbent and market newcomers. Initially, the opening
up of the telecoms market was regulated predominantly by asymmetric norms (limits placed
on the sole incumbent in an attempt to foster alternative operators) and the unbundling of
the “last mile”, or to be more precise the control of the final stretch of the network, which
extends from the nearest central exchange to the user’s building and ultimately to their actual
residence. At present in fact, alternative operators pay an access fee to ‘transit’ the network
infrastructure of the former monopoly holder (in Italy, the fee paid to Telecom Italia is
fixed by AGCOM) whilst competing between themselves and with the incumbent to supply
services (connectivity, telephony, audiovisual etc.). The dual role of the incumbent as network
manager and simultaneously competitor in the telecom services market creates problems for
competition mechanisms. This has led to heated discussions about whether or not the former
Fixed telecommunications and broadband
135
monopoly-holders may be separated into two companies – one solely responsible for managing
infrastructure and the other to manage the commercial operations (supplying telecom services
etc.). The operational separation between networks and services has been dealt with in different
ways depending on the different national markets, ranging from self-regulation to entrusting
monitoring to the national authority, the creation of joint bodies between national telecom
companies and the authority and finally the creation of separate divisions, imposed on the
former monopoly holders that manage network access.
In Italy, Telecom Italia proposed to AGCOM in July 2008 that it would undertake a range of
commitments. These undertakings were approved by the regulatory authority in December
of that year16, to integrate and strengthen existing commitments in relation to equality of
treatment between Telecom Italia Retail (the division responsible for managing the commercial
services) and the other licensed operators (OLO) regarding supplying services on access
networks. Telecom Italia created the Open Access division in 2008 to manage the network
access and service supply to associated organisations, so as to ensure that the principle of
equality of treatment is respected for all operators. Open Access supplies services to both the
incumbent’s retail division and to wholesale (reserved for the other operators), in accordance
with a series of directives aiming to ensure equality of treatment in compliance with 14 specific
commitments. Key commitments include: establishing a new delivery process to overcome the
asymmetry in developing network management between Telecom Italia and OLO; a system
to monitor significant market power (SMP) and equality of internal-external treatment (by
a comparison of key performance indicators regarding services to operators and those to
Telecom Italia’s commercial operations), the publication of guidelines for the maintainance the
access network; adapting financial conditions for internal transfer of SMP services supplied by
Open Access to Retail operations (evidence of separate accounting was guaranteed regarding
the services supplied by Open Access in order to verify that this transfer charge and the
corresponding financial conditions charged to the OLO are equivalent); the publication of
a tender for access and sharing of infrastructure installation; the drafting of a technical and
financial proposal so that interested operators might share the investments and the costs to
create the new installation infrastructure17; membership of the NGN Committee for Italy; and
finally establishing a Supervisory Board (“OdV”) to ensure compliance with the undertakings.
The Supervisory Board is responsible for supervising the proper implementation of the
Undertakings, and a series of key performance indicators to measure the quality of the wholesale
service supply. It is composed of five members, three of whom, including the Chairman, are
appointed by the national regulatory authority, AGCOM. The Supervisory Board monitors
possible compliance breaches and communicates any to AGCOM, with which it cooperates
in its own supervisory activity. The Supervisory Board’s role is to consider measures to ensure
proper implementation of the Undertakings, whilst AGCOM remains the competent body for
any sanctions that may be imposed. In its first two years of activity, the Supervisory Board has
reviewed the correct fulfilment of many of the Undertakings assumed by Telecom Italia, and
has launched a review on how the cancellation of Maintenance Orders18 is handled, to meet the
recommendations of the alternative operators and to ensure equality of treatment in resolving
the network problems experienced by subscribers to telecommunication services offered by
the various operators.
16
Resolution 718/08/CONS
17
As regards the new access networks, Telecom Italia has thus fulfilled the terms of this Group of Undertakings, having transmitted the following documents to the national regulatory authority before the fixed deadline:
“Telecom Italia’s proposal for installation infrastructure for the development of FTTX networks”, the “Telecom Italia
proposal for sharing investments and costs with the OLO to create new installation infrastructure for development
of the FFTX networks” and the “Guidelines for migration to NGAN – minimum notice period and means of communication to the OLO in the transition to the new generation networks”.
18
The process of supplying telecommunications services and lines to alternative operators by Telecom Italia
provides for the incumbent declining any request if problems occur linked to errors in the compilation of the order,
to the unavailability of the access network (network not functioning) or to the unavailability of the client (client
knocked out).
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Fixed telecommunications and broadband
In the UK, in the light of the results of the Strategic Review of Telecommunications (2005),
which identified British Telecom’s exclusive ownership of the networks as a barrier to entry
capable of limiting access to the market by the alternative operators, OFCOM committed BT
to a series of undertakings to determine new rules for product and services supply to the OLO
and to its own commercial divisions. The key point of the operation is the commitment by the
incumbent to guarantee equality of access to the networks on non-discriminatory conditions
to competitors, the Equality of Inputs (EOI) and the operational separation, or a separation of
systems that would allow wholesale supply on an EOI basis, in other words equal conditions
for commercial supply by the various operators. In particular, BT undertook to ensure that
the supply made to its own commercial networks and to the OLO was equal in terms of price,
commercial conditions, timescales etc.
In the wake of these undertakings, Openreach was set up (2006), a operationally separate
entity which, although part of the British Telecom Group, is responsible for the fixed access
network and has its own head office and independent management systems. Openreach has,
in addition, its own commercial brand and its head reports directly to the CEO of the British
Telecom Group. Both BT Retail and the OLO have a direct relationship with Openreach.
The undertakings provided for the creation of a special authority, the Equality of Access Board
(EAB), entrusted with the task of monitoring compliance with the Undertakings. The EAB,
established in November 2005 is an entity of British Telecom Group Board Committee and
is presided over by a non-executive director of BT, who is assisted by a senior manager of the
major operator; the other three members are independents, chosen after consultation with
OFCOM. The EAB is supported by the EAB secretariat, which deals predominantly with the
organisation of the Board meetings and is assisted by the Equality of Access Office (EAO),
which, in hierarchical terms, reports to BT’s head of Public Affairs and monitors the company’s
correct application of the Undertakings. It also assesses reports received. The EAO in particular
periodically assesses a series of specific criteria regarding BT’s compliance with the tasks
undertaken with OFCOM, as well as regard to the Code of Practice. Monthly reports are then
referred to the EAB.
In Spain in 2007 the national communications authority (CMT) imposed a series of key
performance indictors (KPI) on Telefónica, the incumbent operator, to communicate to both
CMT and to the competitors on the quality of service provided abroad and to the domestic
market, in order to ensure that the alternative operators would not suffer as a result of a
discriminatory situation. In 2008, following publication of the results of public consultation on
NGN, the CMT concluded that, prior to ensuring functional separation of the access networks,
it would undertake an in-depth analysis of the impact on the competitive framework and on
the investments, which would, however, constitute an “extreme and exceptional” measure.
In France, no model has yet been established to separate the network from the incumbent and
therefore the French authority (ARCEP) has strongly emphasised on a number of occasions the
negative results that the adoption of a functional separation model may produce in the area of
costs (reorganisation of the historic operators and duplication of the organisational structure),
which appear too severe if compared to the problems the separation should tackle. ARCEP,
moreover, maintains that a functional separation model that would be difficult to reverse, yet
if the same results could be attained by a more precise regulation, this would ensure that it was
possible to amend the regulation if it became apparent that the conditions which had altered
competition had changed. ARCEP also criticises the functional separation for its potential
to act as a disincentive for the operators’ investment strategy. In its opinion, the functional
separation may fail to eliminate the necessity to regulate the prices and quality of services
offered. It further maintains that the problem of monitoring the company that manages the
access network is unaltered – in this way it operates as a de facto monopoly.
Germany has also not established functional separation models for Deutsche Telekom, the
historic network operator, nor has it created independent supervisory bodies similar to Italy’s
Supervisory Board (OdV).
Fixed telecommunications and broadband
137
Furthermore, the sector authority confirmed its opposition to the adoption of similar models,
highlighting the possible negative impacts that might result from a decision of this kind.
Discussion regarding Sweden is much more developed. Following the market analyses between
2006 and 2007, which highlighted the absence of alternative operators to the incumbent in
various parts of the country and the imposition of commercial conditions on the alternative
operators by the former monopoly holder TeliaSonera, the Swedish regulatory authority
proposed a legislative amendment to Parliament to guarantee the possibility of imposing
a functional separation model on the historic operator. The new regulations, in force since
July 2008, allow the Swedish authority to require the incumbent to hive off the copper wire
networks, but this depended on a positive opinion from the European Union. In any event,
the Swedish authority did not impose the functional separation on this historic operator with
immediate effect. Instead it stated its intention to undertake a market analysis to decide whether
to proceed, or at least in which direction, in 2009. For its part, the incumbent in Sweden has
voluntarily created the functional division Skanova Access, with effect from 1 January 2008,
which manages the separate access to the copper-wire and fibre networks with the aim of
ensuring the principle of equality of treatment between all the operators and the commercial
divisions of TeliaSonera. Skanova is a legally separate division of Telia, with separate ICT
systems and is subject to financial reporting requirements. Nonetheless, 100% of the ownership
structure remains in the hands of the historic operator. Skanova Access staff are obliged to
respect the terms of a specific Code of Conduct containing measures to ensure respect of the
principles of equality of treatment and non-discrimination.
According to the new rules regarding functional separation, any autonomous proposal for
separation put forward by the historic operator must be approved by the Swedish regulatory
authority (the Swedish Post and Telecom Agency, PTS). In this regard, PTS has not yet expressed
any assessment of the matter, with the exception of a paper (dated November 2009), which
reveals that the introduction of Skanova had not produced major improvements in terms of
effective transparency.
A relevant body was created to audit Skanova Access’ activities. The Equality of Access Board
was created with the specific task for supervising equality of treatment of the OLO on behalf of
the network division. The supervision is based from the outset on performance analysis using
key performance indicators (KPI) and monitored by external auditors. The Board reports to the
TeliaSonera CEO every four months, following monitoring of the commitments undertaken
by the dominant operator. The Board is composed of a Chairman, who is responsible for the
internal audit of TeliaSonera, and of two independent members appointed by the operator. It is
not anticipated that the Authority will appoint members.
New Zealand too has ultimately made a distinction in terms of regulation of the functional
separation of the incumbent between telecoms infrastructure and services, due to significant
shortcomings in competition between the operators and the significant barriers to entry to the
access networks. The government has imposed a company reorganisation on Telecom New
Zealand (TNZ) the dominant operator. This identifies the functional separation of the networks
as the most efficient instruments to contribute to improving competitive market conditions.
TNZ has therefore adopted a series of Undertakings based on the British model, which were
accepted and ratified by the New Zealand government in March 2008 and which provide for the
separation of the company into three divisions: Networks, Retail and Wholesale. The process
of progressive separation is currently underway and should be completed in 2012. The main
scope of the Undertakings is to ensure respect of the non-discrimination principle for access to
wholesale services offered by the dominant operator to alternative operators. In this case, one
of the commitments is also to set up a supervisory board, the Independent Oversight Group
(IOG), which is entrusted with similar tasks to those of the British Equality of Access Board
and the Italian supervisory body (OdV). This comprises a continuous assessment regarding
TNZ’s proper compliance with the terms of the Undertakings, with reference to the process of
progressive separation of the systems and achieving the agreed standard to guarantee proper
138
Fixed telecommunications and broadband
compliance with the principle of equality of treatment on other products, to be completed
within fixed deadlines.
Finally, it is important to note19, that as with the completion of the new fibre optic network,
the New Zealand government has created a relevant public authority (Crown Fibre Holdings),
which has received 1.5 billion dollars, ensuring in the meanwhile that the operators participate
in investments by means of tender offers. These offers, however, require a structural separation
between the commercial activities and the management of the existing network. Faced with
the possibility of choosing between competing with the public authority or introducing a
structural separation (i.e. a demerger) of the wholesale division, the former monopoly holder
chose the latter route. This should be implemented by the third quarter of 2011 and will lead to
it investing in a fibre network shared by all the operators, which will be a mixed public-private
ownership.
19
For more information on the International comparison on the question of the functional separation of the
networks cfr. http://organodivigilanza.telecomitalia.it/ita/confronto_internazionale.shtml
Fixed telecommunications and broadband
139
Mobile telecommunications
140
Mobile telecommunications
By Lorenzo Principali
1. Market overview
After 15 years of constant growth, the Italian mobile telecommunications market shrunk
slightly for the first time in 2009, recording an overall value of 24.01 billion euros (-1.5%).
The expected transformation of the sector created by a new generation of smartphones and
mobile internet services has, so far, failed to materialise. The general economic downturn
certainly played a part in this delay, though the mobile sector held up better than the overall
telecommunications market (-2.3%) and, particularly, in relation to the fixed segment (-3.3%).
As a result, mobile’s share of the total telecoms market continued to increase, reaching 55.73%.
Table 1: Italian mobile market, 2005-2009
2009
2008
2007
2006
2005
Mobile
24.015
24.390
24.070
23.642
22.625
∆ % 09-08
-1,54
Cagr 05-09
1,50%
Total telecoms
43.085
44.120
44.200
44.040
43.115
-2,35
-0,02%
% mobile of total telecoms
market
55,73%
55,28%
54,45%
53,68%
52,47%
-
-
Note: figures in billions of euros. Source: IEM elaboration of Assinform/Net Consulting data.
The total volume of active mobile connections remained above 91 million lines but, after years
of consistent growth, it appears to be reaching saturation point (-1.0% compared with 2008).
However, the number of unique users of mobile phones continued to rise, reaching 46.5 million
people, or more than three-quarters of the population. The spread of third generation handsets
also increased. They are now owned by 31.9 million users (+9.6%), a figure that points to a
significant development of mobile broadband services in the coming years as the number of
users reaches critical mass and a large swathe of Italian mobile phone users becomes more
technologically sophisticated.
Table 2: Mobile telephone lines in Italy, 2005-2009
2009
2008
2007
2006
2005
∆% 09-08
∆% 09-05
No. active lines
91,3
92,2
90,7
81,9
72,2
-1,0%
28,9%
of which on 3G
31,9
29,1
23,1
17,1
10,0
9,6%
219%
Unique users
46,5
46,1
45,9
44,4
42,7
0,9%
8,9%
Note: figures in millions of units. Source: IEM elaboration of Assinform/Net Consulting and AGCOM data.
The market for mobile services resisted the downturn, registering a slight increase (+0.3%).
This however had less of an impact on the overall decline in the telecommunications services
market during 2009: in 2008 an increase of 250 million euros in mobile services largely offset a
decrease of 300 million euros in the fixed line sector, leaving the overall market virtually stable
(-0.1%). In 2009, in contrast, the increase of 65 million euros in the value of mobile services
Mobile telecommunications
141
was not enough to balance the loss of almost 400 million euros registered in fixed line services,
which contributed to an overall reduction of 0.9% in the value of the telecoms services market.
In the services sector, therefore, mobile continues to increase its market share by value, which
reached almost 55% in 2009.
Table 3: The Italian mobile services market, 2005-2009
Mobile
2009
2008
2007
2006
2005
∆ % 09-08
Cagr 05-09
18.825
18.760
18.510
18.040
17.170
0,35
2,33%
Total telecoms services
34.215
34.530
34.580
34.350
33.635
-0,91
0,43%
% mobile in total telecoms
54,51%
54,32%
53,52%
52,51%
51,04%
-
-
Note: data in millions of euros. Source: IEM elaboration of Assinform/Net Consulting data.
Examining the AGCOM figures on mobile telephone services by sub-category (Table 4), it
is interesting to note that the only growth came from data traffic. The possibly irreversible
downward trend in the text message (SMS) market accelerated (-6% in 2009), so data traffic
emerged as the key sector where operators are concentrating their strategies. (cf. paragraph 3).
Table 4: Mobile telephone services revenue in Italy, 2005-2009*
Voice revenue
Data revenue
2009
2008
2007
2006
2005
∆ % 09-08
Cagr 05-09
10,92
11,04
11,11
11,20
10,80
-1,09
0,28%
4,21
4,17
3,87
3,20
3,80
0,96
2,59%
SMS
2,22
2,37
2,33
2,50
2,30
-6,33
-0,88%
MMS and other data
1,99
1,80
1,54
1,30
0,90
10,56
21,94%
Others
2,56
3,14
3,36
2,20
2,10
-18,47
5,08%
Total
17,70
18,35
18,34
16,60
16,70
-3,54
1,46%
Note: data in billions of euros. SMS= text messages. MMS=Multimedia messages. Source: IEM elaboration of AGCOM data. * In such a comparison a discrepancy between the AGCOM and Assinform/Netconsulting needs to be
born in mind. The industry regulatory Authority, AGCOM estimates overall revenues from the services sector at 17.7
billion euros while Assinform/Netconsulting, whose figures were used in particular for the comparison between mobile telecoms and the whole telecoms sector, values the mobile services sector at 18.85 billion. At the same time, while
Assinform reports growth in mobile services of 0.3%, the Authority estimates that the mobile sector shrunk by 3.5%.
As far as voice traffic is concerned, three points emerge from AGCOM’s data (Table 5). Firstly
more than 87 percent of calls from mobiles are made to users’ own networks; secondly, while
operators maintained their efforts to keep the bulk of their traffic on their own network (+3.9
percent in terms of overall annual traffic), the slight reduction in on-net1 revenues (-0.39%)
points to either the reduction of call rates or promotions based on free minutes packages.
As the net increase in off-net calls (+9.7%) corresponds to a minimal increase in revenues for
such calls (+0.96%), it seems likely that the promotions have included free minutes for calls to
networks other than the one offering the deal.
Table 5: Mobile voice services traffic by destination, 2008-2009
2009
2008
∆ % 08-09
Fixed network
13,9
14,1
-0,9%
Mobile on-net
66,4
63,9
3,9%
Mobile off-net
25,5
23,2
9,7%
Other destinations
Total
7,9
7,5
6,1%
113,8
108,7
4,7%
Note: data in billions of minutes. Source: IEM elaboration of Auditel data.
1
142
Within the service operator’s own network
Mobile telecommunications
Table 6: Voice service revenues by destination, 2005-2009
Mobile network
2009
2008
2007
2006
2005
∆ % 09-08
Cagr 05-09
8,22
8,19
8,45
8,08
7,7
0,37
1,65%
On-net
5,07
5,09
5,06
4,58
3,9
-0,39
6,78%
Off-net
3,14
3,11
3,4
3,5
3,8
0,96
-4,66%
Fixed network
1,72
1,9
2,01
2,08
2,3
-9,47
-7,01%
International networks
0,98
0,94
0,96
0,8
0,8
4,26
5,20%
Total
10,92
11,03
11,42
10,96
10,8
-1,00
0,28%
Note: data in billions of euros. Source: IEM elaboration of AGCOM data.
Overall, the negative economic backdrop weighed heavily on the mobile infrastructure market
and above all on handset sales (Table 7): revenues from the management, installation and
maintenance of networks fell 7.0% to 1.47 billion euros and the provision of software and other
services to operators also displayed a very negative trend (-8.4%). But the biggest decrease in
absolute terms was in the handsets’ market, where the growing spread of smartphones was not
sufficient to offset the general decline in a sector in which the total turnover was down by more
than 280 million euros compared with 2008. This is partly due to mobile operators providing
the latest generation of handsets as part of subscription contracts including voice and data
minute packages.
Table 7: Mobile telecoms market: infrastructure and handsets revenues, 2005-2009
2009
2008
2007
2006
2005
∆ %09-08
Cagr05-09
1.470
1.580
1.650
1.915
2.095
-6,96
-8,48%
490
535
515
475
405
-8,41
4,88%
2G and 3G phones,
smartphones, internet keys and
data cards
3.200
3.480
3.340
3.180
2.920
-8,05
2,32%
Total
5.160
5.595
5.505
5.570
5.420
-7,77
-1,22%
Networks access, installation,
management and maintenance
Software and services for
telecoms operators
Note: data in millions of euros. Source: IEM elaboration of Assinform/Net Consulting data
2. Infrastructure and mobile virtual network operators (MVNOs)
Analysis of infrastructure operators’ market share by sales for 2009 reveals some important
trends: there has been a sharp reduction in the gap between the mobile division of Telecom
Italia (TIM), which now has a market share of 38% following a fall in sales of 8% in 2009
though still the leading operator, and Vodafone, which increased its sales by four percentage
points and its market share from 36 to 37.7%.
The positive performance of Wind, the operator controlled by the Egyptian company Orascom
that is now the subject of a takeover bid by Russia’s Vimpelcom, also continued. Average annual
growth of 7% over the last five years has reinforced Wind’s position as the third largest operator,
boosting its market share to 16.8% in 2009 and increasing the gap between it and rival H3G. The
small signs of weakness displayed by the latter in 2007 and 2008 were confirmed in 2009, when
a decline in sales (-2.43%) saw its share of the total mobile market dip below 7.3%, although
the company’s growth trend over a five-year period remained positive (+4% annual average).
Mobile telecommunications
143
Table 8: Evolution of % market shares by sales in the Italian mobile phone market, 2005-2009
2009
2008
2007
2006
2005
∆ % 09-08
Cagr 05-09
Tim
38,20
41,89
42,45
43,74
44,94
-8,80
-3,98%
Vodafone
37,71
36,04
33,64
33,56
36,34
4,63
0,93%
Wind
16,81
15,86
15,27
13,82
12,51
5,99
7,67%
H3G
7,28
7,46
8,63
8,88
6,21
-2,43
4,06%
Total
100
100
100
100
100
0,00
0,00%
3216,7
3360,6
3241,3
3309,3
3535,3
-4,28
-2,33%
Herfindal-Hirschmann
Index
Source: IEM elaboration of company data.
The overall market was hit less hard by the negative economic backdrop than other sectors
(Table 9), registering a contraction of 2.6%. It must however be stressed that the slowdown
saw some operators worse affected, while others benefitted by winning market share: the worst
annual performance was recorded by TIM, which saw sales fall more than 11% percent from
their 2008 level to 8.6 billion euros. The trend of the last 12 months was, likewise, negative for
H3G, with sales down almost five percentage points. Vodafone and Wind, in contrast, benefitted
from their respective rivals losing ground to move closer to the market leader and strengthen
their own position: the former increased sales by around 150 million euros (+1.88%) to register
a third consecutive year of growth (+1% annual average from 2005). Wind did even better,
with a rise of 100 million euros in sales from 2008 (+3.22%) representing the company’s fifth
consecutive year of growth (+7.83% annual average from 2005).
Table 9: Italian mobile telephone companies revenues, 2005-2009
2009
2008
2007
2006
2005
∆ % 09-08
Cagr 05-09
Telecom Italia
8603
9687
9922
10210
10056
-11,19
-3,83%
Vodafone
8492*
8335
7862
7834
8132
1,88
1,09%
Wind
3786
3668
3570
3226
2800
3,22
7,83%
H3G
1640
1726
2018
2072
1390
-4,98
4,22%
Total
22521
23127
23372
23342
22378
-2,62
0,16%
Note: Revenues for services provided in Italy in the mobile sector, figures in millions of euros (*) Figure for year to
March 31, 2010. Source: IEM elaboration of company data.
As for mobile virtual network operators (MVNOs – companies offering telephony services
using the spectra and infrastructure of actual mobile network owners), 2009 confirmed the
positive trend of the preceding years. Around three years since they entered the Italian market,
the “virtual” operators have notably increased in number (they now total 16) and in terms of
their user base (2.43 million in 2009), albeit that this is subject to an extremely high churn rate
(customers cancelling their subscriptions).
Operators specialising in “ethnic” markets (like come Daily Telecom and PLDT Italia) and
offering competitive call rates aimed at specific sections of the immigrant workforce and those
taking advantage of their existing sales networks by offering promotional telephone tariffs
combined with their own core business (Poste Mobile, Carrefour, Coop, Erg mobile etc.), have
been joined by fixed line operators aiming to capitalise on their ability to offer these services
alongside their existing products as part of an integrated four-way package (Fastweb and
Tiscali)2.
In 2009, the MNVO market reached a value of nearly 150 million euros, registering annual
growth of over 180%. Although data services grew the fastest (+281%), the voice sector remains
comfortably the most significant part of the market, with a value of 125.4 million euros for the
year.
2
These operators offer packages with a fixed line telephony, broadband, audiovisual services (IPTV) and
mobile telephony.
144
Mobile telecommunications
That said, the Mobile Payments market stands out particularly, and more so in light of the
recent liberalisation brought about by changes in Italian legislation, contained in the Legislative
Decree N.11 from 2010, intended to bring Italy into line with European single market
regulations on payment services3. From March 1, 2010 telecoms companies have been able act
as payment institutions, giving their clients the possibility to transfer money, do online banking
and shopping as well as paying for bills, parking or toll fees, bus and train tickets as well as
audiovisual content.
Table 10: MVNO revenues in Italy by type of service, 2008-2009
2009
2008
Var %
Voice services
125,4
46,3
170,7
Data
24,4
6,4
281,4
Total
149,8
52,7
184,2
Note: Figures for Carrefour, Coop Italia, Daily Telecom, Erg Mobile, Fastweb, Noverca, PLDT Italia, Poste Mobile and
Tiscali, in millions of euros. Source: AGCOM.
The first operator to move in this direction was Poste Italiane (the Italian Post Office), which,
together with Noverca (Intesa group) has more than 60% of the MVNO market. In 2009,
mobile payments were principally used for pay-as-you-go mobile phone recharges, ticketing
and parking, but it is likely that the market will evolve towards more advanced services of
higher added value for operators (payments, billing, shopping and money transfers). In this
context, it remains to be established how operators will position themselves on the value chain:
acting as enablers, limiting themselves to transmitting and simplifying transactions or by
managing payment services wholly and directly themselves in order to take advantage of the
wide diffusion of mobile phones and users’ increasing familiarity with mobile billing.
3. Mobile broadband: content, traffic and investment
The data traffic sector, abetted by the growing spread of new generation, internet-enabled
handsets, seems to have the biggest growth potential in the mobile telecoms field. This is due,
above all, to the mobile broadband connectivity provided by telephone operators, a sector still
under development but which could open up a market for new services radically different
from the traditional uses of the mobile phone: infomobility, geopositioning, proximity services
and mobile payments are just some of the possible developments that will drive the “pocket
internet” to a wider population.
Probably for these reasons, this sector comes out as the one subject to the greatest change, as well
as being the terrain on which some of the most important battles will be played out in the near
future. On the one hand, the new business models of manufacturers with the launch of their
own in-house application stores (Apple above all) has, to an extent, cut traditional operators out
of content selling4. This is due to the nature of application stores, which, structured in synergy
with the manufacturer’s devices, grant small software companies or individual developers the
right to create applications aimed at a broad market - or rather the owners of consoles - on the
basis of revenue-sharing between manufacturer and developer.
However, because, in the majority of cases the content is available free or as part of premium
packages, such a model seems to result in a gradual substitution of paid content with freely
available content and applications, rather than pay services being replaced by other pay
services. Whereas in telecoms companies’ portals the pay-free ratio was 95-5, for applications
stores it was completely the other way around (8-92)5. The effect of this dynamic, albeit positive
3
http://www.filodiritto.com?index.php?azione+visualizza&iddoc=1627
4
Vodafone has launched its own application store with products adapted for Samsung and Nokia handsets
while Tim has done a deal with Nokia to makes its own payment system available through Ovi Store, the online
content and applications store launched by the Finnish manufacturer.
5
E-Content 2010 Report, Confindustria Servizi Innovativi e Tecnologici.
Mobile telecommunications
145
for the manufacturers who can offer their own clients a series of micro-services and enhanced
applications, was a general decline in mobile content revenues, which fell by around 20% (-160
million euros) from 2008 levels (Table 11).
Table 11: Mobile revenues compared: access, content and advertising (2008-09)
PoliMi
Confindustria SI
2009
2008
∆% 08-09
2009
2008
∆% 08-09
Mobile internet
392
334
17,37
n.d
n.d.
n.d.
Mobile content pay
596
744
-19,89
763
900
-15,22
24
6
300,00
2
0
-
32
32
0,00
20,5
22
-6,82
1020
1110
-8,11
783,5
922
-15,02
of which from application
stores
Mobile advertising
Total
Note: Figures in millions of euros. Source: IEM elaboration of data from Polimi (Osservatorio Mobile Content 2010)
and Confindustria (E-Content 2010 Report).
Indeed, the decline in content revenues suffered by telecoms operators coincided with only a
minimal increase in earnings for application-store owners, although this is subject to significantly
different valuations by different sources (+2 million euros according to Confindustria SI and
+18 million according to PoliMi).
On the other hand, such new vehicles for the diffusion of content contributed notably to an
increase in mobile data traffic: this sector went from 334 million euros in 2008 to 392 million
euros (17%) the following year, a figure that was certainly encouraging, although it was still not
enough to fully offset the net decline in content revenues.
The competitive pressure from “third party” content providers (with regard to the management
of mobile traffic) seems therefore to have driven telecoms operators to refocus on internet
traffic revenues, as the potential for earnings in the guise of content provider has been reduced.
In this sense, when the gradual spread of flat tariffs, which generated an increase in revenues
of 53 milllion euros from 2008 (+68%), is set against the five million euros increase registered
in usage-based billing (+2% from 2008)6, this constitutes an important signal, as does the
increasing prevalence of bundles based on internet-enabled smartphones combined with
unlimited access. However, flat-rate billing is actually put in danger by the threat of networks
becoming overloaded and, in order to address this problem, every operator is implementing
traffic shaping practices, which limit surfing speeds for users at certain times or once a set
threshold of traffic has been passed.
The flip side of mobile internet provision taking shape according to a business model that
rewards consumers willing to pay more for a better service is a risk that the spread of mobile
broadband to large swathes of the population will be slowed down, consequently delaying the
attainment of the critical mass of users required to make investment in this technology profitable.
To guarantee a development of mobile broadband that will involve the greatest number of
people possible, operators and institutions will have to continue to work to counterbalance the
mobile digital divide through investment and liberalisation. In this sense, the plan to assign
frequencies liberated by radio and television’s switch to digital to mobile telephone operators
by means of a public auction outlined in the 2010 Stability Law, represents an important signal.
Nevertheless, the lack of provisions to direct some of the funds raised into investment aimed at
bridging the digital divide, as requested by the European Commission7, threatens to lead to a
fall in investment levels in 2011-128.
6
Source: Osservatorio Mobile Content e Internet 2011
7
Cf. The Digital Agenda for Europe, Commisioner Neelie Kroes’s remarks to two Italian parliamentary
commissions (the IX of the Chamber of Deputies and the VIII of the Senate) and the decision of May 6, 2010, which
defined the harmonised technical standards that Member States must respect in the allocation of radio frequencies
in the 800 MHz band.
8
As realistically it will be the same operators who will take part in the auction and will be committed to a
significant outlay in order to acquire frequencies (the government anticipates raising around 2.4 billion euros over-
146
Mobile telecommunications
Fig. 1: Investment in mobile infrastructure, 2005-2009
4000
3500
3000
2500
2000
3428
1500
3165
3194
3046
2415
1000
500
0
2005
2006
2007
2008
2009
Note: Figures in millions of euros. Source: IEM elaboration of AGCOM data
In relation to this, 2009 saw a net reduction in investment by infrastructure operators in mobile
networks (-22%), which was due both to the economic recession and, above all, because the
operators have already achieved a widespread coverage of networks.
The absolute value of investments made in 2009 was 2.415 billion euros, the lowest level
registered in the last five years. Again, the growth of data traffic observed above makes new
investment in this area extremely urgent.
The new LTE9 standard is likely to contribute to the further development of the mobile
broadband market. LTE enables downloading at almost 100 Mbps and uploading at 50 Mbps,
with speeds of 326.4 Mbit/s and 86.4 MBit/s10 for pictures. It will offer greater “spectral”
efficiency and more flexibility, but it will also require an updating of transmission networks as it
is not retro-compatible with previous standards11. For these reasons , operators are investing in
specific programmes for the construction of a mobile broadband infrastructure: from January
2010 Vodafone launched a plan to cover 1,000 municipalities currently on the wrong side of
the digital divide, to which the company envisages allocating a billion euros over three years.
The project will initially involve the use of HSPA+ technology before introducing LTE within
two or three years. Municipalities currently judged to be the most deprived in terms of digital
telephone services will be given priority for the new services. The capacity envisaged should
be superior to 2Mbps, a threshold that is twice what is held to be the minimum requirement
(also internationally) for “broadband”, which is 1Mbps. Furthermore, under Telecom Italia’s
business plan, which includes a strengthening of the TIM network, as well as under the
roadmap outlined by Vodafone, upgrades of the two biggest operators’ respective networks
(in areas already covered) have been announced, which will increase capacity from 14.-4 to
21-21.6 Mbps currently up to 42 Mbps in 2012. According to Telecom Italia’s estimates, traffic
on its own mobile network will be equal to 150 Petabytes (150 million Gigabytes), almost three
times the actual 60 Petabytes predicted to be transmitted over the TIM network in 2010 and
all) it is possible they will be obliged to cut back on other infrastructural investment.
9
The new LTE (Long Term Evolution) standard is the latest mobile transmission standard and was established by the 3rd Generation Partnership Project (3GPP). Although it is known as a 4G standard, in reality it does
not completely match the specification of IMT Advanced 4G, in contrast to Advanced LTE, which allows performance at close to 1 Gbps. While LTE is not compatible with older networks (GMS, UMTS etc.) Advanced LTE is totally compatible with the LTE network. Consequently, it will be necessary to establish new infrastructure alongside
that already in place. The task of LTE therefore is to deliver mobile broadband performance by taking advantage of
the experience gained from and investment in 3G networks, which should bring forward the introduction of 4G
standards which, when they are introduced, will not require the construction of a new transmission network.
10
Rumney, Moray. “3GPP LTE: Introducing Single-Carrier FDMA”. Agilent Technologies.
11
Cfr. Note 7.
Mobile telecommunications
147
15 times the volume of 2007. A similar growth rate (even if much lower in absolute terms) was
registered on the network of 3 Italia, which has gone from the transmission of seven Petabytes
in 2008 to 16 for 2009 and five for the first quarter of 2010 alone12.
So, if from the point of view of content and application management, the operators find
themselves in competition with manufacturers’ application stores, as far as the provision of
connectivity is concerned, the problem of overloading of networks appears pressing. As far as the
former is concerned, the new business model introduced by the application store owners seems
to represent competition for the telecoms operators, but it is also a stimulus to development,
and they will need to find effective synergies to make the mobile market profitable. In fact,
to prevent the spread of mobile internet either stalling or becoming a restricted and elitist
phenomenon, it appears necessary to recreate a virtuous cycle, probably involving content and
service providers (possibly even on a revenue-sharing basis), capable of prompting operators to
invest significantly in mobile networks and to promote the use of flat tariffs, thereby promoting
take-up by a maximum number of users. The achievement of the critical mass of users that will
make such investment advantageous will most likely come as a result of the development of a
new market for mobile services that will provide better and more evenly shared returns for all
players.
4. International comparisons
A comparison with the main European markets shows Italy, as in previous years, to be in
a leading position in terms of the number of active mobile lines. Italy still has the highest
penetration of mobile phones in relation to its population (151.2%), although this was down
from 2008 levels. Germany (133.03%) and the United Kingdom (131%) come next, while
France and Spain have lower penetration rates at respectively 97.92% and 109.30%.
Table 12: Growth of mobile telephone lines, 2005-2009
2009
2008
2007
2006
2005
∆ %09-08
Cagr05-09
France
97,9
93,6
89,8
85,1
79,5
4,63
5,35%
Germany
133,0
129,9
117,6
103,6
95,9
2,38
8,53%
Italy
151,2
158,4
157,6
135,1
123,1
-4,56
5,28%
Spain
109,3
107,5
107,1
102,2
96,8
1,67
3,08%
UK
131,7
126,3
121,8
115,9
109,2
4,28
4,80%
Note: Figures in millions. Source: IEM elaboration of ARCEP, VATM, Assinform, OFCOM and CMT data.
Germany still has the biggest mobile market in terms of revenue, although the downward trend
of the last five years points to it now having reached saturation point: having fallen to a value
of 23 billion euros in 2009, it has shrunk at a significant rate both over the medium term (-4%
annual average since 2005) and in comparison with the previous year (-7% compared to 2008).
It was the opposite story for France which, thanks to a consistent growth trend (+4% average
over five years), succeeded in holding up well even in the economic downturn, rising 1.5%
in 2009 and confirming its position as the second biggest market in Europe by value. Italy
reinforced its position with slight growth (+0,3%)13 while Spain’s market contracted abruptly
(-4%), as did the United Kingdom’s.
Breaking down revenues by sectors, two distinct trends emerge: the vibrant growth of data traffic
and the decline of voice and text message traffic. For voice, in Italy and France the contraction
appears restricted (respectively -1.09% and –1.92%), but in Germany and Spain this sector
12
In the course of 2009, 3 Italia signed two significant agreements: an exclusive one with Ericsson for the
development of an advanced mobile broadband network and one with Telecom Italia for the sharing of access sites
for the radiomobile network, in order to optimise investment and development time for its own network (Source: 3
Italia).
13
In this comparison, the figures used were from Assinform, which judges the Italian market to have grown
by 0.3%. The trend was negative according to AGCOM, see above.
148
Mobile telecommunications
shrunk by almost 9%. In contrast to the Spanish experience, the German market has been
shrinking over a longer period (reaching an average of almost 7% annually), suggesting there
has been a gradual change in the habits of users increasingly turning towards subscriptions
based on minutes’ packages, which reduce operators revenues.
Table 13: Development of mobile phone market in main EU countries, 2005-2009
2009
2008
2007
2006
2005
∆ % 09-08
Cagr 05-09
France
20,4
20,1
19,0
18,1
17,4
1,49
4,06
Germany
23,6
25,4
26,4
27,8
28,1
-7,09
-4,27
Italy
18,8
18,8
18,5
18,0
17,2
0,35
2,33
UK
16,7
17,3
16,8
15,6
14,7
-3,24
3,27
Spain
14,3
14,9
14,8
13,3
12,0
-3,99
4,56
Total
93,9
96,5
95,5
92,8
89,4
-2,69
0,01
Note: Figures in millions of euros. Source: IEM elaboration of ARCEP, VATM, Assinform, OFCOM and CMT data.
Table 14: Revenues from mobile telephone services in main EU countries, 2005-09
Country
France
Germany
Italy
United
Kingdom
Spain
Type of
revenue
2009
2008
2007
2006
2005
∆%09-08
Cagr 09-05
Voice
15,30
15,60
15,10
14,60
14,30
-1,92
1,70
Data and SMS
3,80
3,10
2,40
2,10
1,90
22,58
18,92
VAS and
directories
1,30
1,40
1,40
1,30
1,20
-7,14
2,02
Voice
17,23
18,95
20,36
22,08
22,97
-9,08
-6,94
Data
3,23
3,02
2,35
1,67
0,92
6,98
36,92
MMS
0,19
0,20
0,24
0,22
0,17
-7,39
2,85
SMS
2,95
3,23
3,46
3,83
4,04
-8,53
-7,56
Voice
10,92
11,04
11,11
11,20
10,80
-1,09
0,28
Data and MMS
1,99
1,80
1,54
1,30
0,90
10,56
21,94
SMS
2,22
2,37
2,33
2,50
2,30
-6,33
-0,88
Voice
11,78
12,34
12,57
11,89
11,56
-4,54
0,47
1,9
1,57
1,01
0,78
0,44
21,02
44,15
Data and MMS
SMS
3,03
3,36
3,25
2,91
2,69
-9,82
3,02
Voice
10,27
11,28
11,69
10,82
9,83
-8,95
1,10
Data
1,50
1,11
0,78
0,46
0,30
35,02
49,06
1,57
1,73
1,74
1,65
1,55
-9,08
0,30
Note: Figures in millions of euros. SMS= text message. MMS=Multimedia message. Source: IEM elaboration of data
from ARCEP, VATM, AGCOM, OFCOM and CMT.
Data traffic was the sector that performed best. In a mature market like Germany’s it comfortably
exceeded three billion euros in 2009 with an annual growth rate of almost 40% over five years.
Even in Italy, the figures for data were very positive (+22% average annual growth from 2005
and +10% on 2008), creating a market worth two billion euros in 2009, and it was a similar
picture in Spain (1.5 billion in 2009). It is harder to assess the trend in France, where the market
for data and text messaging services combined grew by 20%. As text message revenues declined
in every other major market, it may be that a decline in this sector in France was made up
for by an outstanding performance by data. The text messaging sector, as was predictable, is
becoming a second tier sector in all European markets, either as a result of bundles including
large numbers of messages reducing revenue-per-text or because of changes in the nature of
mobile communications making it increasingly obsolete. In Germany, revenues in the sector
shrunk by nine percentage points, in Italy the drop was 6% and in Spain it was also 9%: the
text messaging market appears destined to be gradually displaced by data exchange. Overall
Mobile telecommunications
149
therefore, in all the big European countries, operators are facing a gradual change in the habits
of users and the transformation of handsets from one-to-one communication devices to full
blown media centres with the capacity to offer connectivity, entertainment and web access. The
ability to lead or follow this evolution will probably determine the shape of the market in the
years to come.
150
Mobile telecommunications
Information
Technology
151
Information Technology
1
By Roberto Triola
1. Introduction
For the last 15 years Information Technology (IT) has gone through two distinct stages of
development in Italy. The first phase was characterised by a true market boom, rising from
approximately 11 billion to over 20 billion euros with an average growth rate of around 12%.
Table 1: The Italian IT market. The boom years 1994 - 2001
2001
2000
1999
1998
1997
1996
1995
1994
Hardware and technical assistance
7,2
7,1
6,5
6,1
5,7
5,4
5,3
5,2
Software and IT services
13,2
11,9
10,3
9,1
8,3
6,5
6,2
5,9
Total
20,4
19,0
16,8
15,2
14,0
11,9
11,5
11,1
Note: Figures in billions of euros. Source: Assinform/NetConsulting.
In the second phase, not yet ended, the occurrence of two global crises has had a very severe
effect on demand: in spite of the maturity and technological innovation of what was available,
they caused the market to plummet by more than 8%.
It took five years to ‘exit’ the 2002-2003 crisis, which affected market development. Over a fiveyear period the market struggled to recover the levels it had reached at the beginning of the
decade. The new financial crisis at the end of the decade crushed demand and has had a greater
impact. This time the effects are likely to last well beyond a five-year period.
Table 2: The Italian IT market. The crisis years 2002-2009
2009
2008
2007
2006
2005
2004
2003
2002
Hardware and technical
assistance
5,6
6,5
6,6
6,3
6,2
6,0
6,0
6,4
Software and IT services
13,1
13,8
13,6
13,5
13,3
13,3
13,4
13,7
Total
18,7
20,3
20,2
19,8
19,5
19,3
19,4
20,1
Note: Figures in billions of euros. Source: Assinform/NetConsulting.
Italy seems to suffer more from a low capacity for uptake of demand-led innovation, than from
an IT supply problem. This is characterised by:
•
patchy dissemination of infrastructure, with few quality ‘highs’ but also much
underdevelopment, both from a geographical perspective and from that of individual
companies (public authorities and businesses);
•
limited computer literacy;
1
The information contained in this chapter is elaborated from official sources – ISTAT, Eurostat, Unioncamere and above all the 2010 Assinform Report. We wish to thank NetConsulting for their kind collaboration.
152
Information Technology
•
lack of widespread awareness of how IT can help businesses and institutions to face present
and future challenges and not be merely a means to reduce costs;
•
the low take up of continual training;
•
the absence of stable mechanisms for collaboration between the world of research and
that of business: this makes it difficult to convert Italy’s heritage of creativity and its
entrepreneurial mindset into development and wealth;
•
the as yet limited application of new forms of collaboration offered by IT (Web 2.0 and
cloud computing). These applications extend the boundaries for businesses and the
authorities, opening up development opportunities that were unthinkable a few years ago.
From the 2009 data available, it is clear that the digitalisation process is very underdeveloped
in Italy (Table 3).
Table 3: Digitalisation indicators for Italy and the major EU Member States
Indicators
Italy
France
Germany
Spain
82%
63.6%
United
Kingdom
Digital citizens
PC/per inhabitant
52%
53%
72%
Internet/per inhabitant
42%
66%
75%
51%
71%
BB/per inhabitant
39%
61%
56%
45%
62%
Internet users (in the past 3 months)
47%
63%
75%
57%
70%
Women using the internet
32%
64%
71%
53%
66%
Adults aged 55-74 as percentage of
Internet users
13%
36%
38%
15%
44%
7%
28%
63%
40%
49%
B2C users, as percentage of Internet users
Digital business
Businesses with Internet
66%
57%
95%
95%
93%
Businesses with broadband (% of
businesses with Internet access)
54%
50%
84%
97%
87%
Businesses with Internet and website
33%
30%
77%
58%
Businesses which purchase over the
Internet
13%
18%
26%
16%
47%
Digital public authorities (e-government, education)
IT costs in the public sector (€ millions)
2.747
5.085
5.907
3.055
13.928
% of current Public Spending
0,9%
1,1%
1,5%
1,3%
3,5%
Businesses which interact online with
public authorities (sending forms)
42%
67%
45%
45%
51%
5%
25%
11%
9%
12%
32%
77%
66%
48%
95%
55%
60%
84%
Members of the public who interact online
with public authorities (sending forms)
Schools with PC in classes (2006)
Teachers and lecturers who use IT
instruments for teaching
Source: Elaboration of various sources (2009).
First, it is apparent that the spread of infrastructure (broadband) and the other main IT goods
(Pc) in households is still at a low level. A directly related factor is computer literacy, which is
still rather low: for example only 13% of Italians aged 55-74 use the Internet.
Second, business digitalisation is still insufficient to ensure adequate modernisation,
considering the delayed adoption of business automation technology and access to advanced
Internet functions, such as electronic purchase and e-procurement of capital and consumer
goods. The latter parameter is higher in other countries than Italy.
One only needs to consider that small Italian businesses, notwithstanding their proliferation
Information Technology
153
(4 million) scarcely represent 18% of total IT outlay. In 2009 these businesses substantially
reduced investment in IT (down 10%).
Finally, with reference to the public sector, it must be noted that Italy’s share of public IT
costs, as a percentage of current expenditure, is lower than that of other European Member
States. This implies the lack of widespread interactive services for business and consumer use,
particularly at local level. Another index that indicates the status of public sector digital activity
is the use of information technology in schools: a sector where, once again, Italy needs to make
major improvements.
2. IT businesses in Italy
With approximately 100,000 businesses and a workforce of 400,000, the Italian IT sector
occupies a significant position within Italy’s domestic economy. According to Eurostat the IT
sector is in fact among Top Ten economic activities in Italy, both in terms of overall added value
and of the number of people employed (nearly 3%). The comparison with other traditional
economic sectors is particularly interesting, for example the wood, chemical and publishing
industries, in comparison to which the IT section has a large weighting (in some cases even
double or triple) regarding workforce and overall added value. In addition, it is extensively
widespread in the Italian entrepreneurial arena.
Productivity figures point to the importance of the IT sector in Italy. If it is considered in
terms of remuneration of human capital by unit of completed production or disseminated
service, the IT sector has a 26% rate of productivity, 13 percentage points higher than the
national average, and is strongly represented in the category of highly skilled personnel and in
businesses with efficient organisational structures.
Looking closer at the IT sector, it becomes apparent that the leading segment is Software
and Services related to IT consultancy, software development in the strict sense of the word,
the management and analyses of data and more generally, all business activities linked to
information technology.
From a structural perspective, 92% of IT business is concentrated in developing software and
related services, 6.2% is active in technical assistance, whilst only 1.8% is principally active in
the construction of IT equipment. In recent years the hardware segment has been experiencing
a slow but continuous contraction in terms of productive units.
As for the legal form, businesses in the IT sector are mainly made up of limited companies. These
are 32% of the total and represent 69% of the workforce (this figure nears 84% if you consider
sole traders). This means that the IT sector is very robust from a structural perspective: in fact,
57% of the businesses with a limited company structure employ 88% of the skilled personnel
and 98% of people in permanent staff positions. It goes without saying that, as with the rest
of the Italian economy, the IT sector is characterised by the overwhelming presence of microbusinesses. Some 94% of Italian IT companies have, in fact, less than 10 workers and employ
just over 25% of permanent staff and 44% of the 390,000 overall workforce in the sector.
The software and services segment is also the most important in the IT sector when measured
in terms of size of workforce. In 2008, in particular, it may be noted that 92.4% of the workforce
in the sector was employed in the development of software and services, 4% was employed in
technical assistance and only 3.6% was employed in the manufacture of office machinery, in
assembling computers or in creating information systems.
As observed among businesses, there is a slight but continuous improvement in the Services
segment (up 0.2%) and a corresponding continuing reduction in the hardware segment.
With regard to the geographical breakdown of IT businesses, local units are mainly concentrated
in the Northwest area (around 38,000 units), followed by Central regions (approximately
24,000 units) and Northeast (22,000 units). The South and the Islands are in a lower ranking
154
Information Technology
(The two areas together have less than 21,000 production units). Lombardy is the region with
the largest number of local IT businesses (some 27,000). Lazio, with 12,000 production units,
lies in second place in the regional hierarchy, followed by Veneto, Tuscany, Piedmont and
Emilia-Romagnia.
The overall turnover for active local units in the IT sector is greater than 44 billion euros, which
equals to around 440,000 euros for every production unit and 110,000 euros per worker. Of
this figure, 88% is from the software and services segment, 9% from hardware and only 3%
derives from technical assistance. The economic and financial crisis in 2008-9 therefore
affected a widespread but fragile structure, with few large businesses (Table 4 the top 50 Italian
IT businesses account for some 50% of total industry turnover) and tens of thousands of small
and micro-businesses, which cover over 50% of the market.
From the supply side, the market is predominantly geared to supplying a small number of ‘big
spenders’ in industry, banking, public health and telecommunications. As regards demand,
there is a limited market. This makes industry growth by means of investments in research and
innovation by IT businesses very difficult.
The market is characterised by:
•
Very low consumer spending as a percentage of total spend (around 6%);
•
a public sector crippled by debt and by the influence of in-house companies, failing to
actively develop the whole market (with a stable market share of around 15% for years);
•
The business segment is largely dominated by a small number of large businesses, which,
in spite of an 8% decrease in IT investments in 2009, accounted for almost 57% of total IT
business spend.
Table 4: Top 50 IT business in Italy
Rank
Company
2009
2009/2008
2008
2008/2007
2007
1
Hewlett-Packard Italiana (Group)
2.850
-7,0%
3.064
2,4%
2.993
2
IBM Italia
2.050
-6,0%
2.182
1,9%
2.141
3
Esprinet (Group)
1.600
-10,2%
1.781
-1,2%
1.804
4
Accenture
960
-0,7%
967
17,1%
826
5
Cisco Systems Italy
880
-4,3%
920
5,7%
870
6
Microsoft
827
0,2%
825
0,6%
820
7
Engineering (Group)
740
5,4%
702
59,9%
439
8
Acer Italy
710
2,4%
693
9,5%
633
9
Ecs
600
6,0%
566
8,6%
521
10
Asustek Italia
590
5,4%
560
28,7%
435
11
Tech Data
585
-5,2%
617
0,8%
612
12
Computer Gross Italia
550
6,6%
516
10,3%
468
13
Ingram Micro Italia
505
-12,4%
576
-11,5%
651
14
Elsag Datamat
500
-0,4%
502
10,7%
454
15
Almaviva (Group)
390
-3,9%
406
-15,8%
482
16
Oracle Italia
381
4,4%
365
7,2%
341
17
Samsung
378
16,1%
326
21,4%
268
18
Sia Ssb (Group)
370
-2,3%
379
-1,6%
385
19
Datamatic
360
3,7%
347
10,2%
315
20
Cdc (Group)
350
-6,6%
375
-20,2%
470
21
Fujitsu Technology Solutions
315
-3,1%
325
4,6%
311
22
Apple Computer
315
5,0%
300
25,0%
240
23
Dell
290
-9,4%
320
6,7%
300
Information Technology
155
24
Google
290
16,6%
249
26,2%
197
25
Italtel (Group)
288
-16,1%
343
-17,6%
416
26
Sap Italia
285
-6,6%
305
20,6%
253
27
Reply (Group)
280
5,6%
265
20,7%
220
28
Value Team
275
-2,6%
282
4,2%
271
29
Ricoh
250
-8,4%
273
-13,1%
314
30
Cedacri (Group)
250
-1,1%
253
25,0%
202
31
Zucchetti (Group)
231
5,0%
220
7,3%
205
32
Xerox
230
-2,1%
235
-0,8%
237
33
Sun Microsystems Italia
228
-15,6%
270
-16,9%
325
34
Sony Computer Entertainment
220
4,8%
210
-16,6%
252
35
Lexmark
210
-8,7%
230
-2,1%
235
36
Epson Italia
210
-5,6%
223
-12,9%
255
37
Csi Piemonte
180
1,7%
177
3,1%
172
38
Bassilichi
180
-2,7%
185
51,9%
122
39
Brevi
172
-3,9%
179
1,2%
177
40
Toshiba
170
-5,6%
180
-14,3%
210
41
Sony Italia
170
9,7%
155
10,7%
140
42
Cse Consorzio Servizi Bancari
167
6,2%
157
10,0%
143
43
Altran Italia
160
-9,2%
176
12,9%
156
44
E-Motion
160
-4,7%
168
-4,0%
175
45
Siemens It Sol. & Svcs
160
-3,7%
166
-7,9%
180
46
Ncr
160
-3,1%
165
-2,4%
169
47
Infracom (Group)
160
-1,2%
162
44,5%
112
48
Emc
150
-9,1%
165
-7,3%
178
49
Olivetti
150
-6,3%
160
-3,0%
165
50
Avnet Technology Solutions
145
-2,6%
149
7,4%
139
Note: Figures in millions of euros. Source: Elaboration of SIRMI estimates.
3. The Italian market
The IT market in Italy clearly experienced a very critical situation in 2009, with an 8.1% drop,
much greater than the European average and, by size, second only to the double-digit market
‘collapse’ in Spain.
Table 5: The IT market in Italy, 2007-2009 (Value in millions of euros; variations in %)
2009
09/08
2008
08/07
2007
Services
8.750
-6,5%
9.355
0,4%
9.317
Hardware
4.874
-14,8%
5.723
-0,2%
5.733
Software
4.307
-3,6%
4.470
3,4%
4.325
755
-5,0%
795
-2,5%
815
18.686
-8,1%
20.343
0,8%
20.190
Technical assistance
Total
Source: Assinform/NetConsulting, 2010.
However, encouraging signs are to be found above all in the software applications segment, and
in 2010, there was a steady recovery of corporate investments in hardware.
The hardware segment recorded the worst results of the entire IT market in 2009 with a
turnover of 4,787 million euros, thus dropping 14.8% in value over the preceding year. All the
156
Information Technology
segments reveal a fall in turnover and in some cases the drop is considerable. In particular, the
worst results relate to expensive top range products. With regard to units, notebook is the only
segment showing growth, due to the performance of the consumer market and to the sales in
the netbook sub-segment (small-scale, budget portable computers).
An important factor regarding supply is the abandonment offshoring by some national operators
in order to dramatically reduce the ‘time-to-market’, attempting to satisfy an increasingly
fragmented demand with timeliness and personalised products.
In general, for the first time, the personal computer segment showed negative growth in terms
of value. Meanwhile the number of units sold continued to increase (although at a slower rate
of growth). In spite of the substantial consumer market performance, the reduced level of
business, corporate and professional investment produced a strong decline in demand. Sales for
the entire segment, which includes individual PCs (desktop and notebooks) and PC Servers2,
totalled 6,942,000 units, a year-on-year increase of 0.5%. However, sales figures dropped by
12.9% and amounted to approximately 2.827 billion euros. Overall, at the end of 2009 the total
stock of personal computers amounted to 33,238,000 items, with a continuous decrease in
desktop models and an increase in notebooks (laptops), which now represent slightly less than
40% of the total.
PC Client (desktop and notebook) demand, which has supported the hardware sector for a
number of years, was weak throughout almost all 2009 with a slight uptake at the end of the
year, due to the availability of models with new processors.
Overall some 6,772,000 items were sold, an increase of 1.2% due mainly to the strong
contribution from netbooks, whose sales increased nearly by 80% in terms of units sold, a total
of some 1,550,000 items. Having smaller dimensions (with a screen measuring less than 11”)
and a low budget price, these models have, however, cannibalised notebook sales, leading to a
lower average price and to a 11.6% reduction in sales.
Interesting uses of these small systems are to be found in the experiments taking place in the
schools sector, for example in elementary and secondary schools: here they use models partially
built in rubber that can withstand to knocks and scratches to create a “connected classroom”.
These models have an antimicrobial keyboard to protect the health of the children. Pupils can
follow the lessons via a Wireless connection: teachers make use of an interactive blackboard,
the advises are stored on a fixed external hard drive and made available on a blog.
Further developments in this area are expected with the launch of the new touchscreen
tablet and e-book devices, which have been very successful in the United States and whose
introduction in Italy is conditional to the development of editorial content and services that
can be used on the new devices.
With regard to PC Server components, 2009 brought a further contraction in the market,
already affected in the second half of the previous year. Demand was very weak during the
year, with a slight sign of recovery occurring only in the final quarter. Sales amounted to
some 170,000 items only a 20.9% downturn on the previous year. The turnover trend was also
negative, since few major projects were untaken, with a detrimental effect on the sale of largescale computer configurations.
In the hardware segment, it was the Mainframe component3 that suffered most from the
2
A PC Client is a personal computer that is used directly by an individual user when he/she is accessing
the services or resources of another component, called the PC Server, used by groups of people achieving simultaneously access by means of a remote device. A computer linked to a server by means of an IT network (local or
regional) and to which it requests one or more services, using one or more network protocols is an example of Client
Hardware.
3
A mainframe is a computer with a large processing power, typically used by organisations running applications that require large amounts of processing and the management of many users at the same time. A single
mainframe may replace dozens or hundreds smaller physical servers, thus reducing the cost of management and
administration and, at the same time providing high levels of scalability and reliability, attributes which are difficult
to achieve with distributed servers.
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lack of strategic investment. All large-scale projects were frozen: investments were directed
at replacing old generation machines or small increases in processing power to meet needs
regarding existing applications.
As in 2008, these issues particularly affected the banking and financial sector, which alone
accounted for over 80% of the entire Mainframe market.
It is worth noting the growing attention being paid to the possible use of mainframes in Cloud
Computing, with software directly usable from the Web in a SaaS (Software-as-a-Service)
distribution model.
In the Printer segment, the trends already seen in recent years were accentuated, confirming
the decline of the inkjet segment, which is now limited purely to consumers, and the decrease
in sale of monofunction components in the laser segment. The sole market area to hold its
position, though with a lower rate of growth than in previous years, was the multifunction
laser printer – both black-and-white and colour. This did not however offset the drop in the
multifunction inkjet market. The trend towards consolidation of business printers towards
multifunctional systems is confirmed, as is the extension of so called consumer ‘Managed
Print Services’, which are based on the payment of a fee calculated on the number of pages/
prints produced (print, photocopy, fax). The fee includes, in addition to the use of the printer,
systems’ assistance, spares, consumables and management. Contracts often contain an offer to
replace the computer stock with new equipment, thus promoting technological renewal.
The Storage segment, comprising discs and tapes, recorded some 272 million euros revenue, a
drop of 15% compared with 2008.
It has been seen with the other segments, the market has mainly required storage solutions
based on the optimisation and rationalisation of what is already in place, rather than solutions
related to new projects. Notwithstanding the negative financial outlook, market demand has
been boosted by the strong growth in the volume of data to be managed, by the extremely high
percentage of unstructured information (e-mails, messages, documents, images and videos),
and by the high and growing number of regulations that frequently require the long-term
retention of corporate data.
The strategies put forward by the operators in the storage sector are geared to satisfying three
fundamental requirements:
•
improvement in service: sharing solutions, virtualisation, automation;
•
risk management: protection, encryption, disaster recover, business continuity;
•
cost reduction: consolidation, intelligent filing, green computing and cloud computing.
Although the Technical assistance segment dropped by 5%, it appears to have suffered less
from the general decrease in investments: the delay in renewing the installed stock has in fact
prompted businesses to procure support services in order to safeguard the operation of the
infrastructure.
The reasons leading the decrease of revenue in hardware manufacturing have been noted for
some time:
•
the new products are always less expensive and maintenance costs reflect the trend;
•
increasingly widespread processes to concentrate and optimise the infrastructure within
a consolidation and virtualisation process: multiple servers or storage towers4, which have
a lower capacity and lower prices are replaced by fewer units, but of superior quality,
which offer better services overall, lower direct and indirect energy consumption, greater
management efficiency so the maintenance service as a whole costs less.
With regard to rates, even if the prices list remained substantially unchanged in 2009, or were
4
The term ‘Storage’ refers to hardware equipment, back-up for information storage, the infrastructure and
software devoted to information storage on physical media of large quantities of information in electronic format.
158
Information Technology
raised only slightly to reflect inflationary trends, vendors frequently agreed to offer the client
improved or more extended services for the same price. Some financial problems arose in the
low-end of the market, because of bad debts and of a general shift to lower levels of service.
In relation to commercial policies, it must be emphasised that the recourse to ‘buy’ policies by
the vendors, which involve the use of Third Parties5 has been greatly reduced in recent times.
The extreme competitiveness of the market resulted in various types of selection, merger and
concentration of operators and only a few fairly large Third Parties have remained competitive
on the market. It is clear that recourse to third parties allows great flexibility and regional
coverage; but management and training are onerous and not without risk: the Third Party
may have reached a critical mass and autonomy in its operations, and may take away business
opportunities from the vendor with whom it is collaborating.
Even though this is a business-line that has been in contraction for a number of years now, the
operators dominating the sector take great care over this type of service for two basic reasons:
•
the large profit margin for technical assistance remains at interesting levels, generally
higher as complexity and criticality increases;
•
the great tactical and strategic value of the service, since an efficient maintenance and
technical assistance service create customer loyalty, it guarantee a significant return in
terms of image and at times make it possible to influence the choice of new investments in
both products and services.
The fears and hopes expressed at the end of 2008 regarding the future development of the
Software and Services section were confirmed in 2009.
The full extent of the effects of the economic crisis were apparent in this sector, with a major
drop in the IT services segment (down by 6.5% over 2008) and a more contained fall in the
software area (down by 3.6% compared with 2008), leading to an overall contraction of 5.6%.
This brought the overall value of the market to 13.057 billion euros (Table 4).
Looking at this in detail, the slow-down in the software market can be traced back to all three
of its segments, outlined in Table 6.
Table 6: Software market in Italy, 2007-2009 (figures in millions of euros and % var.)
2009
System software
Application software
09/08
2008
08/07
2007
590,5
-4,6%
619,0
3,2%
600,0
2.631,5
-4,1%
2.744,0
2,5%
2.678,0
Middleware
1.085,0
-2,0%
1.107,0
5,7%
1.047,0
Software Total
4.307,0
-3,6%
4.470,0
3,4%
4.325,0
Source: Assinform/ NetConsulting.
The middleware market has been significant for some years. In 2009 in particular this segment
has seen direct action by companies on two themes, virtualisation and security, these are now
finding a fundamental technological support in consolidation initiatives.
The adoption of virtualisation solutions is growing, not only in relation to the number of
businesses that have such projects, but also in the elements of IT infrastructure involved in this
kind of initiative. Increasingly, virtualisation solutions affect not only servers, but also storage
devices, desktops, laptops and corporate networks concentrated in a single data processing
centre or located in additional Data Centres. The advantages of virtualisation involve:
•
a strong cost reduction, including indirect costs such as energy consumption and cooling
systems. In this regard virtualisation initiatives can be seen as introductory initiatives to
create “green” Data Centres and the start of sustainability strategies in corporate growth;
•
the optimisation and flexibility of the IT infrastructure, systems and applications in relation
to the variable demand for computational capacity from various business functions.
5
Typically this relates to intermediary business between the vendor and the IT purchaser.
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159
The growing success of new virtualisation models allows on-demand management, that is
management solutions based on the Cloud Computing related to infrastructure (IaaS and
other approaches), development platforms (PaaS) and applications (SaaS). According to this
new IT model, the business Data Centres can evolve into a ‘private cloud’, achieved through the
concentration of a series of IT resources devoted to virtualisation platforms, which operate as
single data processing centres, and perhaps into a ‘public cloud’, based on the outsourcing of
calculating power through the Internet.
Security and governance are other areas displaying growing demand in middleware solutions,
to meet the needs concerning data loss and control of the internal infrastructure and systems
in virtualisation projects:
•
security issues are becoming indispensable to protect company assets from non-authorised
access, increasing the demand for ‘strong authentication’ solutions and for protection from
interruptions to business activity, with an increase in company awareness about aspects
of Business Continuity and Disaster Recovery. In any event, the traditional static security
solutions are increasingly inadequate on the one hand, because they are not in a position to
protect dynamic virtual server pools and on the other hand they can reduce or nullify the
benefits of virtualisation. Within this framework, however, we are witnessing the birth of
a series of virtualised security solutions based on virtual appliances or on detectors placed
within the virtual machines;
•
with regard to governance, business users are showing growing interest in solutions that
support the capacity to control and reconfigure virtualised Data Centres. Some examples of
the functionality supplied by these instruments are represented by: fault tolerance services;
the possibility to structure storage, networks and server security parameters; automation of
configuration management, back-up operations and restoration of data and applications;
self provisioning of the Data Centre resources etc.
The applications solutions market has recorded a greater overall drop than the average for
the segment, down by 4.1% in relation to 2008, compared with a 3.6% drop recorded in the
software segment as a whole. Two issues lie at the heart of this trend:
•
the economic difficulties have slowed investment decisions by business users, mainly the
smaller businesses, which are traditionally more vulnerable, but also by bigger firms, which
generally possess up-to-date stock of applications. That require a lesser degree of revision
and modernisation;
•
the extent of the technological developments, mainly in the field of new ‘on-demand’
concepts, SOA and technical innovations on Web 2.0, and the assessment of possible ways
to use Open Source software have caused end-users to adopt a wait-and-see attitude, which
frequently leads to deferred investments.
Detailed analysis of the individual software products highlights the progressive drop across the
full range of application solutions, even if some areas have suffered more than others from the
negative financial situation.
ERP solutions (Enterprise Resource Planning) are demonstrably the most mature market, with
a drop by 7.1% in 2009 over 2008; followed by CRM (Customer Relationship Management)
products (- 5.7%); and both SCM (Supply Chain Management) and BI (Business Intelligence)
packets, which recorded less negative performances, fluctuating between a - 4.2% and a - 2.9%
drop. Of particular interest is the major integration of SCM packets with BI products to form a
well-founded joint action for business competitiveness in all sectors. In fact, BI systems allow
companies to implement strategies to optimise the performance of core company processes,
contributing to cost-reduction and an increase in revenue:
•
160
in terms of cost reduction and rationalisation of time-to-market, the BI instruments allow
both performance and key performance indicators to be monitored, with positive impacts
on the optimisation of the Supply Chain. They also support production planning for the
Information Technology
Industry sector;
•
the increase in revenue derives from tools aimed at targeting and optimisation of marketing
campaigns and, for some sectors such as telecommunications, utilities and media, at the
development of new products and services.
For that reason, business downstream costs mainly relate to:
•
the Business Performance Management instruments, especially in the field of Finance
and Public Administration, including ad hoc queries and reporting, dashboards and
scoreboards, financial analysis, planning and monitoring, as well as analysis of sales;
•
the business analytics tool in the form of methods of prediction, forecasting and optimisation,
which are taking on an ever larger role in companies’ decision-making processes.
The software systems segment was constrained by the major downturn in PC and server
sales. An upturn occurred in 2009, particularly in the second half of the year, with renewed
investments by business users.
In the last months of 2009 an area that saw particularly positive trends in expenditure was that
of infrastructure licences for virtualisation strategies, which over time allow physical machines
to create a variable and potentially infinite number of virtual applications. These manage access
to applications that reside in virtual environments.
With regard to IT services, downstream businesses costs suffered a major setback in 2009 due
to recent events already outlined above:
•
the persistence of ‘down pricing’ in professional rates, associated on the one hand with
renegotiation of contracts – and on the other with the reduction in their number, driven by
continuing consolidation of the operators;
•
and a major focus by business users on the priority of recovering business economic
efficiency - at the expense not only of investments in technological innovation but also,
even though to a lesser degree, of IT initiatives aimed at increasing business, marketing
and supply.
As a result, surveys have revealed:
•
large investments by downstream businesses on continuing management activities, which
started in the past and have significant impacts on the structure and level of business
expenditure, and on the projects in the field of embedded technology, which have direct
impacts on product and service innovation, a critical factor in the fundamental success to
stimulate demand in a period of consumer contraction;
•
strong caution– mostly in the first part of the year – at the start of ad-hoc projects, both
high-end (Systems Integration and Consulting) and low-end (development, processing
etc.), since, in the attempt to increase efficiency, downstream businesses undertook
multiple measures affecting internal and group organization (restructurings, mergers and
acquisitions, redundancies etc.), which may generate IT investments, but only in the short
and medium term.
In 2009, downstream businesses investments in IT services gave rise to three diverse clusters of
projects and related activities with as many speeds in the rate of expenditure.
•
worst performer: the cluster includes processing services, development and maintenance,
as well as training. These recorded falls well above the sector average: down respectively by
9.3%, 8.7% and 8.8%;
•
average performer: this relates to Consultancy and Integration Systems, increasingly often
combined and connected to the overall packages, whose performance records values more
or less aligned to the overall average;
•
best performer: in this category are continuous Outsourcing services and projects relating
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161
to embedded technology, which are strongly supported by end-user in their search for
rationalisation and efficiency as well as innovation in the supply of products and services.
Table 7: IT Services Market in Italy, 2007-2009 (in millions of euros and % variations)
2009
2009/2008
2008
2008/2007
2007
Outsourcing
2.548
-3,5%
2.640,2
2,4%
2.579,4
Development and Maintenance
1.957
-8,7%
2.143,0
-1,0%
2.165,3
993
-6,8%
1.065,1
1,0%
1.054,2
System Integration
Embedded systems
986
-5,0%
1.037,4
2,2%
1.015,3
Consultancy
950
-7,0%
1.021,0
1,1%
1.010,3
Processing services
827
-9,3%
912,1
-3,1%
941,4
Training
Total IT Services
489
-8,8%
536,2
-2,7%
551,1
8.750
-6,5%
9.355,0
0,4%
9.317
Source: Assinform/ NetConsulting.
4. International comparisons
At European level, the Italian IT market remains under-sized if compared to other EU countries
(Table 8). Germany heads the rank (with a 20% share of the total European IT market), followed
by the United Kingdom (18%) and France (16%). Spain, which had been growing at a steady
pace in recent years, seems the most affected by the crisis.
Table 8: The main EU IT markets
2009
2009/2008
2008
2007
2008/2007
Germany
69,0
-4,6%
72,3
69,9
3,4%
20%
UK
59,7
-6,7%
64,0
62,0
3,2%
18%
France
53,1
-3,8%
55,2
53,4
3,4%
16%
Italy
18,7
-7,9%
20,3
20,2
0,5%
6%
Spain
14,4
-8,9%
15,8
15,1
4,6%
4%
339,3
-5,4%
358,7
346
3,7%
Total - EU27
Share of EU 27
Note: figures in billions of euros. Source: Assinform/ NetConsulting.
Nonetheless, as for number of businesses, Italy is in second place overall, behind the UK, but
ahead of France and Germany. Referring, however to the workforce in the European IT sector,
Italy drops to third place behind the UK and Germany. An analysis of both the average number
of personnel and average revenue per company reveals that Italy lies well below the European
average (both EU15 and EU27) and only slightly above the average for the new Member States.
In Italy, the average number of persons employed per enterprise in the IT sector is only 4, while
the European average is 5. In terms of average sales per employee, the situation is equally bad
(110,000 euros compared to a European average of 150,000 euros), confirming the considerable
fragmentation of Italian firms.
At European level, Italy has 6 regions placed in the Top 20 IT-oriented European regions, more
than the UK (with 4) and Spain (with 2).
Amongst the top 30 ranking European regions (defined by number of local IT units) Campania
is included as the top region in the Mezzogiorno, confirming its strong regional presence in IT.
Table 9: Top 30 European Regions by number of local IT Services
Lombardy
162
Information Technology
2007
2006
2005
26.652
24.825
24.755
Île de France
26.484
26.724
25.367
Közép-Magyarország
14.661
14.066
13.893
Stockholm
14.185
13.782
12.989
Outer London
12.856
12.502
12.368
Lazio
11.525
11.904
11.306
Inner London
11.344
10.867
10.327
Comunidad de Madrid
11.177
11.020
9.899
Mazowieckie
9.649
7.839
7.548
Berkshire, Bucks and Oxfordshire
9.554
9.392
9.320
Surrey, East and West Sussex
8.929
8.963
8.783
Veneto
8.914
8.772
8.257
Denmark
8.605
nd
nd
Tuscany
8.406
6.323
7.197
Cataluña
8.286
8.082
7.084
Piedmont
8.274
8.063
7.715
Emilia-Romagna
8.140
8.252
7.676
Attiki
7.911
nd
4.722
Praha
6.469
7.804
7.532
Oberbayern
6.372
6.540
5.877
Lisboa
6.100
6.394
6.411
Rhône-Alpes
6.026
6.062
5.620
Västsverige
5.760
5.520
5.269
Gloucestershire, Wiltshire and Bristol/
Bath area
5.597
5.810
5.523
Provence-Alpes-Côte d'Azur
5.454
5.579
5.168
Campania
5.442
5.255
5.465
Bedfordshire, Hertfordshire
5.184
5.212
5.110
Bucuresti - Ilfov
5.057
4.607
4.123
Zuid-Holland
5.030
5.060
4.350
Hampshire and Isle of Wight
4.807
4.798
4.790
Source: Elaboration of Eurostat data 2010.
If the workforce is considered, however, Lombardy slips from first to third place overall in
Europe, whilst both Tuscany and Campania exit the Top 30 European regional ranking. On the
one hand this confirms the high degree of Italian entrepreneurial activity, but on the other hand
indicates the lower numbers of people working in this sector, compared to other European
regions.
Table 10: Top 30 European regions by number of workers in IT Services
2007
2006
2005
Île de France
226.508
198.142
202.922
Comunidad de Madrid
129.354
116.661
102.734
Lombardy
99.771
98.708
103.739
Inner London
79.650
72.079
74.266
Berkshire, Bucks and Oxfordshire
66.578
63.913
63.581
Lazio
61.554
63.889
59.954
Stockholm
55.857
51.478
49.382
Denmark
53.838
nd
nd
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163
Stuttgart
45.934
42.520
45.730
Darmstadt
44.065
37.774
38.397
Outer London
43.773
41.026
43.588
Közép-Magyarország
43.309
40.144
38.392
Surrey, East and West Sussex
42.790
41.787
42.043
Oberbayern
41.479
43.000
41.401
Cataluña
41.357
36.900
34.837
Karlsruhe
36.971
35.169
33.354
Düsseldorf
35.162
34.767
32.620
Piedmont
33.522
32.225
33.412
Köln
33.117
30.369
27.886
Southern and Eastern
32.790
30.955
nd
Rhône-Alpes
32.495
33.693
30.643
Veneto
32.461
31.430
30.106
Utrecht
31.668
31.001
29.445
Hampshire and Isle of Wight
31.217
30.442
27.325
Emilia-Romagna
30.955
30.071
29.440
Etelä-Suomi
30.369
29.690
27.655
Mazowieckie
30.003
25.396
23.147
Bucuresti - Ilfov
29.933
25.144
20.131
Praha
27.228
24.286
23.132
Zuid-Holland
27.185
31.148
29.086
Source: Elaboration of Eurostat data 2010.
164
Information Technology
Video games
165
Video games
By William Ricci
1. The Italian market
Recent figures for the video game market show how the continuing strategic repositioning of
the big format owners has had an influence, producing various dips in traditional areas of the
video games sector. While the drop in the video game market has been widely attributed to
the economic downturn’s impact on consumer spending in Italy, and in Europe generally, this
chapter’s analysis shows that, in Italy at least, the situation is more complex and, in part, less
negative than has been recently suggested by the Italian media, in both traditional channels1
and on the web2
Fig. 1: Italian market, millions of euros
Total Software Games
Total Hardware
Total
1400
1.262,7
1200
1.128,9
1.038,2
1000
800
741,9
741,6
557,5
600
514,2
474,9
400
480,5
670,9
591,9
627,8
501,1
266,9
200
227,4
0
2005
2006
2007
2008
2009
Source: IEM elaboration of AESVI data.
According to data supplied by AESVI (Association of Italian Video Game Software Publishers),
2009 marked the first negative year in Italy since 2005, with a drop of roughly 10%, and revenues
amounting to just under 1.130 billion euros. A breakdown of the figures in the two macro
sectors, hardware and software, shows that the decrease in spending differs, with respective
falls of 15% and 6.4%. According to the methodology of the AESVI 2009 Report3, the total is
calculated without taking into account the results of two important segments that are seeing
1
Videogames in frenata: ricavi giù del 10%, Sole24Ore, 2010. Preview available at: www.banchedati.ilsole24ore.com. Jaime D’Alessandro, Per i videogame segnali di crisi, Repubblica, 2010.
2
Federico Cella, Anche i videogiochi sono in crisi, Corrieredellasera.it – I Blog, 2010.
3
AESVI-GFK, 2009 – Annual report on the state of the video game industry in Italy, 2010.
166
Video games
their strategic influence on the market constantly growing: the liquid market (internet and
mobile) and game devices. It should also be noted that the 2009 drop is partially the result
of the market reaching full maturity (or the start of the decline) in the life cycle of hardware
console products.
Before turning to look in detail at the liquid market and gaming devices, we will first look at the
relationship between the hardware and software sectors in their home and portable functions.
Analysis of the data shows that the portable console has registered a directly proportional
market trend since 2005, with both hardware and software recording a similar percentage drop
in 2009, respectively -21% and -27%.
Fig. 2: Hardware & Software, millions of euros
Software Home Console
Software Portable Console
Hardware Home Console
Hardware Portable Console
500
410,1
431,2
400
328,1
319,7
292,5
300
286,8
321,7
228,4
193,7
200
135,2
100
363,3
205,6
146,1
174,4
92,1
120,8
80,6
111,5
179,4
149,1
0
2005
2006
2007
2008
2009
Source: IEM elaboration of AESVI data.
The situation is different in the home console sector. The figures from 2005 to 2009 show a
relationship between video games and consoles that demonstrates the highly compelling driving
force of the hardware market, able to anticipate positive trends in titles by approximately one
year. In December 2005, the hardware market tested the launch of the Microsoft Xbox 360
console, with Nintendo’s Wii and the Sony Playstation 3 following on in December 2006 and
March 2007. Even though prices in the consol market drop after just a year from the start of
sales, in 2007 the amounts generated produced high percentage increases (+98.6% for the start
of Nintendo Wii and Sony Playstation 3 sales and the decrease in prices of Xbox 360) and in
2008 (+26.6%, when prices for Wii and PS3 started to decrease). Whereas the 2009 decline
(-11.4%) can be interpreted as due in part to the hardware life cycle, whether having reached
full maturity or starting a downward swing, and in part as a result of the reduction in consumer
spending as a result of the economic crisis.
Home console titles (software) register growth approximately one year behind the hardware
sector, with a phase of average stability between 2005 and 2007, strong increase in 2008
(+28%) and slight growth in 2009 (+5%). The reason behind this disproportion between
the performance of hardware and software is due to home console software buying habits,
which follow the considerable expense of buying a hardware home console with a delay of
approximately one year. In fact, software aimed at home entertainment is the only segment
registering growth in 2009, proving once again its profitability at a time when spending on
more expensive and binding items is scarce.
The volume of business also shows a similar proportion of growth to that seen in value, for
hardware and software, both in portable and home devices. Sales of home consoles register
the best results in 2007 (+31%) and 2008 (+30%) and a slight decline in 2009 (-2.7%). On the
contrary, home entertainment titles demonstrated a real increase in number of copies sold in
2008 alone (+12%), with the positive trend continuing into 2009 (+3.4%).
Video games
167
In contrast, the portable sector shows a decidedly more homogeneous relationship between
hardware and software. Sales of both consoles and titles in 2007 were up 66%, in 2008 hardware
increased by 14% and software by 22%, while 2009 saw a decline in both segments, respectively
falling 20% and 21.5%.
Fig. 3: Hardware & software, thousands of units
12.000
Software Home Console
Hardware Home Console
Software Portable Console
Hardware Portable Console
10.161
10.000
8.977
8.973
10.507
9.071
8.000
6.689
6.000
5.245
5.466
3.287
4.000
2.187
2.000
0
1.097
835
850
631
2005
767
2006
1.276
2007
1.430
1.467
2008
1.390
1.170
2009
Source: IEM elaboration of AESVI data.
Now we can turn to a new chart showing the results of the liquid sector and game devices
within the overall market context. Game devices in particular have shown remarkable strength
in the last four years, registering notable growth in 2009 (+73%) with revenues of over 159
million euros. In truth, these positive trends are a result of the controller sub-sector which,
taking advantage of the new ways people use controllers thanks to Nintendo Wii, already saw
a strong increase of 30% in 2008 by 30% and then reached over 100 million euro in 2009, up
109% on the previous year.
The game device area includes the sub-sector, game accessories, which are a varied range of
objects and accessories to improve the video game experience, from memory cards for saving
data to carry covers for portable consoles. This sub-sector shows virtually constant development,
part of the new trend of using strategic upgrading to refresh the console as a game playing device.
It would appear that the game device sector in general, and the game controller in particular,
is still far from exhausting its sales impetus in terms of quantity and quality. This is especially
the case given the new products from Microsoft and Sony, whose controllers Microsoft Kinect4
and Playstation Move5 have fully entered the device market, basically competing on an equal
footing with Nintendo. In particular, we are seeing a new structure forming within hardware
strategies through the lengthening the console life cycle, made possible by the implementation
of new and innovative forms of game controls.
The last sector deserving a more detailed description is the liquid market. Growth in this
area has been more contained, an increase of 2% with 148 million generated in 2009, with
a difference in the performances of the mobile and online access sectors. Mobile access, at a
little below 79 million euros, has dropped by 4%, which, while slight (and lower than 2008), is
particularly worrying when seen in Italy’s historical context, where the population is known for
its openness to technology and different forms of mobile use. Online access grown constantly
since 2007 to today, with 2009 seeing an 11% rise and revenues of approximately 70 million
euros. Sales of hardware consoles have been particularly positive, rising from 32 million euros
in 2008 to over 37 million in 2009.
4
5
168
Giacomo Dotta, Project Natal a battesimo: è nato Kinect, Webnews, 2010.
Giacomo Dotta, Playstation Move, the reply to Wii & Natal, Webnews, 2010.
Video games
Fig. 4: Italian Game Device market, millions of euros
Game Controller
Game Accessories
Total Game Devices
180,0
159,3
160,0
140,0
120,0
109,3
100,0
92,0
80,0
63,4
60,0
48,2
41,4
33,2
52,3
40,0
40,0
39,7
32,8
20,0
23,4
15,4
8,2
50,0
Source:
0,0IEM elaboration of AESVI data.
2005
2006
2007
2008
2009
At this point we can now trace a new chart for the video game market, which classifies not only
the traditional hardware and software sectors but also includes digital markets and the devices
mentioned above. For clarification, from this point on, we shall refer to the total video game
market as the ‘traditional market’, as indicated by AESVI.
Fig. 5: Total Physical and Liquid Market, Italy, millions of euros
Total traditional
Total liquid market
1.600,0
Total Game Devices
Total physical and liquid
Total + GD (physical)
1.499,7
1.437,0
1.239,6
1.200,0
1.354,7
1.262,7
1.101,6
1.288,2
1.128,9
1.038,2
800,0
400,0
138,0
0,0
145,0
63,4
2007
92,0
2008
159,3
148,8
2009
Notes: “traditional = software + hardware”; “traditional” + “game devices” (controller) = physical”; “liquid” = web +
mobile. Source: IEM elaboration of AESVI data.
First of all, we need to form a realistic idea of the size of the physical market by combining
totals for hardware, software and devices, obviously excluding liquid revenues. The graph
demonstrates a clear rise in absolute values and a different declination of percentage trends.
In contrast to the traditional market, which lost 10.6% in 2009, physical supports (hardware,
software and devices) dropped almost 5%. If we then add the value of the liquid market to the
Video games
169
physical market, the fluctuation shows an even more encouraging picture, a 4% decrease on
2008. Given the real situation of the video game market, this naturally prompts a partial rebuttal
of the tendency to interpret the 2009 market drop as a result of the economic downturn.
Analysis of the traditional market values shows how the separate data describe different
performances, with an actual increase in the home console market, which illogically appears
to be immune to the economic slowdown. Furthermore, the estimated life cycle of hardware
console products (generally 5 years, with the exception of Sony PS2) has been ignored, the
sector showed a physiological contraction in sales in 2009. Given its economic importance and
its stimulating effect on software products, the maturity of the hardware product sector appears
to be penalising the entire market. Added to this is the strategy common to all the big format
owners (Sony, Nintendo, Microsoft) aimed at prolonging the console life cycle through the
production of innovative control systems, inspired by Wiimote, the revolutionary technology
introduced by Nintendo 5 years ago. Microsoft, in particular, presented its new system, Kinect
(a result of Project Natal, which has a whole range of dedicated software products), which
completely eliminates any kind of control, managing to track the gamer’s movements and
translate them into game input. These new product activities represent a turning point in
the market, able to compensate the decline of the console life cycle through the increase in
controller systems and, therefore, in the game device sector. The 4% decline is, it would appear,
the result of a strategic change in the video game universe. It aims to promote new forms of
play, while avoiding the production of a new generation of consoles (with the exception of
Nintendo, which has produced the new portable 3DS6), and boosting the propensity to buy the
new console hardware needed to run the new controller products from Sony and Microsoft.
Finally, it is worth mentioning the start-up Onlive, which completed beta testing in the USA,
Belgium7 and UK8 in 2010 and offers a new video game experience based on cloud technology,
which founder Steve Perlman promises will provide the opportunity for playing the best video
game titles on the market in streaming via a PC and without the need to download. Cloud
computing brings various hopes for the PC game market, which has been in decline for a while,
and for the new forms of liquid use, which, as we have seen, are struggling to grow in Italy.
Tab. 1: Video game industry market - thousands of euros, thousands of units
2005
Value
Console Games Home
Console Games Portable
Total Console Games
2006
Units
Value
2007
Units
Value
2008
Units
Value
2009
Units
Value
8.973
292,5
8.977
319,7
9.071
410,1 10.161
431,2 10.507
80,6
2.187
111,5
3.287
174,4
5.466
205,6
149,1
408,7 11.160
4.427
404 12.264
70,7
3.642
494,1 14.538
63,4
3.452
6.689
615,8 16.851
55
2.799
5.245
580,3 15.752
PC Games
105,4
Total Software Games
514,2 15.590
474,9 15.905
557,5 17.990
670,9 19.650
627,8 17.925
47,6
Home Console
2.172
135,2
850
146,1
835
286,8
1.097
363,3
1.430
321,7
1.390
Portable Console
92,1
631
120,8
767
193,7
1.276
228,4
1.467
179,4
1.170
Total Hardware
227,4
1.481
266,9
1.602
480,5
2.374
591,9
2.898
501,1
2.560
Total traditional
741,6
741,9
1.038,2
1.262,7
1.128,9
Source: IEM elaboration of AESVI data.
6
7
8
170
Units
328,1
Floriana Giambarresi, E3, le novità Nintendo, Webnews, 2010
Editorial, Onlive coming to Belgium, Onlive - the blog, 2010. Source: http://blog.onlive.com/
Editorial, Onlive coming to the UK, Onlive - the blog, 2010. Source: http://blog.onlive.com/
Video games
Tab. 2: Video game industry market – percentage quotas
Value
Units
Value
Units
Value
Units
Value
Units
Value
Units
80,3%
80,4%
72,4%
73,2%
64,7%
62,4%
66,6%
60,3%
74,3%
66,7%
Console Games Portable 19,7%
19,6%
27,6%
26,8%
35,3%
37,6%
33,4%
39,7%
25,7%
33,3%
Console Games Home
Total Console Games
PC Games
Total Software Games
100% = 100% = 100% = 100% = 100% = 100% = 100% = 100% = 100% = 100% =
79,5% 71,6% 85,1% 77,1% 88,6% 80,8% 91,8% 85,8% 92,4% 87,9%
20,5%
28,4%
14,9%
22,9%
11,4%
19,2%
8,2%
14,2%
7,6%
12,1%
100% = 100% 100% = 100% 100% = 100% 100% = 100% 100% = 100%
69,3%
64%
53,7%
53,1%
55,6
Home Console
59,5%
54,7%
54,7%
52,1%
59,7%
46,2%
61,4%
49,4%
64.2%
54,3%
Portable Console
40,5%
42,6%
45,3%
47,9%
40,3%
53,8%
38,6%
50,6%
35,8%
45,7%
Total Hardware
Total traditional
100% = 100% 100% = 100% 100% = 100% 100% = 100% 100% = 100%
30,7%
36%
46,3%
46,9%
44,4%
100%
100%
100%
100%
100%
Source: IEM elaboration of AESVI data.
Tab. 3: Video game industry market: Game Devices – thousands of euros, thousands of units
2005
Game Controller
Game Accessories
Total Game Device
2006
2007
2008
2009
Value
Units
Value
Units
Value
Units
Value
Units
Value
Units
33,2
1.591
32,8
1.611
40,0
1.746
52,3
1.953
109,3
3.032
8,2
436
15,4
809
23,4
1.377
39,7
2.495
50,0
2.678
41,4
2.027
48,2
2.420
63,4
3.123
92,0
4.448
159,3
5.710
Source: IEM elaboration of AESVI data.
Tab. 4: Video game industry market: Internet and Mobile – thousands of euros, thousands of
units
2007
Value
2008
Units
Value
2009
Units
Value
Units
Internet
Console Hardware
24
91,2
32
125,8
37
n.d.
Software Console Game
20
354,3
28
579,2
31
n.d.
85,9
3
83,6
2
n.d.
44
-
63
-
70
94
19.000
82
17.000
78,8
16.150
138
-
145
-
148,8
-
PC Game
Total
Mobile
Software Games
Total Liquid market
Source: IEM elaboration of AESVI data.
Video games
171
Tab. 5: Video game industry market: Total Markets – thousands of euros
2007
2008
2009
Value
Value
Value
Total traditional
1038,2
1262,7
1128,9
63,4
92,0
159,3
1101,6
1354,7
1288,2
138,0
145,0
148,8
1239,6
1499,7
1437,0
Total Game Device
Total + G.D. (physical)
Total liquid market
Total physical + Liquid
Source: IEM elaboration of AESVI data.
2. The European market
The drop in consumption that took place in Italy as a result of the recession, and its consequent
effect on the video game market was reflected in the entire European market. However, as
previously established, the economic downturn is only one of the causes of the 2009 decline,
which was also above all the result of a series of repositioning strategies and calculations
ignoring items of growing economic importance (liquid market and games devices)9.
As in previous years, the five big European markets group into three blocks in 2009: the United
Kingdom takes leading position with over 3.110 billion euros in revenue, with the second
block, France and Germany, very close behind with revenues respectively over 2.440 billion
euros and almost 2.364 billion euros. The third block consists of Spain and Italy, countries
with many social and cultural similarities, which generate respectively 1.200 billion euros and
almost 1.129 billion euros in 2009.
Fig. 6: European market, millions of euros
UK
France
Germany
Spain
Italy
4.000,0
3.711,4
3.500,0
2.935,2
3.000,0
2.805,0
2.500,0
2.482,0
2.756,4
2.470,9
2.458,2
3.110,2
2.440,6
2.363,7
1.854,3
2.000,0
1.479,4
1.500,0
1.000,0
2.944,0
1.607,0
1.454,0
1.432,1
1.436,0
967,0
1.262,7
863,1
500,0
741,6
741,9
1.038,2
1.200,4
1.128,9
2005
2006
2007
2008
2009
Source: IEM elaboration of AESVI data.
9
It would be interesting to analyse the European data in the context of a wider argument, as we have done
for Italy, but the AESVI supplies information that follows the lines of what we have dubbed the ‘traditional’ market
(hardware and software). We are, therefore, obliged to analyse the European traditional markets, unable to separate
the data further and without access to information on European performance in liquid distribution and game devices.
172
Video games
Comparison of the European markets produces the first positive results for Italy, which closed
the gap with Spain in 2009, after a growing divergence from 2005 to 2007, bringing the two
countries to very similar results, a process helped in part by Spain’s bad performance. Spain
was the only European market to contract in 2008, foreshadowing in some way the “crisis” that
then affected the entire continent.
Performances from 2005 to today in France and Germany were very similar, with France in
slight advantage by almost 100 million euros.
While the overall performances confirm track records in line with past years, the negative
trend produced several surprises in 2009. Beyond the overall contraction throughout Europe,
with the exception of smaller markets like Sweden (+1.5%) and Portugal (+13.8%), and despite
having the smallest overall market of the big five countries, Italy’s market registered the lowest
percentage drop. While France and Germany registered gains in overall values, the French
market suffered the highest decrease, dropping 17% compared with 2008. Spain and UK fell
sharply, both losing 16.2 %, while Spain has been having serious difficulties also in terms of
revenue for at least two years.
Fig. 7: European market (Traditional), trends 2008-2009
Italy
-10,6%
Germany
-14,2%
-16,2%
Spain
-16,2%
UK
France
-17,1%
-18,0%
-16,0%
-14,0%
-12,0%
-10,0%
-8,0%
-6,0%
-4,0%
-2,0%
0,0%
Source: IEM elaboration of AESVI data.
It should also be noted that it is hard to provide an objective valuation of European results
without separate data for liquid performances and the game device sector. As we have seen,
at least in Italy, these two areas are crucial to be able to get a clear picture of a market trend,
which despite dipping slightly, was absolutely in line with international strategic and product
dynamics.
3. Consumer habits
Trends aimed at promoting forms of social gaming are by now commonplace in the video
game world. This was made possible by Nintendo’s innovative products, with its Wii console
and its WiiMote controller making the game experience accessible to all, thanks to a range
of titles developed especially for social gaming. Both Sony and Microsoft responded to the
challenge with several new products in their controller systems: Sony decided to implement
a new remote, Playstation Move, which is very similar to its Nintendo cousin, while the
Redmond colossus developed Kinect, a method that aims to eliminate the need to use any kind
of physical object, leaving the player to fully control the game through their own movements
and voice commands.
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173
Added to these new forms of social use, the format owners are showing a growing tendency
to implement elements of social gaming on a digital matrix in their machines. Often the
titles replicate practises found on social networks or multiplayers, also devising a series of
services that allow the user to exploit online content through original and attractive forms of
access (Playstation Network, Xbox Live, WiiConnect24). This emphasis on socialisation and
consequent repositioning has changed the composition of users in terms of gaming frequency,
through an initial phase of push strategy (Nintendo), with a dynamic that today sees supply
and demand as equal players in a process of reciprocal influence.
Fig. 8: Gaming frequency, Italy – hours per week
less than 1 hour
100%
1-5 hrs
6-10 hrs
9%
90%
12%
80%
11-15 hrs
more than 15 hrs
6%
8%
8%
6%
15%
70%
35%
33%
60%
50%
49%
40%
30%
45%
43%
20%
22%
10%
0%
4%
7%
2007
2008
2010
Source: IEM elaboration of ISFE data.
Fig. 9: Spending, Italy – titles in a year, 2010
none
between 1-3
between 4-6
3%
between 7-10
between 11-15
more than 15
2% 1%
6%
39%
50%
Source: IEM elaboration of ISFE data.
As proof of this, ISFE10 figures show an increase in soft and medium gamers between 2007 and
2010, rising respectively from 4% and 43% in 2007, to 22% and 49% in 2010. This has created a
new status quo, where 71% of video gamers play less than 6 hours a week. This model is far from
10
174
ISFE-Game Vision Europe, Video Gamers in Europe – 2010, 2010.
Video games
the old way of video gaming, which was characterised by heavy gamers with a high volume
of play. Today, video games are played more in the living room than in the bedroom, and the
video game experience is widening its scope, satisfying the tastes of users who, only a few
years ago, were unthinkable targets for the market. Now families, professionals and women are
essential targets, whose gaming habits overturn the stereotype of the solitary gamer, offering a
model of use that, despite its low intensity, heightens awareness of the market. As a result, this
has a positive impact on the penetration of consoles that AESVI estimated as follows: 10,332
Italian families in 2009, approx. 42% of the total (up from 21.8% in 2005).
We end the chapter with a quick look at buying habits. The intensity of 2009 is clearly
characterised by a contraction in spending that saw over 88% of video gamers admitting to
buying less than three titles in the year. Of course part of this contraction can be explained by
the impact of the economic downturn on consumer spending, but careful examination would
seem to show that gaming habits and spending habits are very different today and in continual
evolution. The number of video gamers is on the rise, but fewer titles are being bought with the
preferred choices being games with notable longevity and a high gaming versatility. The added
value of video games is, therefore, represented in how they can be used and in their capability
to support both solitary and social gaming, which allow the video gamers to manage the type
of experience they want and to choose the way in which they access the video game content.
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175
Part II
In-depth case studies
Public investment in the cultural
and telecommunications
industry
by Flavia Barca, Andrea Marzulli, Luca Murrau, Lorenzo Principali e Bruno Zambardino
1. Introduction and methodology
1.1 Introduction
Following in the footsteps of IEM’s traditional research into culture and communications in
Italy, aimed at charting strategies and economic policies in the public and private sector, the
decision to focus on public investment seemed particularly relevant at a time when the whole
concept of culture and its boundaries are being re-defined, as are its funding sources. We are
convinced that these financial resources actually inform, define and condition culture itself, in
the form of the creative, production and distribution processes that shape it and give it visibility
with audiences, whether large or small. So it is necessary to examine this area to understand the
transformations currently taking place and to give public policies the transparency needed to
operate in a virtuous and efficient way that follows EU guidelines.
In fact, the analysis of public spending trends, especially those destined for investment, not
only provides information about the sums of money given to culture (and telecommunications,
see below). It also becomes an element on which to base a qualitative evaluation, in short
examining the efficiency of the policies underlying that funding (to see the actual economic
return on the ground and the social redistribution of the spending), and thus the profitability
of the original expenditure. A reliable and effective survey of the spending figures actually
represents the starting point to be able to measure the real impact produced by that expenditure
on the sector in question and in the territory. It helps to understand how much of this spending
is genuinely productive (for example when it supports innovation in business or in the system
as a whole) and how much, if any, is used to support activities with little or no impact on the
industry’s production capacity and the general economy.
However, the chosen range for this specific analysis is unique compared with the scope usually
taken in traditional studies about culture. Indeed, for our study we have used a definition of the
world of culture and telecommunications that includes live entertainment, cinema, television,
radio and publishing under the umbrella of “culture”.
This choice is dictated by the desire to consider culture 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. We want to try to grasp hold
178
Public investment in the cultural and telecommunications industry
Visual arts
Paintings
Sculptures
Photography
Antiques
Performing Arts
Music and Opera
Theatre and Dance
Circus
Puppetry
MEDIA
CREATIVE
INDUSTRIES
Publishing
Books
Newspapers and
Magazines
Audiovisuals
Cinema
Television
Radio
ART
Cultural sites
Archeological sites
Museums
Libraries
Exhibitions
Traditional cultural
expressions
Arts and Crafts
Festivals
Events
Design, Interior, Graphic,
Fashion, Jewellery,
Toys, Food & Wine
Creative services
Architectural
Advertising
Research & Development
Recreational
FUNCTIONAL
CREATIONS
HERITAGE
The sectors analyses in this study (in bold) in the context of the creative industries
New media, Software, Telecommunications, Videogames
Source: elaboration of a table from the United Nations Conference on Trade and Development (UNCTAD).
of something very ethereal that is complicated to define in its processes of transformation. We
want to investigate those areas in which culture becomes a pervasive phenomenon, driven by
technological innovation and by the multiplication of distribution platforms, at a time when
re-use and ‘prosumerism’ profoundly alter the very concept of culture and all its basic laws,
first and foremost the idea of the “author”.
So, reasoning on the economic foundations of culture taken as the “culture industry” means
taking a conceptual leap from examining the cultural industry as a world where culture is
considered as an intellectual product that has become a commodity, to one where it is an
intellectual product, knowledge that is able to generate wellbeing and development within a
virtuous circle of innovation and technological development1.
This approach, which is, moreover, in line with the industry traditionally examined in the IEM
1
“At the heart of creative economy lie the creative industries… At the crossroads of the arts, culture, business and technology… They comprise the cycle of creation, production and distribution of goods and services that
use intellectual capital as their primary input.” “They range from folk art, festivals, music, books, paintings and
performing arts to more technology-intensive subsectors such as the film industry, broadcasting, digital animation
and video-games, and more service-oriented fields such as architectural and advertising services. All these activities
are intensive in creative skills and can generate income through trade and intellectual property rights” United Nations–2008 Report on the “Creative Economy”.
We recall that the concept of “culture” as understood by Maastricht is very wide. Article 128, comma 2, refers to
cultural heritage, artistic and literary creation, including the audiovisual sector.
Public investment in the cultural and telecommunications industry
179
Report on the Communications Industry, also allows for a horizontal reflection on the main
platforms used to spread the culture system in Italy, also making the audiovisual sector face up
to its responsibilities2, which have often been neglected in Italy by the very entity that should
champion these responsibilities, that is the public radio and television service.
Taking this sector as an industry, we have identified two major groups: culture (which includes
creation and production, in the sectors of television, radio, cinema, publishing and live
entertainment) and telecommunications.
The problem is that some areas like cinema and live entertainment are historically branded as
“cultural” and their status is (partially!) protected by coming under the umbrella of the Ministry
of Culture, and they promote local development where possible, for example in the agreements
negotiated with the Interministerial Economic Planning Committee (CIPE in Italian). But
other areas are much more “unstable”. For example, today it is pretty obvious that a TV drama
is a cultural product just as much as a feature length film for cinemas, and yet the former does
not fall under any ministry and does not have access to the public General Entertainment Fund
(FUS)3. In addition, books, newspapers, television and radio programmes, video games and
the cinema etc. have never been considered by public policies as a “cultural system”, and as such
helped by the State as complementary elements of a single goal to create a countrywide system.
More understandably, the development of TLC has rarely been thought of from the standpoint
of socio-cultural progress, even if today all the distribution systems act as a crucial accelerator
– or a bottleneck – for the growth and dissemination of culture.
However, we should point out some “key” sectors that are absent from the equation. Some are
less visible but their omission is justified because they receive limited State support or even
none at all. These include the video games sector or music. Others are more obvious and totally
arbitrary, like cultural goods: in this case we have excluded this area because of the desire to
focus attention and available energies on those forms of public intervention that support the
culture and communications industry and their subsequent impact, omitting an area such as
cultural heritage in this phase, since direct State management is the dominant model here and
the role played by private initiatives is minor.
The sectors in the industry investigated here are “helped” by the State, for a longer or shorter
time, with greater or lesser attention and applying different principles. The State does this
where and how it is able, without interfering with the natural laws of competition, with a view
to increasing society’s wellbeing by “deliberately” stimulating some key areas of the system.
Therefore, the aim of this work is to measure this aid, that is the amount the public administration
spends on culture and telecommunications. It is a first step, the starting point from which
to base any reasoning of merit and method. In fact, we have given ourselves the mission to
make the figures clear and transparent, analysing them in a comparative and diachronic way,
which tries to arrange the “accounts” in view of their progression over time, and thus see the
modifications introduced in recent years, making comparisons between the different sectors
of culture and the cultural industry. We hope this can be a useful starting point to beginning
to think about the logic that underpins the spending strategies, and thus open the way for a
broader debate on public policies with regard to culture.
To measure the total spending in the cultural industry, it has been decided to examine the
issue on two levels: a “macro” view, using the tool of the Regional Public Accounts (RPA), and
a “micro” view, examining each individual sector and the spending actually given to that sector
(and the regulations governing it).
2
We recall that the concept of “culture” as understood by Maastricht is very wide. Article 128, comma 2,
refers to cultural heritage, artistic and literary creation, including the audiovisual sector.
3
As Annalisa Cicerchia points out, the problem is that “the way in which the cultural sector is institutionally organised at a central level, huge areas, that lie outside the competence of the Ministry of Culture or have a very
marginal niche in that administration (to mention the main ones: first and foremost, television, radio, multimedia
art, press and publishing; and in second place live entertainment and cinema) have basically been left unrepresented. Cicerchia A. “Emergenza e programmazione nelle politiche culturali” in Economia della Cultura, 2/2009, il
Mulino, pag. 139.
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Public investment in the cultural and telecommunications industry
The Regional Public Accounts (also see below, in the methodology section and in the footnotes)
measure the “financial flows at the regional level. They provide information on central and local
government revenues and expenditures. The Public Sector comprises, in addition to General
Government, a non-general-government sector consisting of central and local entities that
operate in the public services segment and are subject to direct or indirect control over their
management by public entities and/or receive financing from such entities”4. For the purposes
of this document this wide definition of the Public Sector will be referred to as the “enlarged”
Public Sector (EPS). The RPA is organised as a Network and it is managed by a Central Unit
based at the Public Investment Evaluation Unit of the Department for Development and
Economic Cohesion supported by 21 operational units located in each region and autonomous
provincial authority. RPA covers the aggregation of revenue and expenditure flows of the
various entities that make up any reference universe, net of any flows between those entities.
The areas are divided into 30 sectors including the one we are specifically interested in here,
culture and telecommunications. However, the category of “culture”, as it is defined in the RPA,
is very large5 and includes segments that even go beyond the wider definition of “culture” being
used in this Report. This would necessitate a thorough clean out conducted by examining all
the individual budget items under consideration, as has already been tried and tested in other
studies. Therefore, in this study we have mainly concentrated on the way figures have altered
over time and on the comparison between culture, TLC and the rest of the economy, which
offer interesting points for reflection.
Given the wide parameters included in the macro level of analysis using the RPA data, this
means that the figures cannot be compared with the second, micro level of research, where each
sector is examined in turn, providing a detailed analysis of public funding measures and their
monetary value (and the financing actually supplied) by evaluating all the available sources.
In the end, the more complex mission actually turned out to be relating to the design of the
increasing complementary nature of national and regional investments. As will be clearly
shown later on, regional administrations’ expenditure in culture and telecommunications has
become increasingly important in the recent years. However, while the national figures are not
always easily available but are generally accessible, the regional authorities’ spending is broken
down into many different budget items, some of which are “camouflaged” and thus impossible
to trace. As a result, for this Report we have chosen to favour the national figures, while trying,
where possible, to also supply the information from the local dimension. Therefore, a more
detailed examination of “decentralised” spending is being postponed to subsequent “spin offs”
from this survey.
Here we want to highlight that the main results to emerge from the research include the lack
of an underlying systematic plan, which is absent in public intervention policies in all sectors
under consideration. In fact, economic policy measures in some areas have tried to create
order in terms of overall funding plans, but over time these have lost their innovative drive
and their original rationale have been forgotten, as is the case for cinema. And in other areas,
4
Volpe M. “Premessa” in AAVV (2007) I Conti Pubblici Territoriali, pag. 7.
5
The RPA’s definition of the culture and recreation services sector includes: “the safeguarding of artistic
and cultural heritage; museums, libraries, art galleries and cultural centres; cinemas, theatres and musical activities;
recreational activities (game parks, beaches, camp grounds and related non-commercial furnished accommodation,
swimming pools, casinos and gaming halls) and sports; initiatives for the dissemination of culture and for cultural
events not primarily organized for tourism; subsidies, advertising, promotion and financing of artistic, cultural and
recreational entities and structures; subsidies for zoological parks and museums; leisure initiatives; subsidies to
academies; support for antiquities and the arts; initiatives in support of religious activities and structures”. Whereas
the telecommunications sector includes: “the administration of activities and services associated with the construction, expansion, upgrading, operation and maintenance of communications systems (postal, telephonic, teleFig.ic,
wireless, satellite, etc.); the regulation of the operation of communications systems (granting of licences, allocation
of frequencies, specification of markets to be served and rates); subsidies, loans and other incentives to enterprises
to support the construction, operation, maintenance or upgrading of communications systems. It also includes
activity in the information technology sector where not directed at a specific sector, as well as spending for the
provision of radio and television services and regulation of the sector”. (in AAVV, 2007, cit, pag 82 & 85). Also see
below, in the methodology section and elsewhere.
Public investment in the cultural and telecommunications industry
181
the pressure of lobbyists and their interests and a policy of making minor compromises have
prevailed over a clear vision of public intervention, as is the case in publishing. Talking of
which, this issue was clearly defined by the Italian Antitrust Authority in its investigation into
publishing enterprises: “the first consideration that arises from the review of the various kinds
of public support for the publishing sector, is the heterogeneity of the funding criteria and ways
the contributions are assigned. In the light of these different approaches it is not easy to identify
an underlying systematic plan governing these contributions, aimed at safeguarding pluralism.
The current structure appears to be the result of the gradual layering of measures, designed to
achieve aims that do not always converge, based on ambiguous parameters for allocation and
quantification. In addition, some measures have been implemented in a discontinuous way,
making it difficult for publishing companies to make any long term plans”6.
The lack of a methodical reflection on the “culture system” has encouraged the proliferation of
minor laws, decrees and stopgap measures that make it extremely difficult to track the flow of
public money allocated, earmarked, re-instated, authorised and eventually supplied and used.
At the same time, there is no sign of an efficient system to monitor and evaluate the interventions,
not only to assess the economic efficiency of the measures but also, and more especially, to
evaluate the actual impact on citizens in terms of access to information, quality of information
services used, and, in the final analysis, the impact on collective wellbeing.
Therefore, it seems as if the whole framework of public intervention in culture needs to be reexamined, with a view to creating a systematic approach, starting from the basis of clear and
transparent objectives, in line with EU policies. We offer a few suggestions:
•
Stimulate creativity and innovation;
•
Generate specialised, competitive employment;
•
Exploit the territories’ cultural and natural resources;
•
Social inclusion;
•
Preservation of national identity;
•
Exporting and strengthening “Italy as a brand” on an international level.
In conclusion, we want to thank everyone who enabled us to undertake this project thanks
to their support and valuable advice, in particular: Mariella Volpe, Alessandra Tancredi,
Gaudenzio Garavini, Paolo Signorini, Carla Bodo, Mario Morcellini, Maurizio Dècina, André
Lange, Andrea Bairati and Fabrizio Barca.
1.2 Notes on the methodology
The aim of this research is to analyse public expenditure in culture and telecommunications,
using a broad definition of “culture” that includes the following sectors: television, radio,
cinema, publishing and live entertainment.
The research has been conducted on two levels.
The first level is a general overview provided thanks to the use of the Regional Public Accounts’
(RPA) database7 . The RPA were launched in 1994 by the Public Investment Evaluation Unit
of the Department for Development and Economic Cohesion (now Ministry for Economic
Development8 ), with the aim of offering a tool able to guarantee the measurement of financial
6
Cfr. AGCM, IC35, Editoria quotidiana, periodica e multimediale, 2007.
7
Part of this note on the methodology used repeats the information found in Guida ai Conti Pubblici
Territoriali (CPT). Aspetti metodologici e operativi per la costruzione di conti consolidati di finanza pubblica a
livello regionale, from the Public Investment Evaluation Unit of the Department for Development and Economic
Cohesion, to be found at the link http://www.dps.tesoro.it/cpt/cpt_notemetodologiche.asp and from official English
language versions of documentation on the same website.
8
When the RPA project actually started, the Department for Development and Social Cohesion came under the Ministry of Economy and Finance.
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Public investment in the cultural and telecommunications industry
accounts for all the Italian regions.
The RPA contain information with reference to the Enlarged Public Sector, and as such include
general government and a non-general-government sector consisting of central and local
entities that operate in the public services segment and are subject to direct public control
(Public Enterprises), producing services to be sold, in which the public administration has
entrusted the task of supplying some services of a public nature, like telecommunications,
culture etc. The definition used for Public Sector is basically the same as the one used by the
Italian National Accounts. In this case, the PS is defined as comprising entities which, on the
whole produce services that are not destined to be sold, which are principally funded through
obligatory payments (taxes, duties, contributions) made by subjects and entities belonging to
the private sector and/or by entities conducting activities that generate earnings.
For each subject belonging to the Enlarged Public Sector, the RPA database reconstructs
the aggregation of revenue and expenditure flows on a regional level on the basis of the
balance sheets of the entity itself, without, in principle carrying out any reclassifications and
subsequently constructing the consolidated accounts for each Italian region.
The advantage of using RPA as a source is that the figures on expenditure are broken down into
regions, thus offering us a unique territorial perspective to carry out interpretative analysis of
the public spending trends at both a central and a local level.
The expenditure figures, identified in this way, are also subject to a process of consolidation,
based on the omission of all transfer payments, in the current and capital (investment) accounts,
received by and paid to the entities belonging to the various levels of government included in
the RPA universe, so that in practise, every entity is considered as the provider of the final
expenditure. The advantage of this process is that it enables the calculation of the overall value
of the expenditure directly provided on the ground, without the risk of duplications.
The RPA are a financial tool: in fact the flows are broken down into economic items, which
reflect those used to compile the balance sheets of public entities adopting the criteria of
financial accountability, recreating a complete picture of all the transactions, carried out by
each individual entity, which generate financial movements.
The RPA figures are divided into 30 sectors, which represent the minimum level of detail and
which can be re-aggregated in order to obtain sector classifications for specific analyses.
In regards to the content of the sectors under consideration, the culture (and recreational
services) sector should, in theory, contains the following components:
•
the conservation and exploitation of artistic and cultural heritage;
•
museums, libraries, art galleries and cultural centres;
•
cinemas, theatres and musical activities;
•
recreational activities (game parks, beaches, camp grounds and related non-commercial
furnished accommodation, swimming pools, casinos and gaming halls) and sports;
•
initiatives for the dissemination of culture and for cultural events not primarily organised
for tourism;
•
subsidies, advertising, promotion and financing of artistic, cultural and recreational
entities and structures;
•
subsidies for zoological parks and museums;
•
leisure initiatives;
•
subsidies to academies;
•
support for antiquities and the arts;
•
initiatives in support of religious activities and structures.
Public investment in the cultural and telecommunications industry
183
Over time, the RPA database has seen qualitative upgrades, which allow the analyst to use it as
a robust tool for analysis and interpretation. The limits of the database are mainly connected
to the structural problem of classifying the public accounts of the entities, which are translated
into items that are “in surplus” and items that are “in deficit”9.
The following table outlines the percentage of entities operating the cultural sector by level of
spending:
Table 1: Culture and recreational services sector: % of entities by level of spending*
State
56.33
Municipalities
27.28
Regional administration
5.59
Publicly owned companies and foundations
3.82
CONI (Italian Olympic Committee)
3.50
Provinces and metropolitan cities
2.14
Institutions and publicly owned firms
0.65
Subordinate entities
0.53
Mountain communities and other local authority unions
0.09
Consortia and public associations
0.07
Chambers of commerce
Overall total
0.00
100.00
Note: * The break down refers to the year 2007 . Source: IEM elaboration of RPA figures.
Turning to the telecommunications sector, and under the RPA definition, it should include:
•
the administration of activities and services associated with the construction, expansion,
upgrading, operation and maintenance of communications systems (postal, telephonic,
teleFig.ic, wireless, satellite, etc.);
•
the regulation of the operation of communications systems (granting of licences, allocation
of frequencies, specification of markets to be served and rates);
•
subsidies, loans and other incentives to enterprises to support the construction, operation,
maintenance or upgrading of communications systems;
•
activity in the information technology sector where not directed at a specific sector;
•
spending for the provision of radio and television services and regulation of the sector.
Once again, the same above-mentioned considerations apply regarding the quality of the RPA
database and the items defined as being “in surplus” and “in deficit”10.
9
“Surplus” items are those areas of expenditure which, according to the RPA classification, should be carried out by other specific sectors: spending on staff training that should, according to the RPA classification, fall
under the Training sector; spending on radio and television services that RPA puts under Telecommunications;
expenditure specifically destined for research that should, according to the RPA; come under Research and development; spending on the reimbursement of expenses incurred by companies implementing job training and guidance
for youngsters in southern Italy (Mezzogiorno), which the RPA categorises as in the Training sector; and expenditure for promotional tourism events and initiatives that RPA classifies under Tourism. The items in “deficit” are classified in other sectors, but it would be more correct to classify the following under the Culture sector: contributions
to religious entities, which fall under the General Administration sector; expenditure on archaeological areas and
museums, coming under Environment; contributions to entities and associations promoting sport for the creation
of initiatives and events classified as Education; and Subsidies for sports facilities and ski runs, which come under
the Education sector.
10
“Surplus” items include: spending on staff training that should, according to the RPA classification, fall
under the Training sector; expenditure specifically destined for research that should, according to the RPA; come
under Research and development; Revolving funds to finance companies that, according to RPA, should fall under
the sector Other in the Economic Sectors category. “Deficit” items include: spending on radio and television and
publishing services, which falls under Culture; expenditure for financing the Public Administration Unified Intersectorial Network and the spending for the operation of the Communications Authority watchdog body which fall
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Public investment in the cultural and telecommunications industry
The following table outlines the percentage of entities operating the telecommunications sector
by level of spending in 2007:
Table 2: Telecommunications sector: % of entities by level of spending*
Poste (Italian Post Office)
55.15
IRI (Institute for Industrial Redevelopment)
32.26
Cassa Depositi e Prestiti
7.04
Publicly owned companies and foundations
4.44
State
0.74
Subordinate entities
0.24
Regional administration
0.13
Consortia and public associations
0.00
Publicly owned firms and institutions
0.00
ENEL (energy)
0.00
Overall total
100.00
Notes: * the breakdown relates to the year 2007. Source: IEM elaboration of RPA figures.
In this research, the aggregate of the spending is recorded in both the current and capital
accounts. With reference to the two sectors under consideration, the items of current account
spending include: spending on staff; purchase of goods and services; current transfers to
households and social institutions, private companies and public enterprises; interest paid;
post-corrective and compensatory revenue; amounts not attributable to the current account.
Whereas the items of expenditure in the capital account include: real estate and property;
furniture, cars and equipment; capital transfers to households and social institutions, private
companies and public enterprises; shareholdings, equity investments and contributions; credit
allocation and duties; amounts not attributable to the capital account.
What’s more, the RPA’s figures can be subject to ad hoc reclassification to allow for full
compliance with European community rules or to compare them with other aggregates of
public finance11.
We also carried out a second level of analysis, investigating the individual items of State
investment in culture and telecommunications, sector by sector, along with the relevant
regulations.
Section 4.1 (Radio and TV) reconstructs the amount of public support in favour of radio
and television companies including different kinds of funding identified, according to the
various cases, by the provider (Ministry, Region) and/or the beneficiary of the contributions
(broadcasters):
•
to quantify the support given to national public television, the items considered were the
income from the licence fee (source: RAI) and the other forms of income deriving from the
main Contracts between RAI and the PA;
•
to quantify the support given to local TV and radio, the analysis includes the contributions
made by the Department of Communications within the Ministry of Economic
Development; the contributions granted by the Department of Information and Publishing
under the category Justice; and spending on the creation of computer and electronic systems, which falls under the
General Administration heading.
11
The main ways the data is normally re-classified is by:
- “capital account spending net of financial items”, which corresponds with the National Accounts. This is obtained
by subtracting the categories related to financial instruments, namely the granting of loans and advances, and equity
investments and contributions, from the overall capital account expenditure.
- “expenditure connected to development”, which, as well as incorporating the capital account spending in correspondence with the National Accounts, also includes the current expenditure for professional training, considered
as an investment in human capital.
Public investment in the cultural and telecommunications industry
185
under the Prime Minister’s Office; and the refunds for electoral advertising which are
allocated from the Ministry of Communications through the CORECOM committees
(Regional Communication Committees);
•
to quantify the contributions for digital terrestrial television, we identified the national and
regional resources that have been allocated so far to enterprises and citizens to help them
adjust to the switch from analogue to digital terrestrial television;
Section 4.2 (Publishing) outlines the framework of direct and indirect public resources
assigned to support publishing enterprises. This compares the figures published on the website
of the Department of Information and Publishing under the Prime Minister’s Office with the
budget estimates, accruals and cash, and the economic accounts for the Prime Minister’s Office
from the last few years (which contain all the items of intervention supporting enterprises,
journalists and the Contracts with the public service), integrating these with information from
the Italian post office, Poste Italiane accounts, which contain the sum of the subsided postal
charges. Regional and local forms of support are excluded from the parameters.
Section 4.3 (Cinema and live entertainment) outlines a frame work of resources allocated to the
areas of cinema (production, distribution, exhibition and promotion) and live entertainment
(operatic-symphonic Foundations, musical activities, theatres, dance, circuses and travelling
shows). The primary source to quantify the amount of financing is the General Entertainment
Fund (in Italian, FUS), managed by the Ministry of Culture. The analysis also included “NonFUS” resources allocated by ARCUS and those taken out of the Lottery funds. For the cinema
and audiovisual sectors, the research also includes investments in audiovisual production
(cinema and drama) made by the public broadcaster on the basis of current legal obligations
(resources coming from the licence fee), the recent funds linked to the tax credit and tax
shelter systems, and the regional funds supporting the audiovisual industry, most of which are
managed by the Film Commissions.
2. State aid for culture and telecommunications: European Union
guidelines and initiatives
2.1 The new Guidelines on State aid
Right from its very founding, with the Treaty of Rome of 1957, the European Union included
control mechanisms to regulate subsidies to businesses, which, then as now, were considered a
primary component of the basic rules for the creation of a European Common Market. And in
fact, paraFig. 1 of Art. 87 of the Treaty reads, “Save as otherwise provided in this Treaty, any aid
granted by a Member State or through State resources in any form whatsoever which distorts
or threatens to distort competition by favouring certain undertakings or the production of
certain goods shall, insofar as it affects trade between Member States, be incompatible with
the common market.” Consistent with the provisions contained in the Treaty, the European
Commission takes direct action on regional national policies by controlling State aid.
However, the European Guidelines for State aid allow exceptions to these prescriptions and
authorise business incentives to be granted to specific geoFig.ical areas and variable levels of
aid intensity, providing these incentives do not adversely affect competition12. The granting of
12
The commission has already taken action in the past with measures safeguarding competition, as was the
case when Italy, following a community notification, and acknowledging the reasoning behind the Commission’s
prescriptions, was required to abolish tax relief on social security dues for companies operating in the southern
Italian region of Mezzogiorno (Decree of the Employment Minister Mastella dated 05/08/1994) with the undertaking that it would be rendered ineffective by 1997. The Commission maintained, in this case, that considerable and
prolonged levels of tax relief constituted a “functional aid” to companies and were as such capable of distorting, on
a structural basis, all competition (Bodo G., Viesti G. (1998), La grande svolta. Il mezzogiorno nell’Italia degli anni
Novanta (The major shift. The Italian ‘Mezzogiorno’ during the Nineties), Published by Donzelli, Rome). Another
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Public investment in the cultural and telecommunications industry
aid to business, without suitable regulations and limitations on the indiscriminate use of the aid
itself, may in the first instance upset correct market operations, but it may also engender other
collateral distortive effects, such as for example delays in the competitive reorganisation of
certain sectors, as normally takes place automatically in smoothly running markets due to the
pressures exerted and the indications provided by the competitive mechanisms themselves13.
The granting of State aid on behalf of the Member States of the European Union is now governed
by the new Guidelines on State aid brought out in 2006, which establish the criteria by which
incentive regimes should be assessed14. The new Guidelines state that “pursuant to article 87,
paraFig. 2, letters a) and c) of the Treaty, the Commission can consider State aid granted to
promote economic development in certain disadvantaged areas within the European Union
as being compatible with the Common Market. The aid of this kind is considered State aid for
regional purposes. This aid provides investment and, in certain specific circumstances even for
the operation of certain large businesses, but in both cases this aid is earmarked for specific
regions in order to balance regional disparities. Even larger investments granted to small and
medium companies located in disadvantaged reasons are considered as having a regional
purpose […]”
Generally speaking, the areas granted aid on the basis of art. 87.3a are entitled to higher levels
of aid compared to those granted aid on the basis of art. 87.3c15.
There are also other aid categories that need not be approved in advance by the European
Commission. These are aid packages granted under what is knows as the de minimis regime,
the threshold of which has been raised from 200,000 euros to 500,000 euros following the
ratification by the EU Commission of decision N. 248/2009 which raised the level of grantable
aid to a maximum limit of 500,000 euros per business enterprise over the three year period
from 1 January 2008 to 31 December 2010.
example is provided by the prohibition against the introduction of tax differentiation on a territorial basis. More
specifically, within the EU it is acceptable that there be different fiscal regimes between the various Member States,
but limiting the reduction of tax imposition to a specific area of a country’s territory is not allowed. However, despite
this limitation, an important innovation of this principle was introduced with the setting up of Urban Tax Free Areas (ZFU) in Italy’s Mezzogiorno, as agreed with the Commission, which envisage a very advantageous fiscal regime
for companies operating there or for those who intend to set up their activities there. So far 22 ZFU’s have been
identified (in the CIPE - Interministerial committee for Economic Programming - meeting of 8 May 2009). The
financial bill 2008 confirmed the allocation of 50 million euros for the implementation stage. As things stand, the
ZFU’s are awaiting a decree of the Ministry of the Economy and Finance which is to provide a detailed description
of the tax and social security breaks and the final unlocking of the State funds now with CIPE.
13
Viesti G., Prota F. (2007), Le nuove politiche regionali dell’Unione (The new regional policies of the European Union) Europea, Il Mulino, Bologna.
14
GUIDELINES FOR NATIONAL REGIONAL AID FOR 2007-2013 (2006/C 54/08) Official Gazette of the
European Union of the 04/03/2006. The new Guidelines do not represent a radical innovation, but rather a codification of accepted practices that have been used for some time by the Commission itself, alongside or as a partial
replacement of the provisions contained in the Guidelines of 1988 and 1998.
15
Art. 87.a states that one may consider compatible with the common Market “aid aiming to promote the
economic development of areas where the standard of living is abnormally low or where there is serious underemployment”; while article 87.3c establishes that “aid to facilitate the development of certain economic activities or
of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the
common interest” can be deemed compatible. The waiver indicated in letter a) only concerns those regions where
the economic situation is extremely unfavourable compared to the EU overall, that is to say regions that are disadvantaged compared to the European average. According to the indication of the Commission these are regions,
defined in territorial terms as NUTS II, where the pro capita GDP, measured on the basis of purchasing power parity
(PPP), does not exceed 75% of the community average. The waiver reported in letter c) has, on the other hand, a
potentially broader scope, in that it is not limited by the economic conditions contemplated in letter a). On the basis
of these dispositions the Commission can authorise aid meant to enhance the economic development of areas of a
Member State, that are disadvantaged compared to the national average.
Public investment in the cultural and telecommunications industry
187
2.2
The exception provided for aid to culture and supporting measures
2.2.1 The waiver for culture
The Treaty of Maastricht in Art. 87, par. 3 letter d) introduced the specific possibility of an
exception to the general principle of incompatibility prescribed by Par. 1 for aid granted by
Member States to promote culture. More specifically, it stated that “aid earmarked for the
promotion of culture and the safeguarding of heritage, if they don’t alter the conditions of
exchange and competition in the Community to an extent that may be considered contrary to
the common good” can be considered compatible with the common market.
The control exerted by the Commission over the authorisation of aid for companies operating
in the cultural sector clearly limits national prerogatives with regard to the kind of support
measures that can be introduced in this sector, yet at the same time it recognises the significance
of cultural enterprises as non-marginal players in the formation of a single European market.
The rules and regulations governing cultural aid apply to a very broad definition of cultural
activity. In fact, thanks to the previously mentioned Article 87, paraFig. 2, letter d) of the
Treaty, as far as State granted aid is concerned, the Commission has in the past approved a wide
variety of national measures that have benefitted the most diverse entities such as museum,
cultural heritage sites, theatrical and musical production, cultural publications as well as the
audiovisual and film sector16. Part of the jurisprudence would seem to assert that, seeing as the
Treaty fails to provide a definition of culture17, it is up to the Member States – according to the
principle of subsidiarity – to come up with one.
There are two instances in which the applicability of the “cultural exception” is excluded, in
other words support for cultural activities “cannot” be qualified as aid when:
1. the cultural activity that has been supported cannot be deemed as an economic activity;
2. it does not have repercussions on exchanges between Member States.
This latter prescription is often encountered in the cultural sector in that many cultural activities,
with the exception of those that enjoy international prestige, exist purely on a local level. One
need only think of the grants awarded for the restoration of monuments that are part of the
local or regional heritage and whose capacity to attract visitors is limited to a very local context.
There is on the other hand a very broad case history that has seen the European Commission
approve State aid by applying the cultural exception. A case in point is the aid granted to
the French cooperative CELF, whose members – a number of French publishers – handled
international orders for French books. In this case the aid consisted in a financial contribution
towards distribution costs, provided in order to enable the publishers to fulfil the small orders
of French books received from abroad, which otherwise would not have been remunerative.
The Commission considered the objective pursued by the French government in providing
help to CELF as being of a cultural nature, because it’s aim was to enhance the dissemination
of works in the French language abroad. On the basis of these premises, it reached the decision
that the French authorities had implemented a cultural policy that complied with the objectives
set by the Treaty (seeing as cultural diversity is among the founding principles of the European
16
Communication of the Commission to the European Parliament, the Council and the European Economic and Social Committee and to the Committee of the Regions - Communication on a European agenda for
culture in a globalizing world {SEC(2007) 570} COM/2007/0242 def.
17
The same Commission acknowledged the difficulty in defining the margins to be applied to a definition
of culture. In the Communication on a European agenda for culture in a globalizing world (see previous note), in
Par.2, it admits that “‘Culture’ is generally recognised as complex to define. It can refer to the fine arts, including a
variety of works of art, cultural goods and services. ‘Culture’ also has an anthropological meaning. It is the basis for
a symbolic world of meanings, beliefs, values, traditions which are expressed in language, art, religion and myths.
As such, it plays a fundamental role in human development and in the complex fabric of the identities and habits of
individuals and communities”.
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Public investment in the cultural and telecommunications industry
model) and that the aid provided was not on a level that it could affect competition, thus
complying fully with the prescriptions of the cultural exception (Togo F., 2009).
Another interesting case is the one involving the Lelystad Aviodrome in Holland. With a letter
dated May 2003, the Dutch authorities informed the Commission of a measure designed to
support the Aviodrome and its efforts to safeguard its aeronautical heritage. The aid measures
were to support the development of an aeronautical theme park, called Aviodrome and located
in Lelystad. The purpose of the project was the conservation of its aeronautical heritage
materials in a museum.
In order to ensure the financial sustainability of the museum in time, a number of commercial
activities were developed to provide backing for the museum activities (for example one of
these commercial activities is an international conference centre, located in the grounds of the
theme park).
The museum activities were separated from the commercial ones in the financial investment
plan. The aid was all earmarked for the museum activities. Although the latter appeared to be
separate from the commercial activities, the Commission could not overlook the spin-off effect
that the aid provided the museum activities would have had on the commercial ones, to the
extent that these could affect sectors where intercommunity exchanges and competition exist.
The Commission therefore acknowledged the measure as State aid as prescribed by Article 87,
paraFig. 1 of the EC Treaty. Bearing in mind however the very limited economic profitability
of the museum activities per se, the Commission reckoned that no private investor would
have been prepared to finance the entire project unless some public funding was available. The
support was therefore considered necessary for the project to go ahead. And what’s more the aid
did not exceed the sum required to achieve the cultural objective. The Commission therefore
ruled – with its decision of 15 October 2003 – that the aid measure could be authorised on the
basis of Article 87, paraFig. 3, letter d) of the EC Treaty (exemption of State aid to protect the
cultural heritage)18.
Even in Italy one can come across instances where the European Commission has applied
the cultural exception. This took place for example following the introduction by the Sicilian
region of Law N. 32/2000, which prescribed aid in favour of publishing. In this instance the
application of the cultural exception by the European Commission was inspired by the principle
which maintains that “the purpose of the measure was to safeguard the cultural production
agencies on the island.”
It is worth noting how certain aid measures which according to the Commission were devoid
of a clear “cultural nature” were subsequently viewed and nevertheless granted aid status on the
basis of Art. 87, par. 3, letter c).
This took place for example in a particularly controversial and significant case for the principles
which it brought to light, when the Commission declared the compatibility pursuant to Art. 87,
par.3, letter c) of the Treaty – and not on the basis of the cultural exception – of aid granted by
Italy, in the form of an interest contribution, to businesses operating in the publishing sector,
and as tax credits, in favour of businesses that produce editorial products19. In this instance,
the Commission did consider the aid system in question as allocating funds for the explicit
promotion of culture, which in actual fact were generically speaking used entirely to support
investments carried out by companies producing editorial products in the Italian language.
The Commission also pointed out that, although the measures introduced could ultimately be
seen as promoting the learning and dissemination of the Italian language and culture, the fact
that they were considered measures based on culture, in the absence of any specific indication
of a pedagogical or language learning purpose, would have meant an excessive broadening
of the notion of culture. Furthermore, in answer to the arguments put forward by the Italian
18
XXXIII Report on competition policies 2003, European Commission.
19
Decision 2006/320/EC, relative to the measure notified to Italy in favour of publishing, dated 30 June 2004
in O.G L118, of 3 May 2006. p.8.
Public investment in the cultural and telecommunications industry
189
authorities linking cultural promotion to pluralism of information, the Commission pointed
out that the educational and democratic needs of a Member State should to considered as
separate from the promotion of its culture (Togo F., 2009).
In December 2007, given the continued evolution of the concept of culture adopted by
the Commission, the cultural exception was applied for the first time to video games. The
Commission in actual fact approved aid granted by France in the form of a tax credit to video
game manufacturers20, recognising the educational value of certain video games, and making
reference also to the UNESCO Convention on cultural diversity, where the cultural nature of
the video game manufacturing industry is acknowledged along with the role it plays in matters
of cultural diversity.
Film production however represents a sector of the cultural industry where the exception on
aid has found its broadest application.
Since 2001 the European Commission had adopted the so called “Communication on cinema21”,
which illustrates the policy guidelines and the principles to be followed in applying the rules on
State aid to the film sector, to improve the production and distribution of film works in Europe,
underlining the difficulties encountered by producers in obtaining the initial funding which
might allow them to move ahead with their production projects.
The supporting measures introduced by Member States for the audiovisual production of films
and television programs mainly focus on the creative and production stages of making a film
and generally speaking take the shape of subsidies or reimbursable advances. Currently it is
estimated that around 1.6 billion euros are spent in the European Union to support national
film industries22.
In assessing the systems used to back film and television production, the Commission generally
takes into consideration two conditions:
•
Compliance with the criteria of general lawfulness, that is to say that the aid in question is
not in contrast with other prescriptions of the EC Treaty relating to sectors other than those
on State aid, including regulations on tax issues. Among other things, the Commission
must also verify that the principles that forbid discrimination based on nationality and
establish freedom of settlement23, freedom of circulation of goods and the freedom to
provide services are not infringed. The Communication clarifies that in compliance
with said principles the aid measures must not, for example, be addressed exclusively to
the citizens of the State in question; it is also established that the beneficiaries must be
national companies set up according to national commercial law and that the employees of
foreign companies that provide cinematoFig.ic services must comply with national labour
regulations. When the prescriptions that violate these principles cannot be separated from
the mechanism by which the aid is granted, the Commission ensures that the principles in
question are complied with by applying the rules on competition.
•
The respect for specific compatibility criteria. In particular, these specific criteria are
defined as follows:
- “The aid must concern a cultural product”: each Member State must guarantee that
the content of the above mentioned production is of a cultural nature based on easily
verifiable national criteria. With reference to the principle of subsidiarity each State must
define such criteria. Consequently the Commission is assigned the task of verifying that
20
Decision of 11 December 2007C47/2006 (ex. N648/2005) Crédit d’impôt pour la création de jeux vidéo in
O.G. L/118/2008 of 6 May 2008, p. 16.
21
See above.
22
See press release IP/09/138 of the Commission dated 28 January 2009.
23
The Articles 43-45 of the European Community Treaty forbid restrictions to freedom of settlement of
citizens of a Member State in the territory of another Member State. “Freedom of settlement” means the possibility
of setting up and managing a business or undertaking any economic activity in a country of the European Union, by
opening agencies and branches.
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Public investment in the cultural and telecommunications industry
the national authorities have outlined a verifiable selection system, capable of ensuring
that only cultural products, as defined by the national authorities, may benefit from the
aid. This criteria is aimed, therefore, to exclude from the benefit those productions whose
purpose is purely commercial;
- “The producer must be free to spend at least 20% of the film’s budget in other Member
States without suffering curtailment of its subsidy as a consequence of any imposed
obligation that expenses be “territorialised” (i.e. spent within a certain territory) ;
- “The intensity of the aid must, as a rule of thumb, be limited to 50% of the production
budget24”: the Commission justifies this limitation as a way of stimulating the normal
commercial initiatives that pertain to a market economy (stimulus of the role played by
the private sector) and avoid a rush by Member States to provide aid for the sector. An
exception to this limitation applies to the so called “difficult films with modest financial
means”, whose definition, once again consistent with the principle of subsidiarity, is
entrusted to each Member State according to its own national parameters25.
- Finally, no further aid is allowed to “specific film activities” (such as for example postproduction), in order to guarantee the neutrality of the aid’s incentive effect and to avoid
that the State distributing the subsidy attracts or protects the activities in question.
One should also point out that the companies that produce films and television programmes
can access other kinds of subsidies not connected to cultural activities, but rather aimed at
supporting certain specific economic activities or regional contexts and granted in the context
of horizontal national aid26 systems, approved by the Commission on the basis of the exceptions
introduced by Art. 87, par. 3 letter a) and c) of the CE Treaty (for example regional aid, aid to
SMEs, for R&D, training and employment)27.
2.2.2 The support initiatives
Culture has occupied a fundamental place in the European integration process, ever since
its inception, due to the importance of its many social, economic and political implications.
The grounds for Community action in cultural affairs (see above) are to be found particularly
in Article 15128 of the treaty that instituted the European Community, which calls to mind
the possibility for the European Community to introduce actions designed to encourage,
promote and if necessary integrate the activities set up by the Member States, contributing to
the full development of their cultures without prejudice to national and regional diversity, yet
highlighting at the same time their common legacy.
Furthermore, Community action is meant to encourage cooperation between Member States
and, where necessary, to back and integrate the latter’s action in the following sectors:
•
improvement of knowledge and the dissemination of the culture and history of the
24
The Commission pointed out that the funds provided directly by community programs do not constitute
State resources; therefore their presence does not affect the calculation of the maximum ceiling of 50%. Furthermore, the programs in question promote the dissemination of national films abroad, consequently their effects do
not compound those produced by national systems, which concentrate instead on production and distribution.
25
The indication “films with modest financial means” refers to films whose overall production cost is not
above 1.5 million euros, while “difficult films” are those films believed to be unlikely to be well received by the
market and therefore have little chance of being commercially viable due to their experimental nature (such as for
example documentaries, first and second films, short films, works produced by film schools acknowledged by the
Italian State).
26
The Commission has introduced a series of rules concerning so called horizontal aid. These rules, unlike
those relative to aid for financial purposes, concern aid that can be granted throughout the community territory
and, unlike sectorial aid, can concern more than just one sector.
27
Togo F. (2009), Aiuti di Stato nel settore culturale (State aid in the cultural sector), Aedon, n. 2/2009, Il
Mulino.
28
Consolidated version which instituted the European Community, Official Gazette of the European Community, 24.12.2002.
Public investment in the cultural and telecommunications industry
191
European people;
•
conservation and preservation of cultural heritage of European importance;
•
non commercial cultural exchanges;
•
artistic and literary creation, including the audiovisual sector.
In order to implement the objectives prescribed by Article 151 of the Treaty, the European
Community in addition to assigning a share of the European Social Fund (ESF) and Regional
Policy Development Fund (FESR) to the pursuit of the objectives related to cultural activities,
has instituted ad hoc programs to promote measures for the conservation of the cultural
heritage, financial instruments for the support of artists, assistance in literary translations and
support for cultural events.
A first generation of programs designed to support culture was introduced in 1996 with the
Kaleidoscope Program, which ran until 1999 and was directed to the support of cultural and
artistic programs coproduced between Member States. These were followed by the Arianna
program, introduced over the 1997-1999 period and designed to sustain the book and reading
sector and the Raffaello program (1997-1999), which aimed to encourage cooperation for the
protection, conservation and expansion of European cultural heritage.
In May 1998 the European Commission proposed to create the first cultural support framework
program (named Culture 2000). The “Culture 2000”29 program, which grouped together the
earlier “Raffaello”, “Arianna” and “Kaleidoscope” programs, aimed to create a common cultural
space by promoting cultural dialogue and knowledge of history, the creation and dissemination
of culture, the mobility of artists and their work, European cultural heritage, new forms of
cultural expression and the social and economic role played by culture.
The “Culture 2000” program is a planning and finance tool for community actions in the
cultural sector, set up during the period between 1 January 2000 and 31 December 2006, which
backed the role of culture both as an economic factor and as a factor in social integration and
citizenship. It also promoted the connection with actions set up in context of other Community
policies that had an impact on the cultural sector.
“Culture 2000” was subsequently replaced by a new program, called “Culture 2007”. It was set
up with decision N. 1855/2006/CE of the European Parliament and Council on 12 December
2006, as a finance and programming tool for cultural cooperation for the period between 1
January 2007 and 31 December 2013. The “Culture 2007” program is meant to support cultural
cooperation initiatives promoted by European bodies operating in the sector as well as the
collection and dissemination of information in this field.
The main objective of the program, as in the previous sector programs, is the enhancement of a
common cultural space shared by all Europeans in order to promote the emergence of European
citizenship. More specifically the Culture 2007 program focuses on three main objectives:
•
it encourages transnational mobility of professionals in the cultural sector;
•
it supports the circulation of works of art and cultural/artistic products beyond national
borders;
•
it promotes intercultural dialogue.
The importance the EU assigns to the cultural sector can also be detected in other initiatives
promoted by the European Commission, which in May 2007 published the “Communication
on a European Agenda for culture in a globalising world”30, as a way of answering the challenges
imposed by the changes brought about by globalisation. This is a new European cultural
29
Decision 508/2000/CE of the European Parliament and Council, of 14 February 2000, which set up the
“Culture 2000” program.
30
Communication by the Commission to the European Parliament, the Council, the European Economic
and Social Committee and the Committee of the Regions, of 10 May 2007, relative to a European agenda for culture
in a globalising world [COM(2007) 242].
192
Public investment in the cultural and telecommunications industry
strategy based on the intensification of cultural cooperation throughout the European Union
(EU). More specifically, the objectives of the new cultural agenda revolve around three main
principles:
•
the stimulation of cultural diversity and intercultural dialogue (artist and worker mobility
in the cultural sector as well as the circulation of any form of artistic expression and
strengthening of intercultural skills and intercultural dialogue);
•
the enhancement of creativity within the context of the Lisbon strategy for growth and
employment (the cultural industries contribute to European economic dynamism as well
as honing EU competitiveness);
•
culture as an essential element of international relations (as prescribed by the UNESCO
Convention on the protection and promotion of the diversity of cultural expression, ratified
by all Member States and by the EU, the new cultural agenda intends to strengthen the
cultural dimension as it is considered an essential element of the EU’s external relations).
A further European initiative in the cultural sphere is the MEDIA 200731 program, which is the
new support program for the European audiovisual sector. In the context of the MEDIA 2007
program, the Commission intends to carry on the community actions promoted through the
MEDIA I, MEDIA II, MEDIA Plus and MEDIA Training programs that have supported the
development of the European audiovisual industry since 1991.
The audiovisual sector is an essential tool for the transmission and development of European
cultural values. It has to be said that this sector performs a fundamental role in the creation of
a European cultural identity and in the expression of European citizenship. What’s more, the
circulation of European audiovisual works (films and television programs) helps strengthen
intercultural dialogue and improve mutual understanding and knowledge of European
cultures. The Community support therefore aims to assist the audiovisual sector so that it may
best perform its role as consolidator of European citizenship and culture.
The new program, which covers the period 2007-2013, was conceived as a single program
that brings together two aspects that have already been party to actions in past initiatives
(development, distribution, promotion and training).
Beyond the cultural aspect, the European audiovisual sector has a considerable social and
economic potential. Thus the Community support for the audiovisual sector can also claim
a place in the context of the Lisbon strategy, which aims to make the European economy the
most competitive and dynamic in the world.
The MEDIA 2007 program pursues the following general objectives:
•
the conservation and exploitation of European cultural and linguistic diversity and of the
European audiovisual film heritage;
•
ensuring access to audiences for the above and supporting dialogue between cultures;
•
increasing the circulation and visibility of European audiovisual works both within and
beyond the European Union;
•
strengthening the competitive edge of the European audiovisual sector in the context of an
open and competitive European market which can promote employment.
In order to achieve this objectives MEDIA 2007 takes actions:
•
upstream of audiovisual production, to help in the acquisition and improvement of skills
and the development of European audiovisual works (pre-production stages);
•
downstream of audiovisual production by providing support for the distribution and
31
Decision N. 1718/2006/CE of the European Parliament and Council, of 15 November 2006, relative to the
implementation of the program for support of the European audiovisual sector (MEDIA 2007). The European Union supports the European film sector via the MEDIA 2007 program, which allocated, for the period 2007-2013, the
sum of 755 million euros for training, as well as the development and distribution of European films across borders.
Public investment in the cultural and telecommunications industry
193
promotion of European audiovisual works (post-production stages);
•
by supporting pilot projects designed to ensure that the program adjustments to market
developments.
In the sectors in which it operates, the program addresses the following four priorities:
•
providing support for the creative process in the European audiovisual sector as well as the
knowledge and dissemination of the European film and audiovisual heritage;
•
strengthening the European audiovisual sector’s structure with particular focus on small
and medium enterprises (SME);
•
reducing, within the European audiovisual market, the imbalances between countries
with a strong audiovisual production capacity and countries or regions with a very weak
capacity for audiovisual production and/or a limited geoFig.ic and linguistic areas (this
priority addresses the need to protect and boost cultural diversity and intercultural
dialogue throughout Europe);
•
providing support for market developments in digital technology and their exploitation.
At the end of April 2010 the European Commission published an important document
dedicated to creativity and culture and the innovative processes underway in these contexts,
that is to say the Green Paper “Unlocking the potential of cultural and creative industries”32,
which aimed to open a debate on the conditions that might help stimulate the development of
the European Union’s cultural and creative industries.
The document pointed out that the cultural and creative industry sector is made up of highly
innovative businesses with a vast economic potential and constitutes one of the most dynamic
sectors in Europe. The cultural and creative industries in particular often contribute to
revitalising declining local economies, favouring the birth of new economic activities, creating
new and sustainable jobs and increasing the appeal of European regions and cities.
In actual fact, the regional and local development strategies introduced in the various
European countries have successfully integrated cultural and creative industries in many
sectors: promotion of cultural heritage for commercial purposes; development of cultural
infrastructures and services to support sustainable tourism; grouping of local businesses and
collaborations between cultural and creative industries and industry, research, education as
well as other sectors; creation of innovation workshops; definition of integrated across-theborder strategies for the management of natural and cultural resources that might restore
momentum in local economies; and sustainable urban development.
What’s more, cultural contents play a crucial role in the development of the information
society, feeding investment in infrastructures and broadband services, in digital technologies,
in consumer electronics and telecommunications.
With the help of the education sector, the cultural and creative industries can also play a
decisive role in providing European citizens with the necessary creative, entrepreneurial and
intercultural skills. In this context, the cultural and creative industries can bolster the European
centres of excellence and help Europe become a society based on knowledge.
All these aspects share the common European Union goal of exploiting the potential of culture
as a catalyst for creativity and innovation in the context of the Lisbon strategy for growth and
employment.
32
GREEN PAPER. “Unlocking the potential of cultural and creative industries”, Brussels, 27.04.2010, COM
(2010) 183 final.
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Public investment in the cultural and telecommunications industry
2.3 European actions in favour of telecommunications
2.3.1 The overall picture
In the modern economy telecommunications represent an important factor for development
and the competitiveness of economic and social systems. Particularly in the wake of the
growing globalisation of the economy and the dematerialisation of production and processes,
communication infrastructures and the availability of technologies based on high speed data
transfer constitute essential strategic assets for the inclusion of the national manufacturing
system in the competitive dynamics of the global economy, but also in order to improve the
efficiency and accessibility of services for local populations.
The strategic nature of communication technologies for the competitiveness of economic
and social systems is proven by the fact that their diffusion in geoFig.ical areas and in various
economic sectors, in addition to assisting economic development and growth has also,
concomitantly, led to a digital divide springing up between areas that can access these new
technologies and increased communication capacity and others which are instead way behind
in this area.
The digital divide issue – which can be seen with reference to differences between countries
but also in relation to the disparities that exist between areas inside the same country – has led
many national and regional governments to introduce policies both on the demand and offer
side specifically designed to develop the use of the Internet and the diffusion of broadband. The
diffusion of broadband leads to positive network externalities – the rise in subscribers/users
increases the usefulness of being connected to the network for all consumers – which tends to
make increasing the rate of service penetration more advantageous, even in those geoFig.ical
areas that are further away from the places where the greatest exchange of information and
communication are concentrated.
The importance of telecommunications in a European context is already acknowledged in the
treaty instituting the European Community, when in Art. 154 it states that in order to create
a free European trade space and to ensure economic and social cohesion “the Community
must contribute to the construction and development of trans-European networks in the
transportation, telecommunications and energy sectors”.
Ever since the 1980s, the issue of the liberalisation of the telecommunication sector has been
discussed and conceived as part of the process leading to the completion of the internal market,
and is now acknowledged as a priority for the European Community.
The liberalisation of the sector began in 1988 when the telecommunication terminal
market was opened up to competition and then continued in 1990 with the liberalisation of
telecommunication services – with the exception of vocal telephone services.
In 1998 the EU proceeded to liberalise the European telecommunications market, with the
aim of establishing competition in a sector where a dominant position over certain services
had up to then been held by national monopolies (such as for example access to high speed
Internet), and to ensure that citizens and businesses could get the best out of the development
and diffusion of the information society.
Alongside the sector liberalisation, another EU priority is currently represented by the reduction
of the “digital divide” between rich regions and poorer regions (particularly rural ones) with
less opportunity for broadband service access. To bridge the territorial gap in this sector, the
Member States along with the regions and the local authorities are encouraged to improve
access to technologies in these areas by investing in the supply of appropriate technological
equipment and identifying ways of boosting demand. The local administration in particular
can provide certain fundamental services to the community, such as services in the field of
Public investment in the cultural and telecommunications industry
195
public administration, healthcare and education directly online33. For its part, the EU can
instead play an important role through the structural measures ascribable to regional policy
tools and policies aimed at rural development.
Even though the national authorities of each individual Member State apply European
regulations separately in matters concerning telecommunications, they coordinate their
strategies at the community level34.
From a policy point of view, in the context of the European telecommunications strategy,
“i2010” represented the new strategic plan by which the European Commission, in 2005,
defined the overall strategic guidelines for the information society and media35. In particular,
the i2010 program intended to set up a unique European space for information, to stimulate an
open and competitive market for the information society and the media.
The communication strategy defined by i2010 set up a more general integrated policy,
which aimed to develop knowledge and innovation in order to support European growth
and employment. This policy, in its turn, has subsequently been incorporated in the overall
revision of EU policy provided by the Lisbon strategy (Lisbon 2020), where the latter,
already in the original formulation in Lisbon 2010, assigned technological development and
telecommunications with a strategic importance for European competitiveness36.
The purpose of the i2020 initiative is to coordinate the actions of EU Member States to facilitate
digital convergence and provide an integrated platform for the information society and policies
relating to the world of audiovisuals.
Moreover, the European Commission has suggested three priority objectives that the European
policies concerning the information society and media were supposed to achieve by 2010:
•
the creation of a single European space for information;
•
the strengthening of innovation and investment into research on information and
communication technologies;
•
the creation of an inclusive information and media society.
As is pointed out in the “European Commission Communication on the Lisbon Strategy
2020”, the global demand for information and communication technologies represents a
market of eight thousand billion euros, of which however only a quarter comes from European
companies. Europe further appears to be behind with regard to the penetration of high speed
internet, which has negative repercussions on the ability to innovate, even in rural areas, on the
diffusion of knowledge online and the online distribution of goods and services.
In this context, community action designed to support investments in communication
technologies on behalf of European businesses, accompanied by appropriate measures
aimed at eliminating the infrastructural gap which handicaps the more backward areas of
Europe, is not only necessary but can also go a long way in achieving the overall objective of
strengthening social, economic and territorial cohesion throughout Europe by setting up a
European information society based on inclusion and the improvement of public services and
the quality of life.
To assist in the implementation of the i2010 initiative, in April of 2006 an “eGovernment”
plan was devised, which aims to improve the efficiency of public services, bring them up to
33
Communication by the Commission to the Council and European Parliament: “Better access for rural
areas to modern information and Communication Technologies (ICT’s)[COM(2009) 103].
34
The coordination of strategies at the community level takes place within the so called group of European
regulators (ERG – European Regulators’ Group).
35
Communication by the Commission to the Council, the European Parliament, the European Economic
and Social Committee and the Committee of the Region, of 1June 2005, entitled “i2010 - A European Information
Society for growth and employment” [COM(2005) 229].
36
COMMUNICATION OF THE EUROPA 2020 COMMISSION. A strategy for intelligent, sustainable and
inclusive growth, CE, 2010.
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Public investment in the cultural and telecommunications industry
speed with the times and adapt them to suit citizen’s needs37. The plan of action underlined the
importance of accelerating the introduction of online administration (or e-government) in
Europe to answer a series of requirements, such as:
•
updating and improving the efficiency of public services;
•
providing citizens with safer and better quality services;
•
answering the plea made by businesses for less bureaucracy and more efficiency;
•
guaranteeing cross- border continuity of public services, essential in order to sustain
European mobility.
There are also a number of European measures affecting the information society that are worth
mentioning, which target certain specific sectors, such as for example the health service.
In 2004 the European Commission set in motion a Plan of action for “electronic health
(e-health)38”, the main objective of which was to enable the European Union (EU) to exploit
the potential of the health systems and services online in the context of a European space for
electronic health. The Plan envisaged the possibility of using information and communication
technologies (ICT) to improve the quality of health service throughout Europe, maintaining
fixed costs or even reducing them while cutting waiting times and errors.
In operational terms, the Plan outlines concrete measures for its implementation, including, by
way of example: the application of information and communication technologies to medical
prescriptions, medical files, patient identification and health cards, by introducing a faster
installation of broadband Internet specifically dedicated to health systems.
Other areas of Community action in the region of telecommunications, supported by
the implementation of dedicated community programs, are the major trans-European
communication networks, in those instances where, in the context of the European Union’s
(EU) policy of trans-European networks, the “eTEN”39 program supports the creation and
diffusion of trans-European services and electronic applications.
The program was initially set up to help the interconnection of networks in the telecommunications
infrastructure sector, only to be subsequently expanded to include the creation, development
and accessibility of interoperable services and applications, concentrating mainly on the
promotion of public services and the innovative use of online services.
2.3.2. State aid for broadband
In a market economy, the investments for the territorial deployment of high speed or very high
speed broadband networks is primarily guaranteed by private operators, yet State aid steps in
as a decisive tool in order to extend broadband coverage to those areas where market operators
have no advantage in investing.
In order to satisfy the growing demand for regulation of the case histories that are by now
very widespread in the sector, in September of 2009 the European Commission introduced the
Guidelines40 for State aid in favour of broadband. These guidelines aim to achieve the general
objective of regulating investments in this highly strategic sector for the economic development
and social cohesion of the States, without distorting competition and thus ensuring the
preservation of competitive market dynamics in a sector that is now completely liberalised.
37
Communication by the Commission, 25 April 2006, The i2010 plan for e-government: Accelerating egovernment for everyone’s benefit [COM(2006) 173].
38
Communication by the Commission to the Council, the European Parliament, the European Economic
and Social Committee and the Committee of the Regions of 30 April 2004, “Electronic Health - making healthcare
better for European citizens: an action plan for a European e-Health Area” [COM(2004) 356].
39
In full “TEN-Telecom” which stands for Trans-European Telecommunications Networks.
40
Communication by the Commission. Community Guidelines for the application of State aid rules in relation to rapid deployment of broadband networks (2009/C 235/04) 30/09/2009.
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Broadband connectivity plays a central role in terms of the development, introduction and use
of information and communication technologies in the economy and in society. The strategic
importance of broadband therefore consists in its capacity to accelerate the contribution of
these technologies to growth and innovation in all economic departments along with social
and territorial cohesion. The European Commission actively supports the generalised access
to broadband services for all European citizens, as a tool for social cohesion, as set forth and
reasserted in the various versions of the Lisbon strategy41.
The availability of guidelines on State aid for broadband offers the European Union Member
States and their respective public authorities a set of rules that can steer their plans to publically
support the sector so that they comply with the community rules on State aid, but that at the
same time facilitate the expansion of high and very high speed broadband networks, reducing
the so called digital divide, increasing Europe’s competitive edge and contributing to the
creation of a knowledge-based society in Europe.
These guidelines have been formulated by the European Commission on the basis of experience
acquired in recent years and based on the introduction of over 40 separate decisions on instances
of public aid and whether the aid could warrant State aid status or not. More specifically they
provide a clear explanation of the rules on the basis of which public resources can be used to
install broadband networks or even new generation networks (NGA42) in areas where private
concerns are not prepared to invest. What State aid can do in supporting the installation of
broadband networks is actually rectify a market failure in that it makes it possible to remedy
situations where single private investors do not consider the investment viable, even though the
investment may end up being efficient in a broader economic prospective, for example owing
to the cumulative repercussions it has on the area’s development.
On the other hand, State aid in support of broadband could also be viewed as a way of levelling
out the playing field, where it is considered a fundamental means of social communication and
participation as well as a tool that can guarantee freedom of expression to all social players,
thus reinforcing social and territorial cohesion.
Already in the “Plan of action in the State aid sector – less and better targeted State aid: a
road map to State aid reform 2005-200943”, the Commission remarked that, in certain given
conditions, State aid can represent an effective tool in order achieve objectives in the common
interest, underlying as far as the broadband issue was concerned, how a targeted public action
can help to reduce the “digital divide” between areas and regions of a country with access to
affordable and competitive broadband services and areas where this offer is absent.
The European investments for the development of broadband networks also comprise an
important part of the European plan for economic revival44 approved on 11 March 2009,
to which the European Commission assigned over a billion euros through the European
Agricultural fund for Rural Development (FEASR) to support the deployment of high speed
Internet connections in rural areas.
In those areas covered by broadband projects subsidised by State measures qualifying as “assisted
areas” pursuant to article 87, paraFig. 3, letters a) and c) of the EC treaty and consequently
falling within the prescriptions of the guidelines on matters of State aid for regional purposes45,
41
See for example, “i2010 - A European Information Society for growth and employment” COM (2005)
229 def., 1st June 2005; “e-Europe 2005: an information society for everyone”, COM (2002) 263 DEF.; “Bridging the
broadband divide”, COM (2006) 129.
42
NGA stands for Next Generation Access. These are networks in fibre optics or advanced cable networks
capable of entirely or largely replacing the current copper or cable broadband networks.
43
COM (2005) 107 def.
44
COMMUNICATION BY THE COMMISSION TO THE EUROPEAN COUNCIL. A European economic
recovery plan COM (2008) 800 def., Brussels, 26/11/2008.
45
For a description of the areas entitled to State aid for regional purposes on the basis of articles 87.3 a and
87.3 c and the various criteria and aid intensity thresholds involved, see the Guidelines on matter of State aid for
regional purposes 2007-2013, OG C 54 dated 4.3.2006, pages 13-45. A definition of areas 87.3a and 87.3c and the
admissibility criteria is also provided in this chapter in the paraFig. dedicated to State aid to culture.
198
Public investment in the cultural and telecommunications industry
the public funding allocated to broadband deployment fits the definition of State aid.
2.3.3. Assisted broadband areas
In order to classify the public aid in support of broadband networks as State aid, the European
Commission introduced a distinction of a geoFig.ic nature between:
•
areas where broadband infrastructures are non-existent and are not expected to be
developed in the mid-term (white areas);
•
areas where only one broadband operator was present (grey areas);
•
areas where at least two broadband network service operators were present (black areas).
This distinction was also applied to the availability of NGA46 networks, whose installation is
still at the very initial stages almost everywhere.
White areas
Considering State aid for broadband in these so called white, rural and inadequately served
areas as a tool capable of promoting economic and social-territorial cohesion and to correct
market failures, the European Commission decreed its close compatibility with community
policies on cohesion.
In almost all decisions reached in this sector, the Commission underlined that, for profitability
reasons, broadband networks tend to provide only partial coverage of the population, making
it necessary for public funding to be provided to reach complete coverage47. Therefore the
European Commission acknowledged that, in providing financial backing for the supply of
broadband services in areas where the facility was not present, nor was it expected that private
investors were likely to establish a similar infrastructure for at least the next three years, the
Member States are pursuing true objectives of cohesion and economic development and the
support is therefore in all likelihood in keeping with the common good48.
Black areas
In this situation, it was upheld that, when in a particular geoFig.ical area at least two providers
of broadband services operate and the service is supplied in competitive circumstances
(competition based on infrastructures), then there is no market failure. Consequently it is very
unlikely that public action will bring any further benefit, while public aid allocated to finance
the construction of a further broadband network, on principle, is likely to distort competition
to an unacceptable extent and could lead to the exclusion of private investors. Therefore, in
the absence of a clear instance of market failure, the Commission negatively assesses measures
designed to support the introduction of a new broadband infrastructure in “black areas”49.
46
It should however be considered that, seeing as NGA networks imply a completely different network
structure in order to provide broadband services of a considerably higher quality compared to the ones currently
available, the definition of areas should be revised to take into consideration the specific nature of NGA networks.
Furthermore, where the introduction of the basic broadband is concerned, the examples of State aid mainly relate
to rural areas/communities (with low population density, high investment levels) or economically backward areas
(with too few means to be able to afford the services), with NGA networks the financial burden required for their
construction may be such do discourage their installation not only in scarcely populated areas but also in certain
urban ones. In other words, the fast development on a broad scale of NGA networks is mainly hindered by the cost
factor rather than a low population density.
47
See Communication by the Commission. Community Guidelines for the application of State aid rules in
relation to rapid deployment of broadband networks (2009/C 235/04) 30/09/2009.
48
See, for example, the Commission decision N. 118/06 on Latvia.
49
See the Commission decision of 19 July 2006, concerning State Aid C 35/05 (ex N 59/05) relative to the
installation of a broadband network in Appingedam in the Netherlands (OG L 86 del 27.3.2007, page. 1). The case
concerned the development of a Council-owned passive network (conduits and fibre optic) the active side of which
Public investment in the cultural and telecommunications industry
199
Grey areas
The presence of a network operator in a certain area does not rule out that there may be a market
failure or a shortage of network infrastructure in the territory. In actual fact, the presence of a
monopolistic position can affect the quality or the price of the services provided to the citizens
to an extent that can also be disadvantageous. At the same time however, in the areas where
a single broadband network operator is present, the public support for the construction of an
alternative network can, by definition, interfere with market dynamics.
It’s for this reason that the State aid supporting the development of broadband networks in the
grey areas requires a very thorough analysis and careful evaluation of compatibility.
Let us take into consideration a few types of admissible aid. Let’s suppose that in the area covered
by the public action a network operator is already present; it is however possible that a few
user categories are not adequately served (for example certain broadband services called for by
users are not available or, due to the lack of regulated wholesale access tariffs, the retail prices
are virtually inaccessible compared to those same services offered in other more competitive
areas or regions). If, moreover, it is fairly unlikely that alternative infrastructures will be put in
place by third parties, the public finance could turn out to be an appropriate measure by which
to achieve this aim. In this case, by compensating for the lack of infrastructural competition,
the aid would reduce the problems connected to the effective monopoly of the longstanding
operator50.
When it grants aid in these kinds of circumstances however, the Member State must guarantee
compliance with a number of conditions. In particular, the Commission can, on certain
conditions, declare the aid measures that interest areas where broadband infrastructures are
effectively managed in a monopoly regime as being compatible with its guidelines provided
that: i) affordable or adequate services are not available to satisfy the needs of citizens and
commercial users; ii) the same objectives cannot be achieved with less distortive measures
(including ex-ante regulation). In order to verify the above, the Commission specifically
assesses the following elements:
a)
the inadequacy of general market conditions, analysing, among other things, the
current price levels for broadband service, the kind of service offered the final user (residential
and commercial) and the conditions imposed;
b)
in the absence of an ex-ante regulation imposed by a national regulating authority, the
impossibility of actual access to the network on behalf of third parties or the presence of access
(management and network operation) was to be tendered out to a private sector operator that would have provided
wholesale services to other broadband service providers. The Commission ascertained, in the decision, that the
market for broadband in the Netherlands is developing very fast and that the electronic communication service
providers, the cable operators and the Internet service providers were about to introduce unsubsidised high speed
broadband services onto the national market. The situation in Appingedam did not appear to differ from that of the
rest of the country. Both the landline operator and the cable operator present on the market already offered clients in
Appingedam a “triple play” service packet (telephone, broadband and digital/analogue TV) and both the operators
claimed to possess the technical competence to extend the bandwidth using the available networks.
50
In Decision N. 131/05 – United Kingdom, Fibre Speed Broadband Project Wales, the Commission took
into consideration whether the financial support granted by the Welsh authorities for the construction of a fibre
optic network, which was open and neutral as far as the operator was concerned and connected 14 industrial parks,
could be considered compatible, considering that the areas involved were already served by the existing network
operator who offered dedicated connections at regulated prices. The Commission reckoned that the service price
charged by the existing operator was very high, almost inaccessible for the SMEs. Given the distance from the existing operator’s telephone switchboard, the parks involved weren’t even able to access symmetrical ADSL services
with speeds higher than 2 Mbps. What’s more, the existing operator did not grant third parties access to inactive
conduits and fibres. Therefore the presence of an operator in the areas involved did not ensure the supply of high
speed Internet connections at affordable prices for the SMEs. Nor was there any likelihood that an alternative high
speed infrastructure be created by any third parties to connect the industrial parks in question. A further examples
of this kind of case history, see the Commission Decisions : N 890/06 - France, Aid to Sicoval for a very high speed
network; N 284/05 - Ireland, Regional Broadband Programme: Metropolitan Area Networks («MANs»), phases II
and III.
200
Public investment in the cultural and telecommunications industry
conditions which do not favour effective competition;
c)
the existence of general obstacles likely to hinder the entrance of any new operators
into the electronic communications market;
d)
no measures introduced or corrective measures issued by the competent national
regulation authority or competition watchdog authority with jurisdiction over the existing
network operator are capable of resolving the above mentioned problems.
In spite of having facilitated the development of broadband in urban areas and more densely
populated ones in many instances, ex-ante regulation may, after all, turn out to be an inadequate
tool by which to guarantee the supply of broadband services, particularly in poorly served areas
where the intrinsic investment profitability is low51.
By the same token, although measures designed to boost the demand for broadband (as for
example the granting of purchase vouchers for fast speed connections for the final users)
may positively contribute to a greater diffusion of broadband, they are not always effective in
achieving the objective of improving the offer52.
In these kinds of situations, in order to overcome the insufficient availability or complete
absence of broadband, there is no alternative but to definite public action which entails the
complete installation of broadband infrastructures entirely financed by the State.
3. Public expenditure in Italy in telecommunications and culture in the
Regional Public Accounts (RPA) system
3.1. Introduction
The trends in public expenditure in Italy are subject to very close scrutiny, particularly since the
country has committed to complying with the European obligations regarding the stability of
its public finances. If on the one hand the constraints on its balance of payments require that its
public spending becomes more efficient and productive, on the other hand there are sectors of
the economy (culture and telecommunications being a case in point) that require a broad range
of public investment support to avoid market failures.
In order to examine public expenditure in culture53 and telecommunications we decided to
refer to the data collected centrally through the Regional Public Accounts (RPA)54, an accounts
system set up according to specific criteria, which were outlined in the notes on the methodology
earlier in this chapter.
In this analysis we have begun by collecting data on the cash flow over time for the Enlarged
Public Sector expenditure for the years 2000 to 2008 (the last year for which the RPA data
is currently available), dividing the public expenditure between current spending (operating
costs which include items such as wages, rents, etc) and capital account expenditure (which
represents investment spending).
51
By way of example, see the following Decisions by the Commission: N 473/07 – Italy, Supply of broadband connections in Alto Adige; N 570/07 - Germany, Eckpunkte zur Breitbandversorgung des ländlichen Raums
in Baden- Württemberg; N 131/05 – United Kingdom, Fibre Speed Broadband Project Wales; N 284/05 - Ireland,
Regional Broadband Programme: Metropolitan Area Networks («MANs»), phases II and III; N 118/06 – United
Kingdom, South Yorkshire Digital Region Broadband Project.
52
By way of example, see the following Decisions by the Commission: N 222/06 - Italy, Plan of action to
overcome the digital divide in Sardinia, N 398/05 - Hungary, Tax deductions to boost the development of broadband; N 264/06 - Italy, Broadband in rural areas of Tuscany.
53
In the RPA system the aggregate expenditure is referred to the cultural and recreational service sector,
where the recreational service sector mainly includes sports facilities, an item that has been kept within the aggregate given its negligible weight. See the outline of the methodology.
54
More detailed information on the activities of the RPA project can be found on the institutional site http://
www.dps.tesoro.it/cpt/cpt.asp.
Public investment in the cultural and telecommunications industry
201
3.2. The overall picture
The data concerning the thirty sectors of the economy measured by the RPA system provides
us with a broad and extremely diverse perspective on the trends governing public spending in
Italy. The analysis of this universe also enables us to verify the specific importance and evolution
of the relative weight of public spending in telecommunications and culture compared with the
rest of the country’s economy.
In the last year of RPA data collection, 2008 to be precise, the public expenditure referred to
the Enlarged Public Sector for culture, in absolute terms, totalled 10,668 million euros, while
for the telecommunications sector it totalled 9,929 million euros (Fig. 1). The expenditure for
culture for the same year represented 1.03 percent of total expenditure within the Enlarged
Public Sector for all the sectors for which data was collected, while for telecommunications it
represented 0.96 percent of the total (Fig. 2).
It certainly comes as no surprise that the sectors of the economy that absorb the largest share
of public expenditure in Italy are essentially National Insurance payments (27.57%), the
Healthcare sector (10.29%) and General Administration expenditure (9.96%), all areas that are
famously responsible for contributing to the country’s deficit and where the broadest and most
sweeping expenditure review is required in order to introduce greater spending efficiency and
quality.
What’s more, in the cultural sector, and the same goes for telecommunications, the ratio of
public spending compared with overall expenditure has been dropping in recent years. In
the cultural sector it has been cut by as much as a half over the period under assessment: it
represented 2.1% of total expenditure in 2000 and, after having dropped to 1.59% in 2002 and
rising back up to 2.2% in 2004, since then it has slipped gradually down to the 2008 level of
1.03%. In telecommunications on the other hand, after expenditure had grown considerably in
2001 (1.88% of total expenditure), it dropped constantly in subsequent years, hitting its all time
low in 2008, when it accounted for 0.96% of the overall public spending fed into the economic
circuit; however, further considerations need to be made concerning these trends so we can
get a better understanding and a clearer picture on the expenditure shifts that have taken place
over the various years. For example, the doubling of telecommunications expenditure that took
place between 2000 and 2001 (from 7,836.59 to 14,434.11 million euros) was a consequence of a
combination of one-off factors: on the one hand, the market operation of the purchase of Wind
by Enel and on the other the increased spending of the Italian post office, Poste Italiane on
personnel, purchasing goods, services and property. By the same token, the drop in spending
recorded between 2004 and 2005 was essentially due to the sale of Wind assets.
202
Public investment in the cultural and telecommunications industry
Fig. 1: Total expenditure for the Enlarged Public Sector (2000-2008)
(absolute values, millions of euros)
National insurance and
wage supplements
285,49
205,15
154,75
Energy
52,32
106,53
Health
General administration
Education
Industry and crafts
Other transportation
Unclassified expenditure
Social affairs
Other economic sectors
Defense
Road works
Public order
Waste disposal
Culture and
recreational activities
Telecommunications
Residential and
urban developments
Water
Environment
Justice
Agriculture
Sewers and
water treatment
Research and
development
Trade
Training
Tourism
Other health affairs and
sanitation
Other public works
Labour
Marine fishing and
aquaculture
67,26
103,07
60,36
57,49
42,59
52,55
25,60
43,79
27,18
38,89
42,17
34,90
24,89
29,33
29,91
18,26
10,90
15,08
10,14
13,24
12,75
11,16
8,74
10,67
14,26
9,93
7,84
7,82
6,49
7,20
2,89
6,82
4,64
6,57
4,86
4,74
5,21
3,57
3,40
3,42
2,53
2,66
1,48
2,65
2,22
1,67
1,47
1,34
0,97
0,90
0,80
0,75
0,61
0,08
0,08
Migliaia 0
50
2008
100
150
200
250
300
2000
350
Source: IEM elaboration of RPA data.
Public investment in the cultural and telecommunications industry
203
Fig. 2: Per sector share of the total of EPS expenditure (2000-2008) (%)
National insurance and
wage supplements
27,58
30,18
14,95
Energy
7,70
10,29
9,89
9,96
8,88
Health
General administration
Education
Industry and crafts
Other transportation
Unclassified expenditure
Social affairs
Other economic sectors
Defense
Road works
Public order
Waste disposal
Culture and
recreational activities
Telecommunications
Residential and
urban developments
Water
Environment
Justice
Agriculture
Sewers and
water treatment
Research and
development
Trade
Training
Tourism
Other health affairs and
sanitation
Other public works
Labour
Marine fishing and
aquaculture
5,55
6,27
5,08
3,77
4,23
4,00
3,76
6,20
3,37
3,66
2,83
4,40
1,76
1,60
1,46
1,49
1,28
1,88
1,08
1,29
1,03
2,10
0,96
1,15
0,76
0,96
0,70
0,43
0,66
0,68
0,63
0,72
0,46
0,77
0,35
0,50
0,33
0,37
0,26
0,22
0,26
0,33
0,16
0,22
0,13
0,14
0,09
0,12
0,07
0,09
0,01
0,01
0,00
5,00
2008
10,00
15,00
20,00
25,00
Source: elaboration of RPA data.
204
Public investment in the cultural and telecommunications industry
2000
30,00
35,00
3.3. Public spending on telecommunications
3.3.1. Overall expenditure for the Italian territory
Even though the importance of investment in telecommunications for a country’s competitive
edge and growth55 is widely acknowledged, the Italian figures on public spending in the
sector reveal that, as of 2001, there has been a gradual reduction of public spending in
telecommunications, while as far as capital investment is concerned, this has suffered a drastic
decrease beginning in 2005. More specifically, after the strong rise in expenditure between
2000 and 2001 (from 7,836 to 14,434 million euros), it then started to fall away to the lowest
level ever, which it reached in 2007 (9,876 million euros), only to rise slightly in 2008 (9,929
million euros) (Fig. 3; Fig. 5). It’s also worth pointing out that for an extensive period, from
2004 to 2007, the rate of public spending growth in telecommunications was always negative,
and this trend was only reversed very slightly in the last year for which we have data (Fig. 4).
Fig. 3: Total EPS expenditure –
(2000-2008)
16.000
14.434
14.000
Fig. 4: Variations in total EPS expenditure –
TLC (2000-2008)
1,0
13.567
13.979
0,84
0,8
12.804
12.000
10.232
10.000
8.000
TLC
9.911
9.877
9.930
0,6
0,4
7.837
0,2
6.000
0,03
-0,06
0,0
4.000
-0,08
-0,03
0,00
0,01
2006
2007
2008
-0,20
-0,2
2.000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
-0,4
2001
2002
2003
2004
2005
Source: elaboration of RPA data.
If one then looks at the spending for the sector in terms of current account expenditure and
capital investments56 we see that it fairly closely matches the trends for the same categories in
overall public spending for the sector over the period. The investment expenditure reveals a
considerable increase in 2001, from 582 million euros to 2,303 million euros, and what’s more
on average, from 2001 and up to 2005, investment expenditure tended to increase while current
account expenditure levels dropped. From 2005 onwards however the trend was reversed, with
current expenditure increasing to the detriment of investment spending. In 2008 the capital
account expenditure increased once again compared to running expenses, indicating that
there could be a revival of investments in the sector (Fig. 6).
55
See above. The impact of the dissemination and technological upgrading of telecommunications in development and growth are proven by a number of international studies, such as the one conducted by the U.S.
Department of Commerce (Measuring Broadband’s Economic Impact, February 2006), which compared local communities with a high and a low level of broadband technology installation. The study, which covered the period
1998 – 2002, showed that the communities with greater access and more widespread distribution of broadband
technologies posted a higher increase in employment and a greater growth in terms of number of new businesses,
particularly those operating in sectors with a higher technological intensity. The study did not point to a statistically
significant increase in average wages, while there was an increase in the value of residential property (measured by
taking as a benchmark the average rent level paid for residential properties in the areas with a more widespread
presence of broadband technologies).
56
For TLCs the running expenses refer to operating costs (wages, rents, etc.), while the investments involved are those required to install the works (purchase of materials, infrastructure construction etc).
Public investment in the cultural and telecommunications industry
205
Fig. 5: Total expenditure (for capital and current accounts) for the Enlarged Public Sector in
Telecommunications (2000-2008) (millions of euros)
20.000
current account
capital account
16.000
2.304
12.000
8.000
2.178
2.460
1.553
1.331
1.430
7.772
8.359
8.546
8.499
2005
2006
2007
2008
582
12.130
4.000
2.186
2.309
11.793
11.259
10.627
7.254
0
2000
2001
2002
2003
2004
Fig. 6: Variations in investment and current account spending in Telecommunications for the
Enlarged Public Sector (2000-2008) (%)
350
300
current account
295,8
capital account
250
200
150
100
50
67,2
0,2
0
-7,2
-50
4,7
-0,4
-5,3
-9,9
13,0
7,5
-26,9
-36,9
2005
2006
2,2
-14,3
7,4
-0,5
-100
2001
2002
2003
2004
2007
2008
Fonte: elaborazione Iem su dati CPT
3.3.2. Expenditure by region
The analysis of public telecommunications expenditure by region shows trends that reflect the
tendencies of the average national figures.
In all Italian regions, from 2000 to 2001 an increase in public spending on telecommunications
is reported, following, as of 2002, by a generalised drop in spending, with values falling away
by half in almost all regions over the 2002 – 2008 period (Fig. 7). The only exception was Lazio,
where telecommunications expenditure went from 2,287 million euros in 2001 to 2,946 million
euros in 2002 and, after falling off considerably, in recent years seems to have levelled out.
In 2008, the regions with the highest expenditure in absolute values were Lazio and Lombardy
with 2,741 and 1,430 million euros respectively, followed by Piedmont, with 848 million euros,
Campania with 697 million euros and Sicily with 511 million euros.
It should also be noted how in certain regions of the Mezzogiorno (Southern Italy) the absolute
value in terms of spending, in 2008, rose considerably compared to the dominant trend for the
previous years. This was the case for example in Calabria, Campania and Puglia. The reason for
this was probably linked to residual structural funds allocated to the abovementioned regions
for the 2000-2006 period, which had to be spent within two years of the end of the programme
ending. The year 2008 was thus the last year in which these community funds could be used,
206
Public investment in the cultural and telecommunications industry
with all remaining unused funds beyond this date being essentially forfeited. This clearly
represented a very strong incentive to ensure they were used up in time.
If on the other hand we consider the pro capita public expenditure in telecommunications per
region, we find that Lazio continues to lead the pack with 487 euros per inhabitant, followed
by Molise with 280 euros per inhabitant, by the autonomous province of Trento with 271 euros
per inhabitant and Valle d’Aosta with 266 euros per inhabitant.
This figure is on the other hand very low for Puglia (only 91 euros per inhabitant),
particularly when compared to other Southern Italian regions, where per capita expenditure
on telecommunications ranges between 101 euros per inhabitant in Sicily and 152 euros per
inhabitant in Abruzzo (Fig. 8).
Fig. 7: Telecommunication expenditure divided by region (2000-2008) (millions of euros)
2.741
Lazio
2.097
1.430
Lombardy
1.032
849
Piedmont
700
698
Campania
594
527
Emilia Romagna
375
511
Sicily
382
508
Veneto
408
461
Tuscany
342
371
Puglia
305
275
Calabria
244
237
Liguria
214
202
Abruzzo
165
192
Friuli Venezia Giulia
155
188
Marche
158
182
Sardinia
219
141
Aut. Province
of Trento
126
124
Umbria
105
90
Aut. Province
of Bolzano
45
90
Molise
65
79
Basilicata
78
2008
34
Valle d'Aosta
2000
26
0
500
1.000
1.500
2.000
2.500
3.000
Source: IEM elaboration of RCA data.
Public investment in the cultural and telecommunications industry
207
Fig. 8: Per head expenditure in Telecommunications divided by region (2000-2008) (euros)
487,2
Lazio
409,9
279,8
Molise
203,6
270,6
Aut. Province
of Bolzano
265,6
267,8
Valle d'Aosta
217,1
191,5
Piedmont
165,8
180,6
Aut. Province
of Bolzano
98,6
156,4
Friuli Venezia Giulia
131,3
151,6
Abruzzo
130,9
147,0
Liguria
135,6
146,8
Lombardy
114,6
138,2
Umbria
127,6
136,7
Calabria
120,9
134,5
Basilicata
129,5
124,3
Tuscany
97,7
121,4
Emilia Romagna
94,6
120,1
Marche
108,2
120,0
Campania
104,1
108,8
Sardinia
134,1
104,0
Veneto
90,5
101,4
Sicily
76,8
90,9
Puglia
2008
2000
75,8
0
100
200
300
400
500
600
Fonte: elaborazione Iem su dati CPT.
3.4 Public spending on culture
3.4.1 Overall expenditure for the Italian territory
The cultural industry in Italy represents one of the sectors where the production process for
both products and services is very drawn out and differentiated. For this reason the way public
resources are allocated in the sector is a very complicated business, and what’s more it now
takes place in a context where the need to contain and qualify expenditure prevails.
Public expenditure in culture supported by the Enlarged Public Sector has been fairly erratic,
208
Public investment in the cultural and telecommunications industry
dropping at first, between 2000 and 2002, then recovering in 2003 and particularly in 2004
which recorded a peak in the years under examination (19,262 million euros), only to drop
away steadily to the lowest level recorded for the period in 2008 (10,669 million euros). What
is particularly striking is the expenditure figure for this last year, seeing as between 2006 and
2007 there had been a gradual recovery in spending for culture, while in 2008 it would appear
that there has been a free-fall, down to the lowest level ever achieved in the last 9 years (Figs.
9, 10 and 11).
However, the most significant shifts in expenditure are due to the transfers that the State makes
every year in favour of the government’s administration of State monopolies to pay for the
Lottery jackpots, an amount that is clearly very variable. If the figures were adjusted to account
for transfers to the State monopoly administration, the amounts would seem much more linear
over the years, as is shown in Fig. 13. In fact, in 2009 there would actually be an increase in
cultural spending, both in terms of current expenses and capital investment. More specifically,
the overall expenditure in culture would be seen to have climbed from 9,865.95 to 10,668.64
million euros, radically changing the scenario described earlier and revealing an increase in
support for the cultural sector.
Fig. 9: Overall EPS spending – Culture and
recreational services (2000-2008)
0,5
25.000
0,43
0,4
19.262
20.000
0,3
16.529
15.000
Fig. 10: Changes in overall EPS spending –
Culture and recreational services
(years
2000-2008)
14.264
13.681
12.769
13.586
13.491
0,2
14.220
10.669
10.000
0,1
0,0
0,06
5.000
0,05
-0,04
-0,07
-0,1
-0,14
-0,2
-0,18
-0,25
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
-0,3
2001
2002
2003
2004
2005
2006
2007
2008
Source: IEM elaboration of data provided by RPA.
On average, between 2000 and 2007, approximately 80% of Enlarged Public Sector spending
for culture went to cover running costs, which placed a considerable strain on the capacity
to support the sector’s demand for investments, such as work required to help exploit the
historical and artistic heritage for touristic purposes (Fig. 12). However, in 2008, faced with a
general drop in cultural expenditure, the funds for investment57 increased considerably (by as
much as 10%) compared with 2007.
Fig. 11: Total expenditure (for current and investment expenditure) for Enlarged Public Sector in culture (2000 – 2008) (millions of euros)
20.000
current account
capital account
3.322
16.000
12.000
2.994
2.503
2.492
2.278
2.482
2.703
2.965
3.217
8.000
15.939
11.760
13.535
11.188
10.490
11.103
10.789
11.255
4.000
7.452
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: IEM elaboration of data provided by RPA
57
The financial entries represent on average only 3% of the total of the investment capital, and the 0.6% of
the overall outlay, so their inclusion does not distort the expenditure figure.
Public investment in the cultural and telecommunications industry
209
A close look at public spending by tier of government
The data for public spending in culture divided by tier of government shows how, over the
course of the years, the State has modified its central role as fund disburser, while there has
been a considerable increase in the weight and importance of the support provided for the
sector by local authorities (particularly by Municipalities). In 2000 the State expenditure for
culture (for the most part by the Ministry of Culture) represented 47% of the total expenditure
by the Enlarged Public Sector, while in 2007 this percentage had dropped to 35.7%, and was at
this point level with Municipality expenditure. In line with the tendency towards a reduction of
the importance of State funding in favour of funds from decentralised territorial bodies, 2007
saw the Regions increase their share of cultural funding (up to 12.3%) along with the Provinces
and Metropolitan Cities (up to 5.2%). There was also another category which in the study was
classified as “Other” and which groups local public companies, accounting for another 11.2%58.
Fig. 12: Total EPS expenditure, for current expenses and investments net of transfers to the
State Monopolies - (2000-2008) (millions of euros)
12000
current account
capital account
10000
8000
2.503
2.703
3.322
3.217
2.994
2.482
2.965
2.492
2.278
7.062
6.540
6.617
7.165
6.900
6.662
6.885
6.901
7.452
2000
2001
2002
2003
2004
2005
2006
2007
2008
6000
4000
2000
0
Source: IEM elaboration of data provided by RPA.
Fig. 13: Enlarged Public Sector expenditure variation in current costs and investments for
Culture (2000-2008) (%)
60
current account
47,7
50
capital account
40
30
18,6
20
22,9
19,4
10
0
-10
-0,4
-6,2
-4,9
1,4
2,8
8,5
-9,9
-17,1
-8,6
-15,1
-20
-18,0
-30
-33,8
-40
2001
2002
2003
2004
2005
2006
2007
2008
Source: IEM elaboration of data provided by RPA.
58
The figures for public expenditure by tier of government are taken from B. Stratta (2009), Public expenditure for culture in the Italian regions: recent trends and models, Economia della Cultura, N.2. The analysis
conducted in this study is also based on the public expenditure figures in the Regional Public Accounts; unlike the
figures in our analysis, in this case a subset of budget entry items for each institution was selected in order to leave
out the component relative to the recreational services (including for example sports facilities). For greater details
on the methods used please refer to the methodology note.
210
Public investment in the cultural and telecommunications industry
Fig. 14: Percentage distribution of expenditure disbursed by the EPS divided by tier of government (2000 – 2007)
State
100
9,3
2,9
90
Regions
Municipalities
Provinces and metropolitan cities
Other
10,7
3,6
10,6
3,6
9,6
3,5
10
3,7
10,1
3,9
8,85
4,95
11,2
37,4
37,2
35
36,8
37,5
37,15
35,7
12,4
11,2
15,1
9,5
11,2
13,35
12,3
35,8
37,4
36,8
39,9
37,2
35,7
35,7
2001
2002
2003
2004
2005
2006
2007
5,2
80
32,1
70
60
8,7
50
40
30
47
20
10
0
2000
Source: IEM elaboration of data provided by Stratta (2009).
If one separates out the expenditure figures for the Central and Northern regions from those
pertaining to the South of Italy (Mezzogiorno), the public spending picture for the sector
changes quite significantly. In the regions in the North and Centre of the country the main
players in public spending for culture are the Municipalities, which in 2007 accounted for
the main share (38.1%), greater that the share financed by the State (36.5%). In actual fact,
this increased presence of the Municipalities in cultural funding is a tendency which already
kicked off in 2001 in the North and Centre, the first year when their expenditure exceeded that
of the State (Municipalities accounted for 40.8% of public spending as opposed to the 34.1%
covered by the State).
Fig. 15: Percentage Distribution of expenditure disbursed by the EPS per tier of government
2000-2007 – Centre-North
State
100
90
10,6
2,4
Regions
Municipalities
Provinces and metropolitan cities
12,4
3
11,4
2,9
10,4
2,6
11,3
3
12
3
12,3
3,2
13,6
40,8
39
36,8
39,4
40,5
40,5
38,1
9,5
14,4
7,4
9
8,2
7,6
34,1
37,1
35,8
39
35,5
35,7
36,5
2001
2002
2003
2004
2005
2006
2007
80
70
34,3
60
50
Other
4,2
6,6
40
9,8
30
20
46,1
10
0
2000
Source: IEM elaboration of data provided by Stratta (2009).
In the South, however, a centrist model for public spending in culture still held sway even in
2007. While the role of the Municipalities increased it remained modest, with an incidence on
total sector expenditure of just 29.2%. In spite of a gradual reduction of the role played by the
State between 2000 and 2007, the central administration is still the main dispenser of public
funding for the sector with 33.4%. What has instead greatly increased over the period under
examination is the level of Regional authority spending, which has gone from 14.9% in 2000
to 24.9% in 2007.
Generally speaking the role and weight of regional administrations, not only in their capacity as
fund disbursing bodies but also as direct promoters of public policies in the various sectors of
the regional economy has increased considerably in recent years. This is partly due to a process
Public investment in the cultural and telecommunications industry
211
of devolution of both administration and functions directly connected to territorial policies,
which has meant that the Regions have “broken loose” of their previous purely bureaucraticadministrative role to become major players in the promotion and implementation of
development policies59.
Fig. 16: Percentage distribution of expenditure disbursed by the EPS per tier of government
2000-2007 – South
100
90
80
State
Regions
5,7
4,3
6,2
5,4
25,5
70
60
Municipalities
Provinces and metropolitan cities
7,6
5,9
6,8
6,7
6,2
5,9
4,8
6,5
31,2
28,5
28,9
28,9
16,7
17,5
16,2
17,6
40,7
38,5
40,4
42,7
42,2
2001
2002
2003
2004
2005
27,9
19,8
40
20
5,4
6,7
4,5
8
33,8
29,2
18,5
24,9
35,7
33,4
2006
2007
14,9
50
30
Other
49,6
10
0
2000
Source: IEM elaboration of data provided by Stratta (2009).
The greater weight of the State’s action in the South compared to the other tiers of government
should not however fool us with regard to the real weight of State spending for culture when
compared to other parts of the country. It turns out that in actual fact the per capita spending
allocated by the State for the cultural sector in the South in 2007 amounts to only 63% of the
average it pays out in the Central and Northern areas. What’s more, if the analysis were focused
on capital investments alone for the cultural sector, one would see that the differential between
public spending in the Central and North of Italy and the South is not at all compensated by
the investments financed by the regional policies with the so called “supplementary” resources
from Structural Funds and the National Fund for Underutilized Areas (Stratta 2009).
Regional policies have earmarked the exploitation of cultural resources as one of the strategic
drivers of policies for the development of depressed areas (Southern regions). The 2007 – 2013
National Strategic Framework for a unified regional development policy has in actual fact named
culture as one of its ten strategic priority policies for Italian development, which must focus
on “the exploitation of natural and cultural resources to foster attractiveness and development”
(Priority 5)60 The priority, subsequently included in regional policy documents (POR) and
in a number of different actions, while pursuing the specific strategy for the sector which
includes many traditional actions for the protection and safeguarding of the cultural heritage,
also underlines the advisability of transforming the local wealth of naturalistic, landscape and
cultural resources into increased opportunities and well-being for the community by tailoring
measures designed to foster its exploitation.
59
The greater role played by the Regions in supporting direct action for territorial development is confirmed
by the incidence of investment spending in these same Southern Italian regions, which, in 2007 represented 48.0% of
the funds allocated for culture, vastly greater compared to the incidence of State capital investments, which totalled
only 35.2% (Stratta 2009).
60
National Strategic Framework for regional development policy 2007-2013, Department of Development
and Economic Cohesion, Ministry of Economic Development (http://www.dps.tesoro.it/qsn/qsn.asp).
212
Public investment in the cultural and telecommunications industry
3.4.2 Expenditure divided by region
The different levels of public spending for culture in the various regions is for the most part due
to the very unbalanced way the central State disburses its funds to them.
Most of the public funds allocated by the State for the cultural sector are in actual fact
concentrated in Lazio and a few other regions such as Lombardy and Campania. This very
uneven redistribution of State resources for culture is due to a number of different elements.
Fig. 17: Cultural spending by region (2000-2008) (millions of euros)
1.611
Lazio
2.034
1.258
Lombardy
1.424
960
Sicily
978
856
Piedmont
747
744
Veneto
859
738
Campania
1.403
678
Emilia Romagna
1.065
599
Tuscany
1.271
512
Puglia
1.365
406
Friuli Venezia Giulia
291
323
Sardinia
461
301
Liguria
303
284
Aut. Province
of Bolzano
334
264
Calabria
308
245
Marche
471
225
Abruzzo
230
218
Aut. Province
of Trento
269
164
Umbria
249
134
Valle d'Aosta
41
98
Basilicata
104
2008
54
Molise
2000
54
0
500
1.000
1.500
2.000
2.500
Source: IEM elaboration of RPA data.
Public investment in the cultural and telecommunications industry
213
Fig. 18: Per capita cultural expenditure by region (2000-2008) (euros)
1.052,5
Valle d'Aosta
342,4
569,5
Aut. Province
of Bolzano
724,1
419,8
Aut. Province
of Trento
567,4
329,8
Friuli Venezia Giulia
246,5
286,3
Lazio
397,6
193,4
Sardinia
282,0
193,0
Piedmont
177,1
190,6
Sicily
196,5
186,2
Liguria
192,1
182,9
Umbria
302,3
168,3
Abruzzo
182,1
167,5
Molise
168,8
165,4
Basilicata
174,0
161,5
Tuscany
363,8
156,2
Emilia Romagna
268,5
155,9
Marche
321,9
152,4
Veneto
190,5
131,2
Calabria
152,6
129,1
Lombardy
158,2
126,9
Campania
245,8
125,5
Puglia
2008
2000
339,2
0
200
400
600
800
1.000
1.200
Source: IEM elaboration of RPA data.
In the first place, the State funds for culture are essentially those allocated by the Ministry of
Culture, eighty percent of which are spent in safeguarding and exploiting the country’s vast
cultural heritage. For which reason, leaving out the self-governing regions and provinces where
different elements are present owing to the different ownership of the cultural heritage in these
areas, the six regions which receive the most visitors to State sites (Lazio, Campania, Tuscany,
Lombardy, Piedmont and Veneto) are also the regions that receive the greatest amount of
State funding for the cultural sector61(Stratta 2009). Consequently State spending is strongly
61
Within this general framework, it turns out however that Lazio and Lombardy are where the concentration of State spending is high and proportionally greater than their concentration of visitors. Where Lazio is concerned this can be accounted for if one considered that besides the high concentration of museums and cultural/
archaeological sites, this where the vast majority of Culture Ministry staff are located (26% of all Ministry staff are
214
Public investment in the cultural and telecommunications industry
dependant on the territorial distribution of the nation’s cultural heritage and the various
management models implemented.
The figures for 2008 confirm this analysis. Excluding the autonomous regions with special
statute, the region that spends the most on culture in absolute terms is Lazio with 1,610 million
euros (although this value is considerably lower than the previous year, when its cultural budget
amounted to 2,152 million euros) followed by Lombardy, with 1,257 million euros, Piedmont
with 855 million euros, Veneto with 744 million euros, Campania, with 738 million euros,
Emilia Romagna with 678 million euros, Tuscany with 599 million euros and Puglia with 512
million euros.
The absolute figures for the remaining regions of the South are however considerably lower,
with Calabria spending 264 million euros, Abruzzo 225 million euros, Basilicata 98 million
euros and Molise 54 million euros.
If we go on to consider the per capita regional spending however, we see that Lazio once
again ranks first, yet this kind of analysis provides a different perspective on the role played
by the Southern regions. It thus transpires that the Abruzzo region has a cultural per capita
expenditure of 168 euros, Molise 167 euros and Basilicata 165 euros, all levels that are in actual
fact higher than regions such as Marche, Tuscany, Lombardy and Emilia Romagna. Calabria,
Campania and Puglia on the other hand are the regions with the lowest per capita spending
(131, 127 and 125 euros per inhabitant respectively) (Fig. 18).
4. Public funding for the communications industry in Italy
4.1 Radio and TV
4.1.1 Introduction
This paraFig. attempts to draw a picture of the importance and the national and regional
strategies used to provide public support for the radio and television broadcasting sector. The
variety of funding options available have been ordered according to six different headings,
based on the entity dispensing the funds (Ministry, Region) and/or the beneficiary of the
funding (type of broadcaster/publisher).
Public support for the radio and television sector: areas of investigation
Support for national public television
Subsidies from the Department of Information and
Publishing in the Prime Minister’s Office
RAI Contracts with the Public Administration
Refunds for electoral advertising
Contributions from the Ministry for Economic Contributions for the nationwide digital broadcasting
Development – Department of Communications
infrastructure
On the basis of the detailed analysis outlined in the following pages, a visual outline is
provided below which quantifies the public resources assigned to the various areas taken into
consideration based on the most recent available data.
concentrated in Lazio, excluding management; the other two regions where the Culture Ministry staff are concentrated, still excluding management, are Campania (18%) and Tuscany (10%): Rome is also where two of the main
Ministry of Culture Specialist Training and Research Institutes are located – The Higher Institute for Conservation
and Restoration and the Central Institute for the Restoration and Conservation of the Archive and Library Heritage)
as well as the most widespread range of territorial cultural services (for example, 15 of Italy’s 46 national libraries are
located in Lazio).’
Public investment in the cultural and telecommunications industry
215
Public support for RAI
1.800
Public support for tv and local radio
120
1.600
100
1.400
1.200
80
1.000
60
800
40
600
400
20
200
0
Convezioni Rai per servizi in
Italia e all'estero (2008)
Canone Rai (2009)
0
Contributi fondo perduto Radio Contributi nazionali per il
locali per attività di informazionepassaggio al Digitale Terrestre
(2009)
(2010)
Source: IEM elaboration. (million of euro)
4.1.2 Support for National public television
European public service broadcasting companies receive over 22 billion euros a year in the
shape of licensing fees or directly from State subsidies and are ranked third among beneficiaries
of State Aid after the agriculture and transportation sectors62.
Within the framework of European Regulations, the Amsterdam Protocol of 199763
acknowledges the authority of Member States in providing finance and defining their own
public service, on condition that:
•
this financial support (being an exception to the general provisions on State Aid) be granted
to radio and television broadcasting bodies in order to fulfil the public service mission
assigned to them, as established and defined by each Member State,
•
this support is not seen to alter the conditions for exchange and competition within the
European Union to an extent that is deemed against the common good, while bearing in
mind the importance that the public service mission be successfully fulfilled.
The previously mentioned Protocol goes on to underline that the public radio and television
broadcasting systems in the Member States are directly connected to the democratic, social
and cultural needs of each society, as well as the need to preserve pluralism within the media.
In 2001 the European Commission issued a Communication outlining in greater detail the
criteria and rules for the implementation of Community regulations on State Aid and the
safeguarding of competition in services of general economic interest and particularly radio and
television broadcasting64. The many changes that have subsequently affected both the market
62
Source: European Commission, Communication of 2 July 2009: “State Aid: the Commission updates the
rules for State funding of Public Broadcasters”.
63
Protocol N. 23 on the public radio and television broadcasting system of the member States attached to
the Treaty of Amsterdam of 1997, now attached as Protocol N. 27 to the text of the Treaty for the Constitution of
Europe. More in general, Art. 16 of the EC Treaty acknowledges the importance of the services of general economic
interest, transferring to the individual Member States, according to their respective authority, the task of ensuring
that these services operate according to principles and economic/financial conditions that enable them to fulfill their
purpose.
64
Since then, the Commission has adopted over 20 decisions that have provided further clarification on the
application of the regulations. The examination of the individual cases has integrated, in many ways, the principles
pronounced in the 2001 CommunicatioN. The most recent decisions on State Aid in favour of audiovisual public
216
Public investment in the cultural and telecommunications industry
and the legal framework have meant that in 2009 the 200165 Communication had to be updated
with greater responsibility and control being required of the individual states through the
introduction of rules to ensure that the overall impact of the new media services that benefit
from State finance could be more easily and transparently assessed66.
In Italy, the public broadcasting service finds its constitutional foundation in the principles of
freedom of speech, the right to information and the right to be informed (Art. 21 of the Italian
Constitution).
In 2002, the Italian Constitutional Court reasserted that the end of the State monopoly
caused by the entrance of private operators into the broadcasting arena did not imply that the
constitutional justification for a public broadcasting service was no longer valid, seeing as its
specific function is to safeguard pluralism and to broadcast culture, which is viewed as a vehicle
for the promotion of social and civil development within the Country67.
The resources provided by the licence fees (see above) also enable RAI (the holder of the
public broadcasting licence until 6 May 2016) to fulfil the public service obligations included
in the specific Three Year Contract signed with the Ministry for Communication by bearing
the relative costs and generally speaking by adapting the type and quality of its programming
to the specific and distinctive objectives of public service. In this way the offer financed by
the licence fee should entail a lesser degree of dependence on audience ratings (published by
Auditel and connected to advertising revenue), thus avoiding a standard programming of the
kind scheduled by private enterprises.
The Broadcasting Code published in 200568 has redefined the tasks assigned to the general
public television service. In particular RAI is required to ensure:
•
it guarantees complete coverage for the entire country;
•
an adequate number of hours of television and radio broadcasts dedicated to education,
information, training, cultural promotion and the supply of long distance training activities;
•
access to programming by political parties and political groups, associations representing
local self-governing institutions, national trade unions, established religions, ethnic and
linguistic groups and other groups of relevant social interest that may request access and
the free transmission of socially relevant messages;
•
the founding of a production, distribution and broadcasting company for radio and
television programs abroad, in order to enhance Italian language, culture and business;
•
the broadcasting of radio and television programs in German, Ladin, French and Slovenian
languages for the border Regions and the exploitation and development of decentralised
production centres for the promotion of local culture and language tools;
•
the transmission, at appropriate times, of content specifically tailored for children;
broadcasting systems in Germany, Ireland and Belgium reflect the Commission’s stance, particularly concerning the
public service mandate in the new media context, for example when broadcasters manage web sites and transmit via
mobile phones.
65
A Commission Communication regarding the application of the regulations on State Aid to public broadcasting services adopted on 2 July 2009, after a broad public consultatioN. The Treaty deals with State Aid and
competition in Articles 86, 87 and 88.
66
The main changes introduced by these new forms of communication concern:
-
the a priori control of new services with considerable potential launched by public service broadcasters;
-
a careful assessment of the inclusion of pay-on-demand services within the mandate of public service
provision;
-
a more effective control over the compensation and supervision excesses of the public service mandate at
a national level;
-
a greater financial flexibility of the public service broadcasting companies.
67
Decision N. 284 of 2002.
68
Legislative Decree of 31 July 2005, N. 117, Art. 5 Definition of the general public broadcasting service assignment.
Public investment in the cultural and telecommunications industry
217
•
the conservation of the historical archives of television and radio broadcasting;
•
the allocation of a share not below 15% of total annual revenue to the production of
European works69;
•
the protection of persons with sensory impairments;
•
the exploitation and development of decentralised production centres;
•
the creation of publically useful interactive digital services.
In order to establish the cost for the supply of general public radio and television services,
covered by the proceeds of the licence fee70 and to ensure a transparent and responsible handling
of the public funds provided, the Code prescribes that the licensee firm draw up annual financial
statements with the revenue obtained from the licence fees and the costs incurred during the
previous solar year for the provision of the above listed services71 recorded in a separate set of
accounts. By the end of November of each year, the Ministry for Communications, with its
own Decree, will set the licence fee to be applied as of the 1st of January of the following year,
at a level that should allow the licensee company responsible for service provision to cover
the expected costs for the following year and fulfil the specific public broadcasting service
obligations assigned to it, said costs being inferred from the previous financial statements
presented, bearing in mind the programmed rate of inflation and the company’s technological
development requirements. The allocation of the licence fee revenue must be organised on a
territorial basis to ensure the economic independence of all national networks. The company
holding the licence for the supply of the public service is forbidden from using the income
received from the licence fee, either directly or indirectly, to finance activities not related to the
general public broadcasting service.
In the 2002 decision the Court reiterated the tax nature of the licence fee (earmarked taxation),
specifying that the general interest which underlies the provision of the public service requires
a form of funding based on the tax instrument.
In order to complete the overall framework regulating public support for radio and television
broadcasting sector, a mention must also be made of the reforms introduced to the V Chapter
of the Constitution (Law N. 3 of 2001) and, more specifically, the inclusion in the list of fields
subject to concurrent legislation (Art. 117, para. 3) of the “regulations on communication”;
a wording which, beyond the actual difficulty in providing a precise definition of its scope,
certainly includes the radio and television broadcasting sector.
Licence fee revenue
The trend of the income from licence fees (paid over to the Tax and Excise Office) reflects the
increase in the fee, which is annually adjusted to account for the rate of programmed inflation
(in recent years in the region of 1.4%). In 2009 it was increased from 196 euros to 197.5 euros,
raising the collected licence fees to 1.63 billion euros (see below).
The most recent adjustment for the year 2010 has set the licence fee at 107.5 euros. From 2002
the rate of growth has been 19%.
The Radio and Television Code expressly includes a mechanism to safeguard the company’s
economic stability, and protect the agent, by acknowledging that the public resources due to
RAI must cover the cost that it bears in order to fulfil its obligations in terms of public service.
69
Specific reference is made here to the investment obligations on drama programs and film productions
through the subsidiary RAI Cinema (see paraFig. 4.1).
70
As prescribed by the Royal Law by Decree of 21 February 1938, N. 246, converted into law on 4 July 1938,
and subsequent modifications.
71
RAI produces separate accounts on the basis of the framework approved by the Communications Regulatory Authority, charging or assigning costs on the basis of accounting principles which are consistently applied and
objectively justified while providing a clear definition of the analytical accounting principles on the basis of which
the accounts are held separately. Art. 47 of the Code.
218
Public investment in the cultural and telecommunications industry
This legal disposition, which is also mentioned in the Service Contract – the “operation’s
charter” which on the basis of national and European Community regulations, establishes
exactly the specific tasks that the Licensee must perform – has been, up to now, essentially
disregarded. In actual fact, if the principle of proportionality between costs and resources had
been complied with, the RAI, for the period 2005 – 2008 should have been able to use increased
revenue by over 1 billion euros.
Fig. 1: RAI licence fee trend, 2002-2010 (millions of euros)
1.700
Revenue from the licence fee
Annual license fee
1.650
1.603
1.600
1.474
1.500
1.483
1.491
106
1.382
110
107,5
109
105
100
99,6
99,6
99,6
95
97,1
1.350
115
104
1.432
1.450
1.300
1.648
1.567
1.550
1.400
1.630
93,8
90
1.250
1.200
85
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: IEM elaboration of RAI data. The 2010 revenue is estimated.
The imbalance between the public resources and the costs sustained by the Licensee to fulfill
its Public Service obligations, has produced a deficit which for the year 2008 (reported in the
latest separate accounts available) totals almost 550 million euros; this imbalance is reduced to
335 million euros following the allocation of the specific share of advertising revenue collected
through scheduling.
Comparisons with other European Countries underline how in Italy the licence fee is the lowest
(it should be recalled however that RAI is the public broadcaster that collects the highest level
of advertising resources compared with its corresponding public broadcasting agencies in
other countries).
Fig. 2: Licence fee revenue in Europe (2009) (euros)
311
300
263,5
250
241
224,3
215,7
191
160
150
148
116
107,5
Italy
200
France
350
100
UK
Ireland
Sweden
Germany
Finland
Austria
Switzerland
0
Norway
50
Source: IEM elaboration.
The income achieved through licence fee collection is very low if one considers the 16.5 million
potential clients. According to a recent study, the licence fee evasion rate in Italy is in the region
of 26/26.5% (the average European level is around 18%) of the total number of households
Public investment in the cultural and telecommunications industry
219
with a television, which means around 5.5 million licence fees and a loss of income of around
500 million euros72. In actual fact, the total figure for the evasion is even higher if we consider
the very high levels of evasion encountered in national and local public institutions, among the
political parties, banks and companies.
The proceeds of the licence fee in any case represent the main source of income for the public
service providing licensee, covering a share of its income which is always over 50%. In 2009
licence fee income accounted for the record share of 64.1% of the revenue due to the heavy fall
in advertising revenue, which dropped by 17% compared with 200873.
Fig. 3: Licence fee and advertising revenue trend (2002-2009)
3.000
Licence fee
Advertising
2.500
2.000
1.040
1.121
1.133
1.137
1.096
909
971
941
1.382
1.432
1.474
1.483
1.491
1.567
1.603
1.630
2002
2003
2004
2005
2006
2007
2008
2009
1.500
1.000
500
0
Source: IEM elaboration of RAI data.
4.1.3 RAI Contracts with the Public Administration
Among the other sources of revenue for the public company, besides licence fee and advertising,
there is also the revenue received by the parent company for Contracts with the Public
Administration for the provision of radio and television services in Italy (in the Regions with
linguistic minorities) and abroad74.
In 2008 the resources earmarked for these services were around 70 million, on the increase
compared to 2007 when the proceeds dropped to below 65 million (the worst figure since 2002)
due to the failure to renew the Contract for short wave radio broadcasting abroad.
Within RAI the task of developing and managing the Contracts with the institutions (Ministries,
Regions etc..) is assigned to the sales department for all that concerns the contractual side
and to the company’s institutional representation for the definition of the content of the
individual activities that need to be performed in return for an annual or long-term economic
72
Figures collected by the Statistics Department of the University of Florence. See Sole 24 Ore 25 March
2010. One should bear in mind that people over 75 with an income below 516 euros a month are exempt. To recover
a considerable share of the evaded licence fee a proposal has been put forward for many years now to collect the
licence fee as a quota tacked on to the electricity bill. A technical committee has been set up by the Ministry for
Economic Development to assess this proposal.
73
Advertising revenue has dropped from 1.096 billion euros to 909 million euros. The Fig. shows the two
main income items (licence fee and advertising) without taking into consideration the so called “other revenue”
which, over the two year period 2008-2009, has recorded a strong increase (+74.3%, thanks to the sale of pay-perview rights for the World Cup) rising from 238.6 million to 415.9 million, partly covering the drop in advertising
revenue.
74
Among the other revenues, in addition to the contracts with the Public Administration, the consolidated
turnover of the RAI group also includes income from commercial activities (RAI Trade), films and home video
(RAI Cinema and 01 Distribution), radio advertising, RAI SAT revenue, sale of archive material exploitation rights,
program production cost refunds and more besides. In this last generic heading (which in 2008 generated 56 million
euros of a total 404) are included further services of a different nature provided by the Parent company to public
institutions which it has not been possible to quantify and infer from the financial statement figures.
220
Public investment in the cultural and telecommunications industry
consideration.
RAI International (for the programming of services abroad and for linguistic minorities), RAI
Way (for technical support) and RAI Educational are subsidiaries or internal departments of
the public group responsible for implementing the Contracts agreed with the various bodies of
the Public Administration.
Fig. 4: Contract revenue (2002-2008)
90
80
78,6
82,5
82,9
77,7
73
70
64,7
69,1
60
50
40
30
20
10
0
2002
2003
2004
2005
2006
2007
2008
Source: IEM elaboration of data from RAI, MAE and the Prime Minister’s Office. Figures in millions of euros.
Among the more substantial of these Contracts there are the ones involving services for
linguistic minorities, which the public broadcaster agrees with the Department of Information
and Publishing in the Prime Minister’s Office. These contracts include terms and conditions
that are usually renegotiated every three years75.
The main provisions that have (belatedly) led to the implementation of what the Constitution
prescribed in 1948 for the safeguarding of linguistic minorities76, are contained in Law N. 482
published on 15 December 1999 and the subsequent implementation regulations contained in
the Prime Minister’s Decree N. 345 of 2 May 2001. Article 12 of the law states that in the contract
between the Ministry of Communications and the radio television service provision licensee
and in the ensuing service contract, there must be the assurance that linguistic minorities will
be safeguarded within the areas they inhabit.
The Regions interested can also draw up specific contracts for news broadcasts or programs
in the languages subject to protection, with the company providing the public radio and
television broadcasting service to be included in the regional radio and television broadcasting
schedule run by the same agency. Clearly the Regions can also sign similar contracts with local
broadcasters.
The protection of linguistic minorities within the mass communication system is assigned
to the Communications Regulatory Authority77, without prejudice to the prerogatives of the
Parliamentary Commission with regard to general policy indications and its supervisory role
over the entire broadcasting sector. It is therefore fully acknowledged that linguistic minorities
have a right to have radio and television broadcasts in their own language78.
75
For the year 2008 and the following years, the expense commitments are authorised with management
decrees.
76
Article 6 of the Constitution states that “The Republic protects with specific regulations all linguistic minorities”.
77
As prescribed by Law N.249 of 31 July 1997.
78
The regulations specifically require that the agency company, in addition to the management of the services granted in concession, must also perform the following services:
a)
ensure that the television broadcasting networks in bilingual border areas, as prescribed by the technical
plans approved by the competent Ministry, be suitable to retransmit programs for neighbouring foreign bodies;
b)
carry out the refurbishing and take over the management of third parties’ systems that may be assigned to
Public investment in the cultural and telecommunications industry
221
The Code of 2005, as has already been mentioned, has meant that RAI has had to “set up
a company for production, distribution and broadcasting of radio and television programs
abroad, designed to promote and enhance Italian language, culture and businesses.”, and is also
required to produce radio and television programs in German and Ladin for the self-governing
Province of Bolzano, in Ladin for the self-governing Province of Trento, in French for the selfgoverning Region of the Valle d’Aosta and in Slovenian for the self-governing Region of FriuliVenezia-Giulia.
On 3 December 2007, three Decrees were published by Prime Minister’s Office which approved
as many Contracts (still in force) with RAI for radio and television services79:
•
in French for the self-governing Region of Valle d’Aosta80;
•
in German and Ladin for the self-governing Province of Bolzano81;
•
in Slovenian for the self-governing Region of Friuli Venezia Giulia82.
Any variations in the number of hours of television broadcasting, or in the weekly scheduling
of said programs, must be agreed in advance between the parties. The broadcasts must have
informative, artistic and cultural content consistent with the particular needs of the areas
involved.
On the basis of the provisions of the Service Contract, the licensee is required to guarantee
an appropriate level of information to the communities that live abroad by providing suitable
programming through the offices of the NewCo RAI International and the Contracts entered
into with the Prime Minister’s Office83.
it, that exist in the area at the time this law came into force;
c)
annually produce television and radio programs, according to the instructions of the Council of Minister’s
Office and after sounding the opinion of the Parliamentary Commission regarding general policy and supervision
of radio and television services, specifically tailored for radio and television stations in foreign countries to broaden
the understanding and knowledge of the Italian language worldwide and carry out, with the Parliamentary Commission’s approval, special radio transmissions;
d)
to produce radio and television transmissions in German and Ladin languages in the Province of Bolzano,
in French for the Self-Governing Region of Valle d’Aosta and in Slovenian for the Self-governing Region of Friuli
Venezia Giulia.
79
Decree of 3 December 2007 containing the Approval of the 3 agreements, published in the Official Gazette
of the Italian Republic – General Part N. 123 of 27 May 2008.
80
In 2007 the sum of 2 million euros was allocated in return for which RAI undertook to continue production and broadcasting of radio and television transmissions in the French language for the self-governing Region
of Valle d’Aosta amounting to: 110 hours of radio transmission in the French language; and 78 hours of television
transmissions in the French language.
81
In 2007 the sum of 15.56 million euros was allocated, in return for which RAI undertook to continue the
production and broadcasting of radio and television programs in German and Ladin for the self-governing Province
of Bolzano amounting to 4,716 hours of radio broadcasts in German; 550 hours of television transmissions in German; 352 hours of radio transmission in Ladin; and 39 hours of television transmission in LadiN. The transmissions
in Ladin continue to be broadcast even in the Val di Fassa.
82
In 2007 6.62 million euros were allocated, in return for which RAI continued the production and broadcasting of television transmissions in the Slovenian language for the Slovenian speaking population and for those
of the Province of Trieste and Gorizia of the self-governing Region of Friuli-Venezia-Giulia amounting to: N. 208
hours of television transmissions in the Slovenian language, equivalent to 4 hours a week. RAI further undertook to
continue the production and broadcasting of radio transmissions in Italian and Slovenian pursuant to Law N. 308
of 1956 amounting to: 4,517 hours of radio transmissions in the Slovenian language; 1,667 hours of radio transmissions in the Italian language.
83
Article 9 of the 2007-2013 Service Contract (Television programming abroad) states that RAI must undertake the promotion and dissemination of the knowledge of the Italian language, culture and economy worldwide,
with the aim of ensuring an adequate level of information to Italian communities abroad on the developments
within Italian society as well as enabling Italian citizens resident abroad to have an adequate access to political information and communication, particularly during electoral and referendum campaigns. RAI further undertakes
to produce new forms of programming for abroad that might enable Italian culture, even of a regional nature, to be
brought to the attention of a broader international audience. In order to achieve these objectives, RAI is required
to present suitable television programming both in the context of the agreement reached with the Prime Minister’s
Office pursuant to law N. 103 of 14 April 1975, Art. 19 and 20 (New regulations on radio and television broadcasting
integrated by Law N. 112 of 3 May 2004, paraFig. 13) and other specific additional agreements.
222
Public investment in the cultural and telecommunications industry
In 2007 the new Contract for television, radio and multimedia programming abroad came into
operation84.
The “RAI International” contract concerns television, radio and digital or multimedia
programming, as well as the technological services, which RAI has at its disposal for the
production and broadcasting of the signal for RAI programming abroad, on a 24-hour basis, in
line with the objectives of the public radio and television service and the requests put forward
by the Prime Minister’s Office relative to the improvement of content and of the means of
fruition of the programming specifically designed to export the national economic system
abroad.
The new Contract envisages an increase of RAI’s editorial efforts, including the preparation
of an offer inspired by the concept of “quality” in the programming and distribution of the
radio-television signal thanks to the use of new broadcasting technologies. Furthermore, RAI
undertakes to:
•
ensure a broadening and enhancement of the cultural and news programming for abroad
(development of an “all news” channel alongside the more general channel);
•
broaden the audience of its international programming by fine tuning its offer according to
the different reference targets;
•
expand into Europe (and therefore to Italy) the satellite reception of RAI International;
•
develop a specific focus on the Mediterranean and the Balkan States;
•
use tools such as for example bilingual presentations or subtitling and dubbing to win over
the Italophile audience.
Another novelty concerns the quality verification procedures, with the setting up of a
Permanent Commission headed by the Head of the Information and Publishing Department
and including three members of the Prime Minister’s Office and four from RAI, as well as one
representative from the Ministry of Foreign Affairs85.
Art. 7 of the Contract details the sum that the Prime Minister’s Office must pay RAI for the
services included in the Contract at 35 million euros (30 million for 2007). The Contract lasts
as long as the Public Service Contract for general radio and television broadcasting entrusted
to RAI by current legislation (up until 6 May 2016), it being understood that the parties are
prepared to review the conditions and mode of service provision outlined in the Contract every
three years.
Within the context of the new contractual relationship, on 17 December 2008 a Memorandum
of Understanding was signed lasting three years between the Ministry for Foreign Affairs, RAI
and NewCo RAI International to “set in motion a strategic partnership which aims to define
the mode and areas of collaboration for an innovative and effective television/news/training
presence both for the national territory and abroad, with particular attention being paid to the
use of new technologies and digital media”.
In particular the collaboration between RAI and the Ministry concerned the configuration of
the platform for WebTV (a project developed by RAI International for the creation of a web
84
Decree of the Prime Minister’s Office of 3 August 2007 concerning “Approval of the agreement between
the Prime Minister’s Office – Information and Publishing Department and RAI – Radiotelevisione Italiana S.p.A.
for television, radio and multimedia services abroad (known as RAI International). Up until 31 December 2006
this subject-matter was governed by two separate Agreements (Agreement on special broadcasts for abroad, known
as RAI short wave and the Agreement concerning the transmission and diffusion of Italian language and culture
abroad of 30 July 1997, known as RAI International).
85
The Ministry of Foreign Affairs is responsible for monitoring the programming (reception and diffusion
of radio and television broadcasts on the RAI International channel) via the consular-diplomatic network and to
write up an annual report to certify the correct execution of the Contract, pointing out any new aspects with particular reference to the quality of the programs and scheduling in general, any improvements in the times of program
airing, and any increase in subtitled programs, the situation with news broadcasts, information programs and local
news bulletins, etc.
Public investment in the cultural and telecommunications industry
223
TV “Casa Italiana” (Italian home) for an estimated cost of approximately 2 million euros), as
well as the distribution on other digital and analogue platforms at RAI’s disposal in order to:
•
define the communication plans for Italian institutional initiatives, foreign policy and
international relations, with particular attention being paid to geoFig.ical areas and priority
issues;
•
set up initiatives for Italian communities abroad to provide them with information and
training (also intended to strengthen the ties between the latter and the Italians resident
abroad as part of the process of internationalisation of the Italian Regions), as well as
culture and entertainment, thus contributing to make the services offered by the Ministry
of Foreign Affairs and its diplomatic-consular network more well known and accessible to
citizens and users;
•
the promotion of Italian culture and language abroad, with particular attention being
paid to quality contents, through the use of existing television and film products and the
production of specific programs aimed at promoting Italy’s multi-faceted artistic and
cultural heritage as well as transmitting promotional didactic messages on the Italian
languages with the aid of computer technologies, the web and digitalisation;
•
support for “economic diplomacy”, viewed as a tool for the support of the country’s
national economic system to be achieved through economic and commercial promotional
initiatives in favour of Italy abroad and designed to attract foreign investment in Italy;
•
the promotion of Italian development co-operation initiatives, an essential component of
Italy’s foreign policy actions, through information and dissemination activities designed to
promote the humanitarian, social and economic aspects of said actions;
•
providing information on the activities conceived to protect Italy’s fellow countrymen
abroad in situations of serious danger, with the indication of the preventive and response
measures used by the Farnesina (Italy’s Foreign Office) along with any practical indications
when necessary;
•
training initiatives on communication issues for the benefit of the Ministry staff.
In order to implement the collaboration, each year the Ministry of Foreign Affairs and RAI will
agree on a program of activities and agree specific communication plans, in Italy and abroad,
with the indication of the economic cost of each initiative to be borne by the various Foreign
Ministry CDR’s (Centres of Responsibility).
The Department of Information and Publishing and the public broadcaster have entered into
further contractual agreements regarding other public services for specific fields.
At the end of 2009, the so called “Milleproroghe” (maxi law covering many different areas)
Decree has authorised the continuation of two Contracts86:
a)
A contract with RAI and the NewCo RAI International on measures designed to
maintain peace and the implementation of communication actions within the context of NATO’s
Strategic Communications in Afghanistan. The Decree has allocated financial resources of the
Prime Minister’s Office within the maximum limit of 660,000 euros.
b)
A contract with RAI for services in favour of RTV, the public broadcasting authority
of the San Marino Republic, first set up in 1991 with a 50% share of the company’s nominal
capital underwritten by Eras (San Marino Radiobroadcasting Authority) and the remaining
50% by RAI. The agreement was first signed in 1990 and subsequently ratified by the Italian
Ministry of Foreign Affairs and the Republic of San Marino. The previously mentioned Decree
has established that until the new collaboration agreement on the radio and television sector is
ratified by the Italian Republic and the Republic of San Marino, signed on 5 May 2008 (which
86
Legislative Decree N. 194 of 30 December 2009 “Extension of the deadlines included in legislative dispositions”. Art. 2 Deadline extensions for matters concerning communication, the reorganisation of institutions and
legal advertising.
224
Public investment in the cultural and telecommunications industry
establishes the need for a new contract lasting 5 years between the Department of Information
and Publishing and RAI, and sets the annual contribution to be paid out to RTV at 18.5
million) and in any case not beyond 31 December 2010, the Department for Information and
Publishing is authorised to guarantee the continuation of the supply of the services detailed in
the specific Agreement using the available financial resources of the Prime Minister’s Office
budget. For 2010 the San Marino RTV will benefit from a contribution of 3.1 million euros.
The new five-year agreement should come into operation in 2011 and it prescribes that the
Italian State, in addition to contributing to the “management continuity” through the RAI
share, should also make all RAI technologies for signal distribution within the San Marino
area both with terrestrial digital and satellite transmission available to RTV. Through its own
departments and its subsidiary companies RAI must also:
•
collaborate where possible, at no charge, in the development and production of television
programs aired on the San Marino RTV network;
•
allow the RTV broadcaster to exploit its own products and distribution rights, including
sports rights, for the purchase of films, television films and fictions (RAI Trade, RAI
Cinema, RAI Teche, RAI Corporation, RAI Sport and RAI International);
•
identify marketing strategies to develop and strengthen the presence of the television and
multimedia market of the San Marino broadcaster;
•
identify collaborations for advertising collection (Sipra, Società italiana pubblicità per
azioni) and the development of web projects (RAI Net) and Televideo (teletext services).
In the attachment to the contract RAI undertakes to facilitate collaboration with regional
branches, staff refresher courses and the purchase of equipment and materials for San Marino
RTV.
In order to complete the picture, a mention should also be made of a number of projects
produced in collaboration and/or under contract with the Ministry of Education, University and
Research which involves the internal RAI department RAI Educational in the conception and
production of a number of educational projectS started up at the beginning of the school year
designed for students and teachers and scheduled on the RAI Scuola (RAI School) dedicated
channel available through the terrestrial digital broadcasting system. Currently the contracts
concern the following projects for which it has not been possible to acquire any costing from
the Ministry87:
•
the “Divertilingue” project, which introduces an innovative and enjoyable way of learning
English and Italian in school through television and the Web;
•
“Explora Science Now”, a production designed to provide students, teachers and in general
citizens with the opportunity of improving their scientific-technological understanding;
•
“Fuoriclasse” is a bridge between education, orientation, training and the workplace. The
project was produced with the participation of the Ministry for Employment, ISFOL, the
Regions and the Provinces;
•
“In Italia”, is a pilot project for the dissemination of the basic tenets of the Italian language,
for the benefit of adults and young-adults who have only recently come to live in Italy;
•
“Medita”, an online Media Library of audiovisual products organised by subject matter and
available to teachers on demand via internet.
Overall in 2008 the Contracts agreed with the Public Administration that have been monitored
87
Given the educational nature of the projects and the public service obligations of the licensee in this context, the services provided by RAI Educational through RAI Scuola are mainly provided at no charge. According to
the Contract agreed on 7 August 2003 for example, RAI undertook to ensure, free of charge, the supply and installation of satellite systems at the school premises distributed throughout the nation, on the basis of a three-year plan
devised by the Ministry.
Public investment in the cultural and telecommunications industry
225
and are summed up below envisage total revenues of roughy 65 million euros, of which 24 to
be spent for services in Regions with linguistic minorities.
Fig. 5: Main revenues from Contracts (2008)
35,0
RAI International (abroad)
15,6
Trento and Bolzano provinces
6,7
Friuli Venezia Giulia
3,1
RTV San Marino
RAI International/Web TV
2,0
Valle d'Aosta
2,0
0,7
NATO (RAI International)
0
10
20
30
40
Source: IEM elaboration of data from RAI, MAE and the Prime Minister’s Office. Figures in millions of euros.
4.1.4 Subsidies granted by the Communications Department of the Ministry for
Economic Development
The current Ministry for Economic Development – Communications Department awards
non-returnable grants to the local television broadcasting sector88 on the basis of the provisions
of Law N. 448/9889. The resources are dispensed to the broadcasters that perform information
activities on the basis of annual rankings organised on a regional basis by Corecom (Regional
Communication Committees) according to objective parameters prescribed by specific
regulations90.
The two assessment elements concern on the one hand the average turnover for the last three
years and, on the other, the size of the staff (journalists and other personnel) engaged in the
performance of the broadcasting activity.
The grant sum annually included in the year’s Budget is allocated by the Ministry according
to the client catchment areas of the various Regions and self-governing Provinces of Trento
and Bolzano as a share of the turnover achieved in the previous three-year period by the
broadcasters operating in the same Region or self-governing Province who have applied for the
support measures91. The sum allocated to each Region or self-governing Province is assigned to
the broadcasters entitled to receive the grant, for 1/5th in equal shares and for 4/5ths according
to the pre-established ranking92.
For broadcasters with legal and operating headquarters in the Regions of Campania, Puglia,
Basilicata, Calabria, Sicily and Sardinia a fixed points mark-up applies depending on the size
of the turnover.
88
At 31 December 2008 there were 376 companies managing 421 local television stations. In recent years
mergers and bankruptcies have caused the local television sector to shrink. In 2005 there were 469 commercial
broadcasters. To these one needs to add the number of community broadcasters which, according to the most recent
estimate (2005), was 115 (and even in this case there have been a number of foreclosures over the course of the years)
Source: FRT – Federation of Radio and Television.
89
Law N. 448 of 23 December 1998, concerning “Public financing measures for the stabilization and development” and subsequent modifications. In particular Article 45, paraFig. 3 of the law (and subsequent modifications
and integrations) states that the Ministry must set an annual allocatioN.
90
Ministerial Decree of 5 November 2004, N. 292.
91
The regulations further establish that in the allocation one must pay particular attention to the Regions
and self-governing Provinces included in economically depressed areas and with high levels of unemployment.
92
The subjects must present a request in order to obtain the subsidy, and if they manage more than one
activity even unconnected to television, they must state that they have set up a separate accounting system.
226
Public investment in the cultural and telecommunications industry
Every broadcaster can forward a request:
1)
for the Region or Self-governing Province where the main operating headquarters for
the distribution of the television station is located;
2)
for any other Regions or self-governing Provinces where that same broadcaster reaches
a share of the population that is not below 70 percent of residents in the territory of the Region
or self-governing Province covered93.
In both instances the broadcaster, unless it is a Community broadcasting entity, must necessarily
produce a share of its turnover in the Region of reference, on penalty of not being included
in the ranking, and as far as point 2) alone is concerned, it must have at least one full time
employee in the area covered.
The Antitrust Agency has recently (September 2010) voiced a few misgivings on the application
of the Ministerial Decree 292/2004, which contains the regulations that governs the benefits
to local TV stations as prescribed by Law 488. According to the Authority, the criteria are
significantly in favour of those companies that already produce significant turnover and have
a considerable number of employees. Among the corrective measures to be introduced to
make the regulations more balanced and competitive, the Antitrust has suggested that the
ranking also be based on the time allocated to information programs and the renovation of
radio broadcasting systems. Among the criteria for exclusion from the ranking one should also
include the failure to present a certification of National Insurance payment fulfilments, which
is currently only required when applying for the grants. Some criticism has also been levelled
against the allocation of 4/5ths of the total only to those TV stations that account for 37% of
the ranking, a mechanism that is severely penalising to the positions that just fail to achieve this
ranking and which can consequently only access 20% of the total subsidy fund94.
Over the years, the funds have been gradually increased in the various Finance Acts, and have
gradually grown in importance in terms of their impact on the financial sustainability of the
companies, contributing to a significant increase in employment, particularly in the journalistic
professions.
The positive trend has however ground to a halt in 2009, a year when a severe cutback in public
subsides was recorded (-41%), with total allocations shrinking from the 162 million approx.
of the previous year (highest ever reached thanks to an integration in August of 2010) to little
more than 95 million, a sum below the indications reported in the Budget for 201095.
The funds for the year 2010, thanks to the refinancing of 50 million guaranteed by the same
Budget, should stand at around 130 million, to be added to the 80 million euros allocated in
the 2007 Budget96.
The weight of public subsidies has gradually increased in percentage terms and now accounts
for 26% of the total overall revenue, with a marked increase of the impact in the last 3 years
considered (2006 – 2008). In 2008 the total revenue, amounting to 621 million euros, was equal
to 7.3% of the entire television market.
The remaining share of the resources is almost entirely made up of advertising revenue which,
according to FRT estimates in 2008 amounted to 9.8% of the total advertising for the sector.
93
In this instance the broadcaster must declare the capital city of the Province, the Provinces, and the Municipalities served within its television catchment area, specifying whether coverage is total or partial and, in the
latter case indicating the areas, of the Province capital, of the Province or of the Municipality, served.
94
The Authority, more specifically, proposes that 4/5ths be allocated proportionally to all the TV stations in
the rankings and the remaining 20% set aside for the lowest positions.
95
Law N. 191 of 23/12/2009 which had reinstated the original allocation of approximately 150 million euros
per year (of which 85% for the TV sector and the remaining 15% for the radio sector).
96
Law N. 296 of 27/12/2006.
Public investment in the cultural and telecommunications industry
227
Fig. 6: Subsidies to local TV stations on the basis of L. 448/98 (1999-2010)
200,0
180,0
161,8
160,0
140,0
120,0
106,5
100,0
85,8
2005
2006
77,2
80,0
56,1
60,0
95,4
65,1
42,3
40,0
20,0
90,3
20,7
12,4
0,0
1999
2000
2001
2002
2003
2004
2007
2008
2009
Source: IEM elaboration of FRT data. Figures in millions of euros.
If one takes a look at the distribution of subsidies at the regional level, in 2009 Lombardy is
the Region that received the highest volume of public resources (12.3 million) ahead of Puglia
(12.1) and Veneto (11.9).
The regulations governing the allocation of benefits to local radio stations are based on a code
issued with a Ministerial Decree in 2002, as prescribed by Law 448 of 200197.
The total annual grant was apportioned with three-twelfths for the commercial radio stations
and three-twelfths to the community radio stations.
Fig. 7: % incidence of subsidies to local TV stations against total revenue (1999-2008)
Contributions
700.000
Revenues
% incidence
647.272
583.618
600.000
621.379
575.732
26,0
509.004
500.000
448.854
400.000
300.000
335.203
279.061
18,5
14,5
25,0
20,0
399.930
14,0
15,2
15,0
15,5
13,3
11,7
200.000
100.000
362.538
30,0
10,0
5,0
6,2
4,4
0
0,0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: IEM elaboration of FRT data. Figures in thousands of euros.
The broadcasters whose main operating headquarters were located in the Regions of Campania,
Basilicata, Sicily, Puglia, Calabria and Sardinia were allocated a mark-up of the subsidy, both in
relation to the share assigned to commercial radio stations and the share assigned to community
radio stations, of 15%. The remaining six-twelfths of the annual grant were assigned on the basis
of a predetermined ranking bearing in mind the specific conditions indicated in the code, as a
proportion of the score obtained by each broadcaster. The elements taken into consideration
in order to determine the ranking are the average turnover produced by the broadcaster over
the previous two-year period and the staff employed in the performance of their broadcasting
activities at the time of presentation of the contribution request.
Even the radio stations must take steps to set up a separate accounting system and they must
97
Legislative Decree N. 225 of 1/10/2002. The regulation adopts the dispositions contained in article 52,
paraFig. 18 of the Law N. 448 of 28 December 2001 (2002 Finance Act).
228
Public investment in the cultural and telecommunications industry
draw up a financial statement plan which clearly details income and expenses related to the radio
broadcasting activities. The subsidies are allocated by the Department of Communications of
the Ministry for Economic Development at a national level and within the threshold of the
annual budget and assigned to the ranked broadcasters according to the proportional share
based on their score, within six months following their grant request presentation.
The trend for the allocations over the course of the years shows a very considerable growth,
increasing from the 6.2 million of 2002 to 21.8 million of 2009, with a particularly marked rise
in 2007, a year when resources doubled compared to the previous year.
The emergency financial measures introduced by the government at the end of May 201098,
which aimed to reduce the deficit/GDP ratio as required by the European Community
institutions, will produce negative effects even on the funds earmarked as subsidies for local
broadcasters (radio and TV) pursuant to law 448/98.
Fig. 8: Subsidies to local television stations pursuant to L. 448/98 by Region (2008-2009)
12,3
Lombardy
Puglia
15,8
11,9
Veneto
10,7
Sicily
9,9
Campania
6,5
Piedmont
5,8
Lazio
5,6
Emilia Romagna
4,8
Tuscany
3,2
Sardinia
2,8
Calabria
Liguria
2,6
Friuli Venezia Giulia
2,1
2,6
Abruzzo
1,2
1,4
Umbria
1,2
1,6
15,4
14,3
14,3
8,5
7,9
7,5
6,3
4,3
3,5
3,8
1,0
1,3
Marche
0,9
1,2
Molise
Trento
17,0
12,1
0,6
0,8
Bolzano
0,1
0,2
Basilicata
0,1
0,1
Valle d'Aosta
0,0
0,1
2009
Milioni 0
5
10
15
2008
20
Source: IEM elaboration of FRT data.
98
Legislative Decree N. 78 of 31 May 2010 “urgent measures for financial stabilization and economic competitiveness”. The austerity law establishes that as of the year 2011, there should be an across-the-board cut of 10%
of the financial endowment for discretionary expenses of all Ministries.
Public investment in the cultural and telecommunications industry
229
Fig. 9: Subsidies to local radio stations pursuant to Law 448/2001 (2002-2009)
25,0
21,6
21,8
2008
2009
19,3
20,0
15,0
10,0
7,2
7,7
2003
2004
6,2
9,0
9,9
5,0
0,0
2002
2005
2006
2007
Source: IEM elaboration of MSE data - Communications Department. Figures in thousands of euros.
4.1.5 Subsidies granted by the Department of Information and Publishing in the
Prime Minister’s Office
Besides the subsidies envisaged by Law 448 of 1998, local broadcasters receive further public
funding at the national level thanks to the benefits granted on an annual basis by the Department
of Information and Publishing in the Prime Minister’s Office and regulated by complex rules
which have been modified and updated over the course of the years.
Table 1: Grants and fee reductions for radio and television stations
Beneficiaries
Regulatory Framework
Subsidies for radio stations
Law 25 February 1987, N. 67, Art. 11
Law 7 August 1990, N. 250, Arts. 4,7, 8
Subsidies for local television stations
Law 6 August 1990, N. 223, Art. 23, paraFig. 3
Law 27 October 1993 N.422, Art. 7
Subsidies for theme channels authorised for satellite
Law 3 May 2004, N. 112, Art. 7, paraFig. 13
broadcasting (political party broadcasting organs)
Source: Department of Information and Publishing – Prime Minister’s Office.
In particular the joint provisions of Laws 223/1990 (Law Mammi, subsequently modified by
Law 422/2003) and Law 250/1990, prescribe that benefits be assigned to those broadcasters
that transmit self-produced information programs on political, religious, social, trade union or
cultural events on a daily basis, in the hours between 07.00 and 23.00 for at least one hour99. The
grants have over the years contributed to the creation of news desks within the local stations
thus consolidating the professional competence of the resources involved and contributing to
their capacity to provide information about the surrounding area.
The grants prescribed for the entitled radio and television broadcasting stations amount to:
•
60% refunds (80% up to 2005) of the cost of subscriptions taken out with press and
information agencies;
99
The measures supporting radio broadcasting are governed by Article 4, 7, 8 of Law N. 450 of 7 August
1990 and Article 7 of the Law N. 422 of 27 October 1993 (Regulations governing grants to radio and television
companies). In particular Art. 7 has been introduced to modify paraFig. 3 of Art.23 of the Law N. 223 of 6 August
1990 (Code for the public and private radio and television system). The currently enforceable texts reads: “To those
licensees local television broadcasting, or those subjects authorised for local television broadcasting… (…) that have
registered the television channel with the competent court and broadcast, on a daily basis, between the hours of
07.00 and 23.00 for at least one hour, self-produced information programs on political, religious, economic, social,
trade union or cultural events, are entitled to the benefits detailed in paraFig. 1 of Article 11 of the Law N. 67 of 25
February 1987, as modified by Article 7 of Law N. 250 of 7 August 1990, as well as those pursuant to Articles 28, 29
and 30 of the same Law N. 416 of 5 August 1981 and subsequent changes and integrations.
230
Public investment in the cultural and telecommunications industry
•
40% electricity and energy bill reductions (50% up to 2005) as well as costs for satellite
links (rental and subscription fees for satellite broadcasting systems); in these cases the
reductions were delivered through the Providers of the particular services according to a
specific procedure100;
•
50% fee reductions for all telephone costs;
•
Subsidies for radio and television companies that were also house organs of political parties
represented in Parliament; these contributions amount to 70% of the average costs posted
in the company’s financial statements for the last two years101.
The overall trend for the subsidies in the period taken into consideration (2003-2007) shows
strong swings. In five years the resources have increased from 13 to 21.5 million with a growth
of 65%.
In 2005 the overall subsidy total reached its peak at approximately 27.5 million euros.
Fig. 10: Subsidies to local broadcasters pursuant to Laws 223/1990 and 250/1990 (2003-2007)
30.000.000
TV
Radio
Tariff reductions (radio-TV)
25.000.000
6.815.038
20.000.000
17.473.095
15.000.000
10.000.000
12.847.628
12.242.208
13.378.474
9.100.565
5.000.000
10.044.958
3.865.846
4.636.859
2003
2004
7.305.037
8.609.015
2006
2007
0
2005
Source: IEM elaboration of data provided by the Department of Information and Publishing – Prime Minister’s Office.
Proportionally speaking, the radio broadcasting companies have obtained more conspicuous
subsidies (approximately 65% on average) compared to the television broadcasters thanks to
the greater incidence over time of the contributions to so-called political house organs (Radio
Radicale, Informazione Libera) and to the fact that only since 2005 have theme satellite channels
begun to be granted benefits.
If one considers the subsidies paid out in 2008 (relative to 2007) one notices a very strong degree
of concentration of the distribution of resources allocated; out of a total of approximately 21.4
million euros, 75% (16.1 million) went to 7 broadcasters which represented political parties (of
which 5 were radio stations and 2 television stations) with an average subsidy of 2.3 million
euros per company; the remaining 25% was divided up between 300 radio and television
stations, which received an average subsidy of 19 thousand euros.
If one then looks at the trend by subsidy type one cannot fail to notice that whereas up to 2005
the increase of the refunds for press and information agency fees and political house organs
was fairly equivalent, over the last two years examined there has been a further increase of the
100
Once the right to fee reductions has been acknowledged, the order is sent to the Managers, who, having
carried out their calculations on the items for which they can obtain a subsidy, then proceed to refund the companies by 40% (until 2005 it was 50%) of the electricity and satellite service costs incurred and then forward the
requests to obtain the refunds of the sums advanced to the companies to the Prime Minister’s Office –Publishing and
Information Department.
101
The access regulations for subsidies for channels with these specifications are found in Law N. 112 of 3
May 2004.
Public investment in the cultural and telecommunications industry
231
second type (over 16 million euros in 2007) at the expense of the former, which has suffered a
sharp contraction (5.3 million euros in 2007). The fee reductions for telephone and electrical
energy services are a different matter, as it has not been possible to evaluate the data for the
period under observation, with the exception of 2004, a year in which the total concessions
totalled 6.8 million euros.
Fig. 11: Subsidies for local broadcasters pursuant to Laws 223/1990 and 250/1990 by subsidy
type (2003-2007)
18
Press agencies
Political organs / thematic satellite channels
16
Tariff reductions
16,1
14,9
14
12,6
13,5
12
9,9
10
8
8,3
8,1
6,8
6,1
6
Million
4
5,3
4,6
2
0
0,0
0,0
2003
2004
2005
0,0
2006
0,0
2007
Source: IEM elaboration of Data provided by the Department of Information and Publishing - Prime Minister’s Office.
The current Government has decided to take decisive action in an attempt to rationalise the
subsidy allocation system and reduce the costs borne by the State. The three-year plan of 2008
has on the one hand led to a reduction of the various subsidy funds, and on the other it has
taken steps to introduce a new code designed to help simplify the procedures for fund allocation
and ensure that the refunds and benefits actually reward those who truly deserve them, thus
guaranteeing that these State support measures actually promote information pluralism, which
is the underlying principle that the contribution system is supposed to attempt to achieve102.
The final draft of the code is currently being examined by Parliament and is intended to reduce
the overall direct subsidies to publishing from the current 120 million euros to 87. The detailed
subsidy cuts for radio and television broadcasts foreseen by Law 250 of 1990 should entail a
drop from the current 25 to 12 million euros. The full application of these new dispositions is
expected to be in force by 2012103.
The only item that between 2011 and 2012 should show a slight increase is the one relative to
“expenses for press and information services including costs due to the implementation of the
contracts and cooperation programs in the field of information”.
In the 2010 Budget, the Parliament, when converting the legislative decree termed
“Milleproroghe” (maxi law covering many different areas)104 into law, initially decided to
suppress the subsidy system for publishing (not just for radio and television), by abolishing the
subjective right (essentially the democratic right for publishing companies to receive public
support as a mainstay of the concept of freedom of speech) and cutting back all subsidies not
102
For further details on the complex system of subsidies to publishing, refer to the website of the Department of Publishing Information and to the special program that discusses the issue on the communication rights
portal www.medialaw.it
103
It should be remembered that for 2008 and 2009 the support system is guaranteed by what is called the
additional Robin Tax, which has enabled a considerable supplement to be added to the funds.
104
Decree 194/2009.
232
Public investment in the cultural and telecommunications industry
included in the State budget for this purpose, with the resources dispensed on a proportional
basis to the entitled parties if the funds were not enough to go round105.
The ensuing Trade Association protests led to an amendment being presented at the end of
February 2010 reinstating the direct subsidies (to a maximum of 100%)106 for the current year
on the basis of the ‘subjective right’ for all house organs and broadcasting stations managed by
political parties, non-profit organisations and cooperatives, while awaiting the much awaited
organic review of the sector which has been in the pipeline for years.
The reinstated subsidies do not however include the refunds to local radio stations of 80% for
costs incurred for subscriptions to press agencies or electricity bills. The phone refunds paid
out by the Ministry for Economic Development have, on the other hand, been maintained.
Within the previously mentioned ‘Milleproroghe’ Decree a further fund was authorised totalling
9.9 million euros for the years 2010 and 2011 to ensure the continuity of the broadcasting
service for parliamentary sessions currently provided by the production centre managed by
Radio Radicale, as prescribed by the special Contract between the Ministry for Economic
Development and the Production Centre first reached in 1994107, and renewed every three years
at a cost of 5 million euros per year (10 billion lire)108.
4.1.6 Refunds for free self-managed messages during electoral campaigns
By 31 January of each year, the Ministry for Communications in concert with the Ministry of
the Economy, issues a decree for the definition and allocation of the funds to be paid out to
local broadcasters to the Regions and self-governing Provinces pursuant to Law N. 28 of 22
February 2000 as modified by Law 313/2003109.
The law prescribes a refund for local radio and television stations that are prepared to transmit
free self-managed messages during electoral or referendum campaigns and allocates the funds
available to the Regions and self-governing Provinces of Trento and Bolzano as a proportion
of the number of citizens registered in the electoral lists of each Region and self-governing
Province. The radio stations are allocated one-third of the entire overall yearly fund.
On a more general note, in order to ensure equal treatment and impartiality for all political
subjects, the law details the rules for access to the media for political communication as well
105
The abolition of the company rights was one of the new elements of the Regulations established in the Law
of 2008.
106
The amounts cannot in any case be higher than those owed for 2008.
107
The Contract required the licensee, for each house, to transmit at least 60% of the overall annual number of hours of hearings held in the two houses of parliament between 8.00 and 21.00. These broadcasts cannot be
interrupted, preceded or followed, for at least thirty minutes before their beginning and after their end by political
announcements or advertisements. The Contract is renewable until the public service licensee has not completed
the dedicated radio broadcasting service to cover parliamentary operations as prescribed by Article 24, paraFig. 1 of
law N. 223 of 6 August 1990.
Law N. 224 of 11 July 1998. Radio transmission of parliamentary hearings and assistance to publishing
108
(Art.1 paraFig. 1): “in order to guarantee the continuity of the radio broadcasting service of parliamentary hearings,
and confirming the Contract instrument to be stipulated following a public call for tenders, the criteria of which
shall be established in the framework of the approval of the general reform of the communications systems, as a
temporary measure the Contract between the Ministry of Communications and the Centro di Produzione S.p.a,
underwritten pursuant to Article 9, paraFig. 1 of the Legislative Decree N. 602 of 28 October 1994, and approved
with a decree of the Ministry of Post and Telecommunications on 21 November 1994, renewed as of 21 November
1997 for a further three-year period, with a revaluation of Lire 11,500,000,000.00, sum reported in paraFig. 4 of said
Article 9. The collective labour agreements, including, for the editors, the journalist’s national labour agreements,
apply to the employees of the Centro di Produzione S.p.a until the expiry of the contract.
109
“Provisions for equal access to media during electoral and referendum campaigns and for political communication; Official Gazette of the Italian Republic N. 43 of 22 February 2000”. The law introduces a series of rules,
prescriptions and relative penalties in matters of political communication via radio and television (both local and
national), political electoral messages on daily newspapers and magazines, opinion polls and institutional communications. Article 4 governs radio political communication and self-managed messages on television and radio
during electoral campaigns. ParaFig. 5 details the refund mechanism. The law has been subject to changes and
modifications with the Law N. 313 of 6 November 2003.
Public investment in the cultural and telecommunications industry
233
as access to the media during campaigns for elections to the European Parliament, political,
regional and administrative elections and for all referendums.
During the period that elapses between the date the candidates stand for election and the end
of the electoral campaign, the local radio and television stations can transmit self-managed
messages free-of -charge for the presentation, without debate, of political lists and programs,
according to the prescriptions established by the supervisory board and the Authority for
Communications.
The refund is paid out within ninety days of the end of the electoral operations, for the
spaces actually used and jointly certified by the broadcaster and the political party, within the
constraints of the available resources, by the Region which can rely on the supervision of the
regional committee for Communications (Corecom), which is responsible for the preliminary
agreements and the management of the spaces offered by the broadcasting stations.
The Communications Regulatory Authority (AGCOM) with its own decision, generally
approved 45 days prior to the voting operations for each electoral ballot, issues dispositions
concerning political communication and equal access to the media. Within the fifth day of the
watchdog’s measures becoming effective, the local radio and television stations that broadcast
the self-managed messages must:
•
publically announce their intention by means of a communiqué that must be broadcast at
least once during prime time. In the statement they must report the maximum number of
slots, the technical standards and the delivery deadlines for the supply of the self-produced
materials;
•
Send the statement indicated above to the cognizant Corecom, even by fax.
From the sixth day after this, until the candidates stand for election the political subjects
interested in broadcasting the messages inform the broadcasters and the Corecoms of their
requests, the length of the messages, the person responsible for the electoral body and their
specific political position. The messages must be long enough to allow a reasoned presentation
of a program or political opinion, with slots lasting between 1 and 3 minutes for television
broadcasts and between 30 and 90 seconds for radio broadcasts.
The positioning of the messages within the individual political message ‘container’ programs
for the first day of programming is decided by a drawing of lots, which must be held at the
Corecom offices. For the subsequent days, the same positioning is established according to
rotation criteria whereby each message shifts by one position within each program unit, in
order to respect the equality of presence within each set broadcast slot.
The Corecoms also take action when called to investigate on violations of the equal treatment
regulations, by performing specific duties which are better detailed in the regulations issued by
AGCOM in the communications detailing the implementation of the code regulating political
communication and fair access to the media, which are issued for each election110.
The Corecoms examine the requests and, bearing in mind the funds available, draw up a table
which indicates the allocation of self-managed political messages among the broadcasters111.
110
These communications reiterate the role of Corecoms in:
-
the supervision over the correct and uniform application of current legislation, the self-regulation of local broadcasters as well as the instructions dictated, for the general public radio and television service licensee by
the Parliamentary Commission for general policies and supervision of radio and television services in relation to
regional transmissions (TGR);
-
the certification of any infringements, by transferring the reports and any supporting elements and detailing the consequent proposals to the Authority in order that it may take the actions for which it has jurisdiction.
111
The table is forwarded, with a note, to each broadcaster and to the transparency and communication Service of the Prime Minister’s office which requires the Regional Planning Councillor’s Office to enter the State sums
allocated into the accounts. A copy of the note is also sent to the Ministry of Communications. Once the electoral
campaign is over, the radio and television stations present a self-certification of the actual messages broadcast during radio and television spots. The Corecom carries out the necessary checks, forwards the self-certification to the
transparency and communication Service which arranges for the payment of the refunds by means of a director’s
order.
234
Public investment in the cultural and telecommunications industry
Unless other regulations intervene, AGCOM approves the territorial Corecom’s proposal on
the basis of which it sets the total number of free messages to be distributed among the political
subjects that have requested them, considering the available resources allocated by decree by
the Ministry of Communications with the approval of the Ministry of Economy and Finance
and the distribution by Region of the sum available for the year.
Fig. 12: Subsidies to local broadcasters pursuant to Law 28/2000 (2000-2007)
12
TV
Radio
10
8
3,62
3,62
3,62
6
4
1,78
6,71
6,71
6,71
Million
2
1,11
1,11
1,11
1,11
2,22
2,22
2,22
2,22
2004
2005
2006
2007
3,55
0
2000
2001
2002
2003
Source: IEM elaboration of MSE data – Communications department.
The trend for these allocations shows a considerable drop over the period 2000-2007 under
examination. If during the first three-year period the overall refunds regularly went over the 10
million euro mark, as of 2003 there was a first significant drop, while in recent years the sum
allocated is in the region of 3.3 million euros, one third of the expense compared to 2000.
Table 2: Subsidies for local broadcasters by Region pursuant to Law 28/2000 (2000-2007)
REGIONS
Lombardy
2007
2006
2005
2004
2003
2002
508.559
510.299
508.410
510.122
819.142
1.589.983
2001
1.594.095
2000
1.585.240
Campania
325.306
326.582
324.460
323.433
517.247
1.000.781
997.721
996.725
Sicily
324.000
302.964
301.718
301.129
482.682
932.956
930.308
943.983
Lazio
309.235
308.312
307.000
307.025
485.662
942.278
936.617
937.342
Veneto
260.341
261.446
260.275
260.046
415.602
805.406
805.848
802.748
Piedmont
242.075
243.660
243.745
244.725
394.033
765.795
770.102
766.379
Emilia Romagna
228.431
229.577
229.180
230.066
369.801
717.203
719.674
714.156
Puglia
205.358
235.794
234.520
234.294
375.150
725.503
723.808
720.705
Tuscany
200.517
201.753
201.515
202.489
325.777
632.757
635.441
633.297
Calabria
121.000
110.600
122.774
121.302
192.435
371.514
370.310
380.272
Sardinia
99.271
97.399
96.759
96.702
154.998
299.938
299.609
297.415
Liguria
93.007
93.814
93.900
94.434
152.331
297.835
300.336
299.782
Marche
85.721
86.092
85.560
85.397
136.405
264.085
264.256
263.443
Abruzzo
82.517
80.500
79.000
79.377
126.434
244.294
242.139
247.043
Friuli Ven Giulia
72.441
73.130
72.965
72.981
116.869
226.864
227.501
228.385
Umbria
47.448
47.806
47.724
47.917
76.882
149.197
149.380
148.826
Basilicata
42.175
36.914
36.840
36.391
57.882
111.886
111.297
111.408
Bolzano prov.
26.555
26.550
26.406
0
41.061
79.335
79.279
83.354
Trento prov.
26.555
26.598
26.511
52.677
43.206
83.479
83.553
79.157
Molise
21.739
22.175
22.000
21.755
34.488
66.610
66.356
67.938
6.885
6.905
6.876
6.881
11.050
21.439
21.506
21.537
Valle D'Aosta
Total
3.331.144 3.330.876 3.330.143 3.331.142 5.331.141 10.331.140 10.331.139 10.331.138
Note: Figures in euros. Source: IEM elaboration of MSE data – Communications Department.
Public investment in the cultural and telecommunications industry
235
The allocation of resources proposed by the Corecoms at the regional level and subsequently
approved by the Ministry, reflects the tendency found at the national level with drops
proportional to the reduction in funds available.
By analysing the refund distribution for 2007 we see that Lombardy is the Region that has been
granted the most conspicuous refunds (little over than 500,000 euros), equivalent to 15% of the
overall funds available. Three more regions (Campania, Sicily and Lazio) have received over
300,000. A second group which includes Piedmont, Emilia Romagna, Puglia and Tuscany each
received over 200,000 euros. The broadcasters of all the other Regions (with the exception of
Calabria) are all below 100,000 euros.
600.000
508.559
Fig. 13: Subsidies for local broadcaster by Region pursuant to Law 28/2000 (2007)
21.739
Molise
6.885
26.555
Aut. Prov. of Trento
Valle D'Aosta
26.555
Aut. Prov. of Bolzano
72.441
Friuli Ven Giulia
42.175
82.517
Abruzzo
Basilicata
85.721
Marche
47.448
93.007
Liguria
Umbria
99.271
Calabria
Emilia Romagna
Piedmont
Veneto
Lazio
0
Lombardy
100.000
Sardinia
200.517
Tuscany
200.000
121.000
205.358
Puglia
228.431
242.075
300.000
260.341
324.000
Sicily
309.235
325.306
400.000
Campania
500.000
Source: IEM elaboration of MSE data – Communications Department.
4.1.7 Contributions for digital terrestrial television
The transition to digital terrestrial television is not just a technological step forward, it also
has considerable economic and social repercussions, which means that all the players involved
must take on their share of responsibility.
The State and a few Regions (with different tools and methods) have introduced a series
of support measures for companies who are investing in the updating of their systems and
expanding their offer, as well as for citizens to help them face the technical and economic
difficulties encountered with the technological development.
We can distinguish between two fronts on which the State and the Regions have implemented
various support measures over the years:
•
the first is of an institutional nature and concerns governance measures addressing either
technological (planning) or informational (communication) issues;
•
the second pertains to organisation and economic support on behalf of the National and
local Public Administration in favour of operators and clients.
236
Public investment in the cultural and telecommunications industry
Fig. 14: Public actions supporting the transition to digital terrestrial transmission
Governance
Planning
Communication
Support
Companies
Users
State
contributions
Assistance
Regional funds
Incentives
Source: IEM for IRER.
The first support measures backing the transition to digital terrestrial transmission date back
to the Finance Act of 2004, when the schedule for the final analogue switch off had been
established as taking place in 2008 (but was subsequently delayed). The law set aside a fund
of 110 million euros mainly earmarked as a bonus (110 euros per consumer) for the purchase
of the decoders in the first digital Regions (Sardinia and Valle d’Aosta), to which a further
16 million euros of investment by RAI was to go to cover the signal for the first two Regions
involved. The 2005 Budget set aside a similar sum but for individual contributions of 70 euros.
These first two budgets provided contributions for the purchase of interactive decoders that
could receive the free-to-air digital terrestrial signal and without costs to the client and the
content provider. This measure was considered necessary in order to support the move to the
digital transmission technology, which was seen as an obligation at European Community
level, by providing a direct contribution to the citizens for the purchase of a device designed to
receive the digital terrestrial signal for free. The limitation was justified by the fact that satellite
television would have meant additional costs to the consumer for the purchase of the satellite
dish and to subscribe to the service. Following the complaint filed by a number of television
operators (SKY and Europa 7) the two measures for 2004-2005 have been the object of a
Community infraction procedure because the above-mentioned subsidy was considered State
aid as it violated the technological neutrality principle and created a competitive distortion in
favour of the digital terrestrial broadcasters (seeing as the incentives were not applicable to
decoders for satellite platforms).
The Italian State however, as early as September 2005 had informed the Commission of
its intention to suspend the payment of the subsidy on the basis of the abovementioned
requirements and, in the 2006 Finance Act, further technological neutrality requirements were
introduced.
On this basis and with the possibility of receiving the contribution for the purchase of decoders
for digital terrestrial, cable and free satellite broadcasts, the European Commission approved
the measure with its decision N. 270 of 2006 . The subsequent decision to postpone the date of
the transition and fall in step with the deadline set at Community level (31 December 2012) has
Public investment in the cultural and telecommunications industry
237
meant that the funds were suspended until the end of 2006112.
The Budget of 2007113, as a way of facilitating the transition to digital terrestrial transmission
and broaden the base of the new technology throughout the nation, set up a “Fund for the
transition to digital technology” with the Ministry of Technology , providing it with 40 million
euros for each of the years 2007, 2008 and 2009 for the implementation of the following actions:
•
stimulation of the production of quality content using digital technology;
•
fostering the transition to digital terrestrial by those responsible for guaranteeing coverage
of the overall service;
•
enhancing the design, production and broadcasting of interactive services of public utility
to be distributed on the digital television platform;
•
assisting households in need either economically or socially with the transition to digital
technology;
•
enhancing the awareness of digital technologies among the population.
With a subsequent Decree, the Ministry of Communications114, decided to earmark a good deal
of the 2007 resources of the abovementioned Fund for digital transition (roughly 33 million
euros) to RAI, to implement the project to expand digital services which involved work on 104
installations, the infrastructural updating of approximately 45 sites while bearing in mind the
obligations included in the Service Contract115.
For the year 2008, the Ministry of Communications issued a Legislative Decree116 to apply the
instructions of the 2008 Finance Act, which were to set aside 54.8 million euros (a sum greater
than the 40 million expected) to foster the digital transition process in the Italian Regions
involved. The decree specifically earmarked:
•
35,000,000 for RAI system updating;
•
10,300,000 for initiatives in “all digital” areas (firstly Sardinia)
•
6,500,000 for planning and design activities by the Bordoni Foundation and for
communication;
•
3,000,000 for service activities (call centres, sales outlet promotion, letters to citizens,
information support) entrusted to the Italian Postal Service.
For the year 2009 the Ministry of Economic Development assigned resources totalling 30.9
million euros to the “all digital” areas involved in the first switch-off phase (Valle d’Aosta,
Western Piedmont, Lazio, Campania, the Provinces of Trento and Bolzano) to ensure the
development of terrestrial digital services. The funds were allocated as follows117:
112
In accordance with the Commission’s decision on State aid relative to the subsidy for the purchase of digital decoders granted in the 2004-2005 budget and following the request forwarded on 17 November by the Director
General for Competition, on 4 February 2009, the RTI company has complied with said request by paying over to
the Italian State a sum of over 6 million euros.
113
Law N. 296 of 23 December 2006 “Dispositions on the formation of the annual and long-term State accounts” Art. 1 paraFig. 927 (Identification of the actions to facilitate the transition to digital television).
114
Ministerial Decree of 2 August 2007: “Support for initiatives of the general public service licensee for radio
and television broadcasting RAI – Radiotelevisione italiana S.p.A. in favour of the transition to digital”. Previously,
in August of 2006, a National “Italia Digitale” Committee had been set up for the purpose of defining the necessary
activities for the national switch-off.
115
Article 23 paraFig. 2: “(…) RAI assures it is able to provide actual coverage of the multiplex connections
(…) not below 75% of national population within six months of this Contract becoming effective and not below 85%
of the national population within the first twelve months of this contract becoming effective”; Article 27: “in order to
ensure the fulfilment of the obligations for universal service, during the time this Contract is effective, the Ministry
undertakes to support, with adequate measures and within the constraints of available resources, the investments
that RAI should deem necessary in order perform the transition to digital”.
116
Ministerial decree of 24 January 2008.
117
In order to increase the fund for the transition to digital terrestrial transmission set up by the Ministry
for Economic Development, the Finance and Production Activities Commission approved an amendment to the
“incentive decrees” that envisages the use of 20% of the greater revenue generated in 2009 owing to future assign-
238
Public investment in the cultural and telecommunications industry
•
7.5 million to pay contributions to households for the purchase or rental of decoders;
•
4.0 million to back Poste Italiane Spa initiatives (call centres and service centres);
•
5.5 million to support the initiatives of the Fondazione Ugo Bordoni relative to technical,
scientific and operational support activities;
•
3.5 million to RAI for system updating in order to expand the areas of terrestrial digital
transmission coverage;
•
10.4 million assigned to local broadcasters to support awareness campaigns on digital
technology among the population.
As far as the first item of the above list of actions is concerned, the support granted to viewers
at a national level has consisted in the possibility of benefiting from a State contribution (50
euros) for the purchase of an interactive digital decoder. The benefit is restricted to citizens
who are up-to-date with their RAI licence fee payments and have annual incomes of 10,000
euros or below and are aged 65 or over118. It should be pointed out that the bonus instrument,
as it had been conceived, did not turn out to be particularly effective. Proof of this is provided
by the figures that report a limited recourse to this incentive by potential beneficiaries. Overall
during the course of 2009, the number of decoders sold taking advantage of the State subsidy
totalled approximately 20% of the potential customer base119. This is not surprising as it there
seems to be an element of contradictoriness in trying to convince the weaker sectors of society
to purchase an interactive decoder, which is in any case more expensive than the traditional
zapper.
During the course of the first meeting (held on 16 December 2009) among the task forces
of Piedmont, Lombardy, Veneto, Friuli Venezia Giulia, Emilia Romagna and Liguria, the
Government announced that it had set aside funds for 53.5 million euros to communicate the
transition to digital services to citizens in 2010, funds that were to be allocated as follows:
•
12 million spent on communication campaigns (television adverts) on local television
stations in the areas affected by the 2010 switch-off120;
•
8 million assigned to the Bordoni Foundation for switch-off support activities (support for
the communication campaign to inform the citizens/customers);
•
7 million assigned to the Postal Service for call centre management;
•
7 million spent on communications through the press.
The remaining 19.3 million euros will fund subsidies for decoder purchase (50 euros for those
aged over 65 and with an annual income of less than 10 thousand euros and who hold up to
date licence fee subscription payments).
The regional switch-off grants
Only a few Regions have taken steps to provide technical assistance services to their citizens and
economic resources to support local broadcasting stations involved in the complex transition
stage and requiring heavy investments both in terms of system updating (replacement and/or
ment of usage rights for radio frequencies or numeration resources. It is estimated that this could bring between
200 and 250 million euros of new revenue of which approx. 40/50 million euros (equal to approximately 20%) to be
earmarked for the increase of the abovementioned fund (Source: FRT).
118
At 15 October 2009, 210 million euros had been paid out in favour of 926 thousand households who have
purchased 2.2 million interactive decoders using the bonus for low income sections of the population.
119
For example in Campania, in 2009, 30 thousand decoders were sold (through 308 certified dealers) among
the 142 thousand of those potentially entitled, according to the Tax and Excise Agency.
120
Resource distribution was based on the Corecom rankings and the coverage achieved by each broadcasting unit. The sums awarded by Region to the broadcast stations are listed below: 3.7 million in Lombardy, 1.2 in
Piedmont, 2.2 in Emilia Romagna, 830 thousand in Friuli V.G. and finally 1.9 in Liguria, totaling approx. 10 million
euros (the Decree has not cleared up exactly how and to whom the remaining resources shall be assigned).
Public investment in the cultural and telecommunications industry
239
adaptation) and improvement/diversification of the service offer.
The package of measures implemented feature a number of different characteristics and scopes.
Table 3: Regional support for the transition to DTT
Regione
Campania
Tipologia di sostegno
Durata
Importo
Contributions for technological updating of
systems (POR ERDF)
2009-2010
10.000.000
Citizen awareness campaign
Piedmont
2009
800.000
Memorandum of Understanding with the Ministry
of Communication and Adgtv (households and
public utility services)
2007-2008
5.000.000
Transition support for local broadcasting stations
(regional law)
2009 -2011
Call for tenders for investment support
Communication campaign for citizens
2010
8.600.000 (1/3 non
returnable)
Campagna di comunicazione ai cittadini
2009
1.000.000
Lazio
POR (Regional Operating Program) audiovisual
sector grant tender
2009-2010
40.000.000*
Valle D’Aosta
Updating of call centres, work stations, onsite
technical assistance, information campaigns
2009
3.850.000
Notes: *Only partly earmarked for local broadcasters. Source: IEM elaboration of Regional data and from various
sources.
The self-governing Region of Valle d’Aosta, in addition to benefiting (like all the other “all
digital” Regions) from the funding available from the National digital fund, also allocated
3,580,00 euros for digital terrestrial transmission, which was distributed as follows:
•
2.3 million for updating workstations;
•
1.25 million for call centres and free onsite technical assistance (roughly 20 thousand
technical call outs expected, covering 50% of the population);
•
30,000 euros for an information campaign channelled through the press close to switchoff time (as an integration to the funds allocated at the National level by the Ministry of
Communications)121.
In Lazio the region opted for a call for tenders (launched in July 2009) to grant support for
the audiovisual sector (not exclusively for local broadcasters engaged in the digital transition)
involving the Regional Operational Program ERDF 2007-2013 managed by the Lazio
Development Agency. The overall resources available stood at 39.8 million euros (initially the
budget available was 16.8 million, and was later increased by a further 23 million) and they
were earmarked for investment programs of sums equal to or greater than 50,000 euros for
individual companies or equal or greater than 100,000 euro for consortia. The sectors entitled
to access these funds were very broad and diversified: film, video and television program
production, post-production and distribution; film screening; publishing of sound recordings,
sound recording studios; radio transmissions; television programming and broadcasting as
well as land, mobile and satellite telecommunications. There were two types of action involved:
a)
Industrialisation of film and documentary heritage;
b)
Strategic investment actions and programs designed to improve the competitive edge
121
Other sources (including Key4biz), quoting statements by the Regional President, report that the overall
investment involved for the transition to digital terrestrial transmission amounted to 11.5 million euros, of which
600,000 used to organise information and communication events and to provide assistance to citizens. The updating, dismantling and replacement of the stations was carried out by the Regional Administration in the context of
a broader action of relocation and restoration of existing infrastructures as prescribed by the Regional Law of 4
November 2005.
240
Public investment in the cultural and telecommunications industry
of the Local Audiovisual Production System122.
The resources made available by the Campania Region were also fairly extensive, seeing as
thanks to the substantial contribution provided by the EU Structural funds, it set aside 10
million euros (maximum overall sum) to be paid out as subsidies to “facilitate the required
technological updating of the local TV systems123.
In detail, the maximum subsidy grantable for each local television station was of 200,000 euros,
therefore within the threshold of the “de minimis” aid regime, as prescribed by EC regulation
1998/2006124.
A further decree approved the call for tenders for small and medium size local television
broadcasting companies funded under the ERDF Campania Regional Operational Program
2007-2013 to facilitate the transition of the television transmissions from the analogue to the
digital terrestrial transmission system125.
The subsidies were granted for the following activities:
•
Design and works supervision, consultancy, technical, economic and financial feasibility
studies, marketing and other general costs up to a maximum of 15% of the total of eligible
expenses foreseen by the program;
•
purchase of brand new machinery, tools and equipment, essential to carry out the project;
•
purchase of patents, software, programs, information and telecommunication services,
know- how and licence rights;
•
construction and/or updating of essential systems for project realisation;
•
information supports and e-business services.
A further 800,000 euros from the Ministry of Economic Development (see above) were
allocated by the same Region for the customer communication campaign to be aired during
the switch-over period by means of announcements broadcast on local television stations. The
Region added a further 600,000 euros to train new professionals capable of operating on the
new digital platforms.
In Piedmont, the first significant support measure was introduced following the signature of a
joint memorandum of understanding between the Ministry of Communication and the DGTV
Association on 1 December 2007126. The agreement, among its various measures, included the
State-Region co-financing for the following actions to be implemented as of 2008:
1. implementation of the most suitable initiatives to support economically or socially needy
households to make the transition to digital systems using the funds allocated in the 2007
Budget (see above), which totalled 11 million euros in two years starting from 2008, of
which 10 million charged to the State and 10 million to the Piedmont Region. To this
end the Ministry for Communications and the Piedmont Region, jointly established the
122
The Trade Associations have expressed doubts concerning the real possibility of local television stations
interested in the transition from analog to digital being able to participate and access the resources of the call for
tenders.
123
Decision of the Regional Council N. 1240 of 15 July 2009.
124
Every law that grants financial aid or support must be notified and authorised by the European Commission as established by the European regulations on State Aid. An exception to this rule is granted for aid which
is authorised by means of specific exempting European Union regulations termed de minimis aid. These are small
financial aid packets and facilitations, the size of which is considered irrelevant in terms of its impact on market
competitiveness. The States can therefore pay out this aid to businesses of any size, under the de minimis regime,
without notification obligations, as provided for in the conditions currently in force according to the EC Commission regulations N. 1998/2006. For the years 2009 and 2010 only the European Commission has raised the maximum threshold for sums allocated under this regime from 200,000 to 500,000 euros.
125
Management Decree N. 244 of 29 July 2009. The call for tenders was launched to implement the operational objective 5-2 – Activity sub B) of the ERDF POR.
126
Memorandum of Understanding concerning the final transition to digital terrestrial television (switch
off) in the territory of the Piedmont Region.
Public investment in the cultural and telecommunications industry
241
criteria identifying the categories which would benefit from said initiatives;
2. the Ministry of Communications, bearing in mind the needs of the Piedmont Region,
undertook to facilitate and develop the best initiatives for the expansion of digital
technology, with particular focus being placed on infrastructural development of marginal
areas of the Piedmont territory, in the context of the implementation of the technological
transition project promoted by RAI and complying with the Ministry of Communications
decree of 2 August 2007;
3. development of the planning, introduction and broadcasting of public utility services to
be transmitted on the digital television platform, with the involvement of broadcasters for
the transmission and Regional instrumental institutions for the development of programs
appropriate to the Region’s needs as well as research and innovation activities supporting
the transition to digital television totalling 5 million euros over two years beginning in
2008, of which 4 million allocated by the Piedmont Region and 1 million by the Ministry.
After repeated appeals from Trade Associations, the Regional Law N.26 was approved on 26
October 2009 (Actions promoting institutional information and communication via radio,
television, cinema and information technology systems). The law aimed on the one hand
to provide an organic code which might regulate the “integrated communication system”,
favouring the creation and growth of new forms of communication and information, and
on the other it was meant to support the local radio and television broadcasting system
during the current transition stage to digital terrestrial transmission.
As far as the measures introduced specifically for the benefit of radio and television broadcasters
(Chapter III) the following objectives were established:
1. to primarily provide assistance with the transition from analogue to digital transmission,
technological convergence and the accessibility of editorial products in a multichannel
environment;
2. to promote projects designed to increase employment for young people and women,
initiatives designed to foster a European dimension for local news and reporting, and the
planning and creation of news and services for the visually and hearing impaired;
3. to support the successful introduction of radio and television transmission systems via
the Internet (IPTV and web radio), owing to their impact on proximity communication
systems, particularly in the field of social services, health and emergency communications;
4. to encourage the widespread introduction of systems based on the principle of sharing of
cultural content and knowledge without jeopardising intellectual property rights;
5. to favour forms of editorial joint ventures through agreements, consortia or other forms of
association and understandings, in order to enable companies to jointly share broadcasting
systems, company logistic management structures, data transmission for one’s own
purposes or for third parties, editorial structures, content production and distribution
methods;
6. to support the construction of regionally based broadcast networks, that can be activated
for occasional events of particular impact which require a very widespread distribution
of signals and messages throughout the region, both in order to promote events of great
import as well as for social prevention and defence operations;
7. to promote the distribution of new kinds of digital reception systems and advanced
decoders by stimulating their use by a broader public;
8. to promote quality editorial products on local information in magazines, on Piedmont
radio and television stations and online newspapers;
9. to help fund subscriptions with press agencies that provide national, regional or at least
inter-provincial coverage, to ensure a continuous flow of news to the editorial desks of the
local radio and television networks and online newspapers;
242
Public investment in the cultural and telecommunications industry
10. to promote the planning and production of new news and communication program
formats on a regional basis, ensuring that they can be enjoyed in a multichannel mode;
11. to assist with the introduction of editorial platforms and systems that enable archiving,
indexing and sharing of informative multimedia content in order to ensure their cultural
and commercial exploitation;
12. promote the production and distribution of radio and television news bulletins at local
level;
13. promote and support the production of programs specifically designed for children and for
young audiences, including local information products.
In order to implement these measures the Regions can rely on a series of tools which include:
1. agreements and contracts with telecommunication companies and with the company
responsible for providing the general public radio broadcasting service;
2. concessions, service offers and payments for subsidies to be charged to capital or interest
accounts;
3. the concession of subsidiary guarantees to back financing and financial leasing operations;
4. the availability of suitable transmission platforms;
5. financing for training and refresher courses;
6. prize giving initiatives for young people, scholarships and work experience opportunities
aiming to improve the quality standards, the conception and production of new information
and communication formats;
7. scholarship and research aiming to provide editorial platforms and interconnection
software and provide useful data on communication flows and market trends.
The resources allocated by the Region for the sector for the three-year period 2009-2012 total
approximately 2.5 million euros of which:
1. 500,000 for expenditure in 2009, most of which was assigned to solving the problem of
the lack of RAI signal reception in certain mountain areas (65 municipalities for a total
of 25,000 households are still “blacked out”), by improving the relay systems not included
among those managed by RAI or receive ministerial support. The regional funds particularly
affected fifty or so relay systems;
2. 1 million a year investment costs in capital account for the two subsequent years to help
with the digital transition in Eastern Piedmont, expected to take place in Autumn of 2010127.
On 30 November the local Piedmont television stations also underwrote a Memorandum
of Understanding with the Region in order to establish how it intends to support the digital
transition. The memorandum revolves around three main actions:
1. a communication awareness campaign aimed at the citizens, to be aired by the entire
spectrum of Piedmont television networks by March 2010. The funds for this action total
1 million euros, to be subdivided among the broadcasters according to a criteria (already
implemented by the Ministry) that allocates 50% on the basis of three different company
size ratings and the rest according to the Corecom ranking;
2. stipulation of an agreement between the Region, the local banking system, the ABI (Italian
Banking Association) and the underwriting syndicates, enabling broadcasters to access
credit lines “for cash” or short term loans with the Regional guarantee of up to 80% of the
sum granted; the companies must be reliable but the operation must be possible even in the
presence of previously granted credit lines;
127
Article 18 of the Law states that the current expenditure funds for 2009 and the investment expenditure
funds for 2010 be primarily earmarked to facilitate the transition to digital terrestrial transmission on behalf of
regional broadcasters and to guarantee, even for mountain communities, the service in fringe areas.
Public investment in the cultural and telecommunications industry
243
3. the presentation of a call for tenders for the transition to digital transmission with a
measure specifically tailored for local television stations, on the basis of which they will
be granted subsidies for a number of different investments (both tangible and intangible)
that broadcasters should undertake or have already begun to undertake for things such as
hardware but particularly for intangible articles, which it is much harder to find financing
for, such as consultancy on technological innovation, know-how, development projects,
retraining of personnel and company organisation. The allocated budget is 4 million euros
and the sums that each broadcaster may access vary between 150,000 to 500,000 euros,
depending on the size of the company (as defined by the 3 size categories established by
Corecom). A 1/3 share of this fund will be non-returnable, while the remaining 2/3 will
have to returned in five years without interest128.
The memorandum was subsequently approved by the Piedmont Regional Council on 19
January 2010 and thanks to the use of European Community funds (ERDF) the financing
involved totals 8.6 million euros.
4.2 Newspaper Industry
Public support for the newspaper and magazine industry in Italy began in 1935 with the
institution of the “Ente Nazionale Cellulosa e Carta” (National Pulp and Paper Agency,) which
allocated subsidises to the newspaper industry for the purchasing, and therefore the protection,
of Italian paper, through offsetting the price of acquisition. Tariff incentives (for telephone and
postal services) were introduced with the Law 482 of 1949. The integration of the price of paper
was confirmed by the Law 168 of 1956, while the 1971 Law 1063 introduced extraordinary
contributions to be assigned to the industry in an inverse proportion to the quantity of paper
used and made provision for types of credit facilities. These conditions were further extended,
along with obligations for companies to operate a transparent system plus an increase in the
kinds of beneficiaries (press agencies, magazines) eligible for the subsidies, occurred with
the Law 172 of 1975129, which provided for the institution of a national press Register and a
Committee appointed to assess the applications for subsidies.
Law 416 of 1981 replaced the generalised subsidies with more targeted provisions for the
industry, through both direct measures (grants) and indirect ones (tariff incentives), with an
attempt to push companies to free themselves from State aid, stimulating them to invest and
grow. The measures were originally anticipated to be in force for five years, with the goal of
removing barriers for companies entering the market, leaving room for the best initiatives to
continue on their own. Subsequent interventions (beginning with Law 939 of 1982 and the
Supreme Court rulings that recognised the receivers of the grants had a “perfect subjective
right”, substantially making the grants130 “automatic”) made the system of State aid “permanent”
and practically detached from the possibility of stimulating companies to invest and freeing
themselves from “external” support like that of public intervention.
Law 62 of 2001, subsequently put the “publishing product” instead of the “publishing company”
as the object of the regulations, underlining the special nature of the service as an “information
asset” of public interest131, already expressed in Art. 21 of the Constitution and by various
sentences of the Constitutional Court. More specifically, the Constitutional Court underlined
the necessity to guarantee “the maximum of external pluralism, to satisfy, through a plurality
of competing voices, citizens’ rights to information132”.
128
The non-returnable share has subsequently been increased. The publication of the call for tenders is expected to take place in June 2010.
129
Cf. Maria Romana Allegri, La disciplina della stampa, available online at http://www.comunicazione.
uniroma1.it/materiali/19.40.58_Slide%20su%20stampa.pdf [last access: 13 June 2010].
130
Cf. Beppe Lopez, La casta dei giornali, Stampa Alternativa – Rai Eri, Viterbo-Rome 2007.
131
Sentence of the Constitutional Court 24 May 1977, N. 94.
132
Constitutional Court, sentence N. 826 of 1988 and N. 420 of 1994, cited in Survey 35 by the Italian Competition Authority (see below).
244
Public investment in the cultural and telecommunications industry
Law 62 also introduced a fund for soft loans, in the attempt to favour investment and increase
the proportion of indirect contributions compared to direct ones. In defining the “publishing
product” it also considered the diffusion of information via electronic communication networks,
in the attempt to adapt legislation to the technological evolution and the use of information on
the Internet (a modality, however, in which the distinction between professional information,
with the status of a company and obligations regarding registration, and user-generated
information tends to be rather grey).
Mention should also be made of the 2001 reform of Chapter V of the Italian Constitution
introducing a form of devolution, which put communication amongst the subjects of joint
jurisdiction between the State and the Regional authorities. This may prefigure a situation
in which regional policy compensates for the contraction of funds allocated by central
administration, with the possibility of creating a more incentive-based system.
In general, the forms of intervention may be defined as follows:
•
direct contributions to favour newspapers and magazines;
•
indirect contributions, that is tax and credit incentives and the reduction of tariffs for
certain services (telecommunications and postal delivery – a typology that also concerns
the book publishing industry).
Most of the direct contributions are provided for by Law 250 of 1990, which defined and
restricted the beneficiaries of such contributions. It generally concerns the grants that cover
up to 60% of the balance sheet liabilities, in favour of newspapers run by political parties
and movements, daily newspapers and magazines printed by cooperatives of journalists or
by companies that depend on non-profit organisations like cooperatives, foundations and
charities, newspapers in other languages printed in border regions, or printed and distributed
abroad. The contributions are quantifiable in a fixed part in proportion to costs (generally
30%) and a variable part based on the number of copies printed133. Regarding the requisites for
access to the contributions, it must be mentioned that the percentage of proceeds derived from
advertising must not exceed 30% (in some cases 40%) of total proceeds.
In the years leading up to 2010, when the funds were significantly cut, the most significant
indirect contributions were in terms of special tariffs for the postal charges for delivering
publishing products under subscription (Law 46 of 2004). The Italian Post Office, Poste Italiane
applies a special rates for publishers and the State pays Poste Italiane the difference between
this tariff and the normal one.
Other incentives concern reductions on charges for telecommunication services (up to 50%),
the reduction of VAT to 4%, tax credits for the purchase of paper and interest credit facilities
for investment in technology, including production restructuring, technological upgrading,
distribution and training projects.
Grant aid to the publishing industry is managed by the Department of Information and
Publishing within the Prime Minister’s Office, which publishes the balance sheet containing the
various interventions. The Prime Minister’s Office also manages some interventions in favour
of public broadcaster RAI (linked to public service activities abroad), local radio and television
stations, as well as institutional communication activities, broadcasting of Italian news abroad
and funds for unemployed journalists.
2010 saw an increase in parliamentary bills and corrections of regulations governing support
for the publishing industry – a need that had already been on the agenda in the previous
parliamentary term – combining with the government’s need to introduce austerity measures
and spending cutbacks. It will only be possible to analyse the final result and the practical
impact on companies and the market at the end of this reorganisation process. Reforms
133
At the time of the conclusion of this study, the Council of Ministers still has to pass the bill ruling for the
reorganisation of the criteria for the allocation of grant aid, which links the percentage of copies sold out of the total
number distributed (and no longer the total number of copies printed).
Public investment in the cultural and telecommunications industry
245
include the abolition (and the subsequent re-introduction, with a one-off partial supplement)
of funds for special postal tariffs, the reorganisation of the requisites for access to direct grant
aid (including calculating the copies distributed instead of copies printed), but, above all, the
change, following the Decree N. 112 of 25 June 2008 (Art. 44), from the “subjective right” to
accessing funds (essentially the democratic right for publishing companies to receive public
support as a mainstay of the concept of freedom of speech) to the capping of resources in the
budget allocating grant aid, irrespective of the requirements of the publishers and the proquota division of the resources available. The subjective right has been included and abolished
many times, and, finally, guaranteed until the 2009 fiscal year. Art. 44 provided deregulation
rulings reorganise the whole sector though by August 2010 it had still not been approved.
The absence of an underlying systematic structure appears to be the characteristic trait of
public intervention to support the publishing industry, as the Italian Competition Authority
highlighted in its investigation into publishing companies: “The first consideration that
arises from the review of the different types of public support for the publishing sector is the
heterogeneity of the criteria and modalities for the disbursement of grant aid, which makes it
difficult to identify an underlying systematic structure aimed at guaranteeing pluralism. The
current system appears to be the result of a progressive stratification of measures, with goals
that are not always convergent, based on ambiguous attribution and quantification parameters.
In addition to this, some measures have been affected in a discontinuous way, making longterm planning of publishing companies’ activities difficult134”.
Table 1: Direct grant aid per typology of beneficiary, 2004-2008
Beneficiary
Law /year –
Article, paraFig.
2008
2007
2006
2005
2004
Political parties and movements
250/90-3.10
26,19
29,91
28,79
27,52
26,69
Political organs (cooperatives
before 30-11-2001)
388-153
11,75
16,96
nd
25,23
29,81
Newspapers printed by journalist
cooperatives
250/90-3.2
46,14
50,64
44,45
39,33
31,81
Newspapers printed by companies
controlled by cooperatives,
foundations and charities
250/90-3.2bis
42,32
48,58
43,89
48,11
38,09
Newspapers in other languages –
in border regions
250/90-3.2ter
5,37
5,36
3,93
5,41
5,33
Newspapers printed and
distributed abroad
250/90-3.2ter
8,33
8,74
9,30
8,38
8,16
Magazines published by
cooperatives of journalists
250/90-3.2quater
11,69
10,84
11,22
nd
9,61
Magazines published by
companies controlled by
cooperatives, foundations and
charities
250/90-3.3
9,23
8,30
5,90
6,85
3,67
Italian newspapers printed and
distributed abroad
416/81-26
nd
nd
nd
nd
1,45
Publications printed in Italy and
distributed abroad
416/81-26
nd
nd
nd
nd
0,62
Italian daily newspapers
electronically transmitted and
then printed outside the EU
62/01-3
nd
nd
nd
nd
2,07
Magazine publishing for the blind
Decree-Law
542/96-8
nd
nd
nd
nd
0,47
Consumers’ associations
Decree 218/99
nd
nd
nd
nd
0,50
161,02
179,33
147,48
160,83
158,28
Total (on a non-comparable basis)
Note: figures in millions of euros. Source: IEM elaboration of DIE-PdCM data.
At the same time, there does not seem to be an effective system in place to monitor and evaluate
134
246
Cf. the Italian Competition Authority, Survey 35, Editoria quotidiana, periodica e multimediale, 2007.
Public investment in the cultural and telecommunications industry
interventions, not only regarding the economic effectiveness of the measures, but especially
in regard to the effect on citizens in terms of access to information, quality of the informative
services used and, lastly, enhanced collective wellbeing.
It is not, therefore, easy to determine with precision the amount of public intervention in the
publishing sector. Over the last few years the Department of Information and Publishing at the
Prime Minister’s Office has published detailed reports of the sums of direct grant aid given to
every newspaper. The data available for 2008 show, for the main types of direct intervention,
161 million euros of disbursed grant aid, 18 million less compared to the previous year. Daily
newspapers published by journalist cooperatives obtained 46 million, slightly more than the
newspapers published by companies controlled by non-profit organisations (like cooperatives,
foundations and charities), which were given 42 million euros. Approximately 38 million went
to political organs (as opposed to more than 56 million in 2004).
To have a broader picture, the balance sheet forecasts of the Prime Minister’s Office offer the
list of the interventions per category of expenditure, in a less detailed way in respect to direct
grant aid (aggregated in budget item 466 “grant aid to publishers of daily newspapers and
magazines”). The allocations for this item, between 2003 and 2007, increased from 186 to 214
million euros (peaking at 247 million in 2006). For the 2008 tax year the expenditure forecasts
were 140 million, dropping to 50 million in 2009 and then rising to 170 million euros for 2010.
The item registering the greatest expense, however, is that of the special postal tariffs: in 2003 it
amounted to 346 million euros (273 million in budget line 471 and 73 million in item 472) in
payments. In 2007 it was 243.7 million. In 2010 the initial allocation of funds was slightly more
than 50 million, subsequently increased by a further 30 million euros for certain non-profit
publishers.
In any event, the figures differ from those issued by the Italian Post Office, Poste Italiane, under
the category “proceeds from publishing industry tariff compensation”, which recorded 220
million euros for 2009 (and 247 million for 2008, nevertheless a lower figure than previous
years).
Table 2: Special postal tariffs, comparison of sources, 2004-2009
Sources
2009
2008
2007
2006
2005
2004
PM’s Office – accrued expenses (balanced
forecasts)
45,4
149,4
161,2
67,7
234,4
308,3
PM’s Office – cash disbursements (balanced
forecasts)
nd
nd
243,7
182,5
234,4
308,3
Poste Italiane – proceeds from publishing
compensation
220,0
247,0
265,0
241,0
281,7
266,8
Note: figures in millions of euros . Source: IEM elaboration of data from DIP-PM’s Office and Poste Italiane.
Table 3: Items of expenditure of the balance sheet forecast of the PM’s Office –DIP, 2004-2010
Balance sheet forecast for year
2010
Forecast
Initial
Accounting of data
Accrued/
cash
Year of reference for the data
2010
2010
2009
Initial
Initial
Accrued
Accrued
2009
2008
2007
2006
2005
2004
balanced
assestate
assestate
assestate
assestate
Cash
cassa
cassa
cassa
cassa
2008
2007
2006
2005
2004
2003
140,00
213,99
246,96
173,56
158,86
186,15
Budget
Item of expenditure
line
Current expenses – Interventions
466
Contributions to
newspaper and magazine
publishing companies
170,00
50,00
Public investment in the cultural and telecommunications industry
247
467
Contributions in loans
to publishing companies
debt extinction 31-12-90
468
-
-
-
-
-
6,30
15,88
22,61
Reduction in electricity
and telecommunication
and satellite service
tariffs
4,00
4,06
4,31
13,43
10,98
18,99
20,86
17,28
469
Magazines for the blind
1,00
1,00
1,00
0,49
0,98
0,47
0,47
0,47
471
Reimbursement
for special postal
tariffs (companies
on the register of
communications
operators (ROC) +
publishing houses)
9,00
1,00
105,00
243,69
182,49
234,35
308,31
273,17
472
Contributions for postal
expenses non-profit
assoc. and org.
50,80
44,45
44,45
0,00
-
-
0,00
73,02
473
Contribution to the
foreign press association
0,01
0,01
0,01
0,01
0,01
0,01
0,01
0,01
559
Unemployment and
training fund for
journalists
0,00
0,00
0,00
3,52
6,17
10,95
0,98
6,65
479
Italian Agencies
dissemination of news
and information abroad
7,85
7,85
7,50
10,03
8,66
9,51
9,51
12,49
560
Press services,
cooperation agreements
in the field of
information
40,00
41,00
34,50
51,00
55,51
41,69
40,28
49,80
561
Experimental
multimedia programme
for communication,
training and publishing
market
0,00
0,41
0,50
0,00
-
-
-
-
563
Social communication
or that in the public
interest
15,00
10,00
10,00
28,33
11,86
12,20
10,55
11,39
556
Communication projects
funded by EU
0,00
0,00
0,00
0,09
0,10
-
-
-
566
Awards and subsidies for
writers, publishers and
bookshop owners
0,21
0,21
0,21
0,00
0,21
0,21
0,42
0,41
Capital account expenditure – Investment
935
Loan contributions to
publishing companies,
debt extinction 31-12-90
0,00
6,30
6,30
22,06
6,30
0,00
0,00
0,00
936
Interest account
contributions,
development funding for
sector
0,00
0,00
0,00
34,46
15,00
13,08
22,42
43,41
938
Fund for soft loans for
publishing companies
0,00
17,10
5,00
70,02
58,36
12,00
79,94
64,94
297,87
183,39
358,78
691,12
603,59
533,32
668,49
761,80
Total interventions and investment
in publishing sector
Note: figures in millions of euros. Source: IEM elaboration of PM Office’s balance sheet forecast.
248
Public investment in the cultural and telecommunications industry
4.3 Cinema and live entertainment
4.3.1. Introduction
Any attempt to plot the evolution over the medium and long-term of the national public
funding system for entertainment activities (both live and reproduced) and identify the main
tendencies in terms of resource allocation among the various areas in order to provide a
systematic representation, will necessarily be a rather complex and ambitious project135.
On the basis of the very in-depth analyses presented in the following pages, we intend to offer
a Fig.ic representation of the quantities of public resources earmarked for the sectors under
observation for the most recent year the figures are available. In order to guarantee a simpler
reading of the data, the resources have been lumped together into two distinct macro-areas:
•
those paid out by the General Entertainment Fund (FUS) and other funds (ARCUS and
the Lottery) for opera, cinema, theatre and other live forms of entertainment (see box on
the left);
•
public investment by RAI (Italy’s public broadcasting company) in cinema and drama
pursuant to its public service obligations (see box on right) and, as such, funded by licence
fee income, along with the regional funds for audiovisual production.
A first critical factor concerns the degree of reliability of the primary source of the data and its
analysis, that is to say the Annual Parliamentary Report on the use of the General Entertainment
Fund (Fondo Unico dello Spettacolo, FUS), which collects and processes the data provided
directly by the competent Boards136. The report is edited by the Entertainment Observatory and
analyses the following activities137:
Live and reproduced entertainment: division into sectors
Operatic and Symphonic Foundations
Film and cinema activities
Musical activities
Dance activities
Theatre and dramatic activities
Circuses and travelling shows
Primarily levelled at Members of Parliament and experts, the Report has the undoubted
merit of providing an account of the total funds assigned to the entire entertainment sector,
accompanied by a substantial outline of the legislative and regulatory acts governing these
matters. From this point of view it is a very useful and effective tool for the analytical
assessment of resource distribution in the various sectors of the entertainment world divided
into its component elements (production, distribution, management and promotion) but it
is nevertheless inadequate if the aim is to assess investment choices and to verify – through
135
For data collection methods please refer to the notes on the methodology. This investigative report does
not address issues concerning the country’s “cultural heritage” (archives, books and libraries, cultural institutes,
archaeological heritage, architectural, historical, artistic and ethno-anthropological heritage, landscape safeguarding, architecture and contemporary art) having included within the boundaries of the analysis exclusively “cultural
activities” (live entertainment and cinema). This also excludes the costs relative to the organisation, the internal
operation and all staff costs.
136
The “Fondo Unico dello Spettacolo” (equivalent to the Arts Council Budget in the UK) was legally instituted on 30 April 1985 with Law N. 163 “New regulations for actions in favour of the entertainment sector”. The
law prescribes that the Observatory present an annual Report on its use to Parliament. The Report can be consulted
via the Internet on the site of the Ministry for Culture. The data is provided by the offices of the Live Entertainment
Board and the Film Board. The latter, in addition to providing support for the Observatory, since 2005 has published
its own report limited to activities supporting film production.
137
The Entertainment Observatory works through the Live Entertainment Board. According to a three-year
agreement (2008-2010) the drafting of the Report on the FUS is assigned to the Ente Teatrale Italiano (Italian Theatre Agency, ETI). It should be noted that the Ente Teatrale Italiano was abolished by Legislative Decree N. 78 of the
31 May 2010. Its task and funding have been transferred to the Live Entertainment Board.
Public investment in the cultural and telecommunications industry
249
a dynamic evaluation of the data – the consistency between the cultural policy objectives,
the quantitative and qualitative assessment criteria and the projects that have been granted
financial support138.
In 1985, the law that first set up the FUS fund represented a significant innovation for the
sector. Its aim was on the one hand to rationalise the many different forms of State funding
adopted up to then for the sector, and on the other as a step towards a new and more effective
medium/long-term planning of public resource allocation and management in favour of the
world of entertainment139. In actual fact the innovative approach which, in the mind of the
legislator, should have led to a resource distribution strategy based on a dynamic analysis
of market conditions and the changing needs of the various sectors (by means of a correct
balancing of the fund allocation to the various sectors), soon gave way to the fossilisation of
what became known as “allocation quotas” which, apart from a few exceptions, have left the
original situation essentially unchanged and inhibited any programming intent140.
The Reports on FUS deployment do not however present the same consistent level of detail and
accuracy owing to the fact that over the years the techniques for data collection and analysis
have been greatly honed. In recent editions considerable effort has been spent in introducing
new precious indices, such as the distribution of funds at the regional and provincial level, which
can be used to assess the uneven distribution of funds on a territorial basis and consequently the
geoFig.ic subsidy concentration levels by macro-area or even the breakdown of the funding by
contribution bracket. The reports for the previous years (at least up to 2001) seem much more
paired down and organise the data on the basis of aggregate areas, limiting their assessment to
a mere statement of the expenditure headings, the decrees and the minutes of the commission
meetings, making it very difficult to make any kind of comparative assessment between these
figures and the investment policies promoted in the years to come.
In recent years the report has broadened its scope to include in-depth analyses on the demand
for entertainment (audience spending in relation to the number of inhabitants), the labour
market and the nature of the beneficiaries (legal status, geoFig.ic origin, classification based
on contribution bracket in various activity sectors, the introduction of a per head subsidy
evaluation criterion) thus enabling a much more complex assessment of the funding policies141.
There is nevertheless a methodological hitch in the approach used: the report does not go
beyond a mere certification of the funds dispensed without providing any kind of qualitative
information on:
138
See Luca Zan (edited by), Le risorse per lo spettacolo, (Resources for entertainment) Il Mulino, Bologna,
2009.
139
Law N. 163 of 1985: “Nuova disciplina degli interventi a favore dello spettacolo” (New regulations for actions in favour of the entertainment sector).
140
See. Angelo Zaccone Teodosi, “Fus statico e vischioso tagliato per abitudine” (A static and viscous FUS
cutback out of habit), Il giornale dello spettacolo N. 18 of 7 June 2002. It can be useful to recall a passage in the
first FUS report to appreciate the innovative spirit and the topicality 24 years down the road of the issues that were
being addressed at the time: “the various temporary refinancing laws of the many funds on which the legislation
concerning the entertainment sector has ended up being spread have clearly not allowed a consistent programming
of the activities nor a serious assessment of the public resources to be employed in addition to the self-financing and
in relation to management costs”. One is surprised to find such a clear headed analysis of the critical elements that
are still at the core of the debate and the belief that they could be overcome thanks to the new financial instrument:
“the State contribution has, in the end, often turned out to be an ineffective transfer of wealth of a merely charitable
nature. With the Fondo Unico dello Spettacolo one can now engage in programming public and private investments
in the framework of true compatibility with the general requirements of public expenditure and the productivity
that this expenditure must constantly strive towards in both industrial and cultural terms”.
141
The last available report for 2008 contains 8 chapters, subdivided into two parts and complete with an
appendix: the first section sums up and analyses the entertainment sector in a overall perspective but also broken
down into its regional and provincial components, including an investigation of the public expenditure followed
by an in-depth analysis on specific issues; the second part is given over to the sector analysis of the various areas of
the entertainment field: operatic and symphonic foundations, musical activities, dance activities, theatre activities,
circus and travelling shows, film activities, main institutions which operate in the various entertainment sectors with
an annual focus on each of them.
250
Public investment in the cultural and telecommunications industry
•
the decision making process underlying project selection (beyond the general assessment
criteria included in the various regulations);
•
the degree of flexibility of the resource distribution system;
•
the beneficiary turnover rate based on an assessment of the number of first requests;
•
project sizing (in terms of the size of funding requested) as a decisive factor for subsidy
admittance142.
From a recent empirical research certain phenomena have come to light concerning funding
choices that would seem to point to the need for a review of the funding allocation procedures
so far adopted. By restricting its analysis to the live entertainment sector (music, theatre
and opera), the study highlights “a system that hinges on a rhetoric of project financing and
selection process, despite the fact that a considerable share of resources appears to be assigned
and informally guaranteed over time to a restricted number of organisations”143.
More in general, unlike what happens in other countries, the Ministry has not yet felt the need
to accompany the current Reporting system with other economic analyses and assessment
instruments capable of establishing the effectiveness of the public investment through an
effective monitoring system based on performance indicators, which might provide a measure
of the direct and indirect repercussions of said investments144. A change for the better would
seem to be signalled by the results of the Ministry of Culture-ETI conference in 2009 which,
in addition to assigning specific instructions to the ETI-Observatory, also took steps to
commission a study on the funding mechanisms adopted for the entertainment world in the
other European countries and the identification of a series of indicators designed to measure
the impact of public funding on live performance145. What has clearly been missing up to now
is an efficient monitoring system capable of providing an overall assessment of the initiatives
promoted and consequently an accurate assessment of the results obtained by the allocated
funding. Only in the presence of effective control and constant verification tools can one
hope to move on to a more correct planning of future activities and the quantification of any
additional funds required. It will therefore hardly come as a surprise if the annual decision
for the allocation of the resources for the individual sectors (the so-called allocation and suballocation decrees that apply to the FUS fund) are not accompanied by motivations that might
justify their appropriateness146. Ultimately it is not enough to demonstrate – where they do so
142
In the last available report (year 2008) a significant innovation was introduced, namely not just the indication of the number of projects admitted to receive subsidy, but also the requests not approved or those that were
not completed so that one could verify the rate of project approval for every area receiving funding and make some
considerations regarding the reasons that had led to these exclusions and on the funding choices.
143
Luca Zan (edited by), Le risorse per lo spettacolo, op.cit. From this investigation it turns out that in the
musical and theatrical activities and in the Operatic-Symphonic Foundations only approx. 13% of the FUS assigned
to these sectors relies on a resource allocation criteria based on a selection process (“non stable” funding). The remaining part appears to be “blocked” in that it is accounted for by organisations that benefit from a “given” level of
funding (constant, considerable and not subject to a request process) and to organisations that benefit from “stable”
funding (relatively high, constant in time, despite being formally subjected to a request and selection process).
144
An investigative thread that aims in this direction, albeit with a more lateral approach, is the one explored
in the White Paper on Creativity drafted in 2007 by a special investigative committee set up by the Ministry of
Culture and in which an investigation is undertaken of the added value of the various economic sectors including
audiovisual and entertainment, in the attempt to demonstrate the impact on the GDP. Interesting impact studies in
the field have been conducted by the University of Turin and Trento in the context of initiatives designed to measure
the effectiveness of certain projects using the so-called income multiplier. (The Turin Olympics and the Festival
of the Economy in Trento). See “Progetto Capitale Culturale – Cultura Motore di sviluppo per Torino” (Cultural
Capital Project – Culture a driving force for Turin development), Published 2007-2009 (edited by the City of Turin
in collaboration with the Economic Faculty of the University of Turin).
145
In the 2008 report it states: “The Ministry for Culture believes the future activity of the Entertainment
Observatory to be strategic and the start of a new collaborative relationship with ETI, particularly in the current
cultural, social and economic context of objective difficulty for the world of entertainment, which requires qualified
and effective assessment, investigation, analysis and forecast tools capable of supporting and appropriately validating the political and management choices”.
146
In the film sector, certain criticisms recently highlighted by the Court of Auditors should be noted, such
as the impossibility of efficiently establishing the subsidy trends for certain sectors (such as running costs); the ab-
Public investment in the cultural and telecommunications industry
251
– that more or less all resources allocated to the various expenditure items have been spent or
the capacity to promptly expedite the evaluation of the projects submitted thus complying with
the regulatory parameters, one should be verifying the overall results achieved by the various
ordinary and special initiatives financed using specific tools, which can provide a complete
assessment of the actions undertaken in terms of their effectiveness and value for money. These
indicators would necessarily presuppose a form of negotiated programming with the Regions
(see below) and an action strategy that must be consistent with the assessment criteria adopted
by the Committees that are called to approve or reject the projects.
Another factor that distorts the results of the analysis of public funding in entertainment and
is prejudicial to a completely accurate assessment of the volume of resources assigned each
year by the State, concerns the actual allocation of these resources to the accounting years of
reference and the choice of whether they should be considered on a cash or an accrual basis. In
the analysis we have put forward here, we have opted (as far a possible) to take into account the
figures actually deliberated and paid out by the competent Committees147. Therefore, the figures
shown do not match the funding anticipated by the original allocation decrees, which often
include surpluses relative to previous years, supplementary or special funds made available
during the years, transfers of resources from one heading to another or fund depletion (as has
happened in the film sector). These deviations and financial scheduling discrepancies, which
are due to the frequent delays in resource allocation to the various areas, make a uniform
assessment very complicated: the clear instance of this phenomenon can be seen in the
allocation of quality awards or movie house refurbishing loans for the film sector: the length
of time taken by the Committee to evaluate the requests and the subsequent unavailability
of the resources themselves has led to delays measurable in years between when the benefit
awarded was finally cashed and when the works were supposed to take place. These temporal
misalignments effectively prevent any uniform comparison of the volume of funds paid out in
any given year.
Moreover, in recent years, there has been a marked increase in “extra-FUS” funds, which are
not monitored in any systematic way and are intrinsically difficult to pin down and analyse
within the same Annual Report. As of 2003-2004, the FUS therefore no longer represents the
only source of State funding for the sector, seeing that over the years conspicuous additional
extraordinary resources have been assigned to supplement ordinary funding. Here we are
referring specifically to the revenue of the midweek Lottery draws, the pre-tax charitable
donation refunds (“8 per mille” of which however only a very minimal share goes to the State,
and the “5 per mille” system), the funds managed by ARCUS and, sporadically, and while there
was still funding available, by the remuneration of the management fund for film and theatre
credit run by the Banca Nazionale del Lavoro. To these one needs to finally add the special
resources made available on specific occasions by Budgetary funds, emergency decrees, specific
“bylaws” or special measures, as was the case of the fund worth 60 million euros allocated in
favour of live entertainment by the Ministry of Culture for the three year period 2007-2009 in
the context of the so called Entertainment Agreement (see below). These additional resources,
besides playing an increasingly important role over the course of the years, are handed out
according to different criteria compared to those that govern the FUS allocations. What’s more
the considerable room for manoeuvre in the allocation of these funds enables the State to fall
back on these funds with increasing regularity to deal with emergency situations (as happens
with the Operatic-Symphonic Foundations that post losses) or in order to support institutions
of national significance such as Cinecittà Holding (which merged with the Istituto Luce in
sence of a system of checks and balances for subsidies to distribution and export companies; the failure to actually
pay out significant resources to production companies that had been granted funding; the meagre returns in terms
of paybacks of loans granted. See Gestione delle risorse del Fondo Unico per lo Spettacolo destinate al settore cinematografico (Management of FUS resources for the film sector), Court of Auditors, year 2009.
147
The choice is thus more consistent and faithful to the methodological approach on which the consolidated
public finance accounts are based, as analysed in the first part of the study and which are based on the regional public accounts as they appear in the expenditure statements.
252
Public investment in the cultural and telecommunications industry
2009), the Venice Biennale, the Ente Teatrale Italiano148. A particularly relevant case were the
supplementary funds provided for the FUS in July of 2009 (following energetic protests by
sector operators) by means of a Prime Minister’s Office Decree issued with the agreement of
the Ministry of Finance, which awarded a further 60 million euros in favour of cinema and live
entertainment, thus raising the overall resources available for the year in question from 397
million to 457 million149.
The problem with this kind of action lies in the fact that these kinds of special resources, seeing
as they are retrieved from an emergency fund managed by the Prime Minister’s Office, have
been assigned on the basis of “political” decision produced in order to solve a purely contingent
situation, thus contributing to the distortion and lack of uniformity of the mechanisms that
govern the allocation of public funding to the sector in question150.
Criticism of this by now consolidated practice of differentiating how the entertainment
business is funded is voiced in no uncertain terms by the drafters of the FUS Report, who
maintain that it is becoming increasingly difficult “to reconstruct in any uniform way the
overall picture of the funding and the focus of the State’s action for the sector, objectives which
are clearly stated in the law which first set up the Fondo Unico per lo Spettacolo but which are
far from being accomplished”151. Such a critical situation would seem to call for a new method
of analysis which, through a systematic and structured approach, might bring together the
many sources of national funding so that a more comprehensive picture of the impact of the
different levels of public funding on the entertainment sector can be acquired, in relation to
both the national extra-FUS subsidies and the sub-national funds provided by the Regions and
local institutions. In this way another critical issue, which concerns the lack of a systematic
form of monitoring that might make it possible to compare the trends of public spending at
the national level with the other forms of subsidy available at the sub-national level, would
be addressed152. This issue is particularly crucial given the increasing relevance acquired by
Regions, Provinces and Councils in terms of their contribution to a sector which traditionally
is very territorially rooted but particularly so now, given the recent changes introduced to
Chapter V of the Constitution, which assigns joint jurisdiction to the regions on matters of live
entertainment153. The systematic acquisition of this comparative data would enable an accurate
picture to be drawn of the importance of each institutional level but also mean that decisions
could be reached with a view to introducing more rational criteria to investment choices. Minor
steps forward in this regard have been recorded in the film sector where, as of 2008, the Italian
Film Board has instituted a joint evaluation procedure with the Regions (as part of the threeyear Territorial Consultation Program) with the aim of “rationalising support actions and fully
exploiting the most deserving initiatives, identifying the objectives and priority actions at the
regional level and setting up shared databases”154.
148
In 2008 for example, thank to the Lottery Funds, the Operatic-Symphonic Foundations benefited from an
additional 20 million euros compared to the 215 allocated at the ordinary level; Cinecittà Holding accounted for 8,
while another 3 million were rerouted towards the Venice Biennale. From the 2007 Lottery funds the Ente Teatrale
Italiano received 90% of the resources (10.5 million euros) it required to carry out its activities.
During the meeting of the Entertainment Problems Committee (a consultant body of the Ministry of
149
Culture), which on 24 February approved the FUS allocation for the current year (414.5 million euros), the Ministry
undertook to ask the Prime Minister’s Office for further supplementary funding for 2010 as well, which was supposed to amount to approx. 50 million euros.
150
In this case cinema only received 24 million euros, of which 6 were running cost credits – a sum that was
entirely earmarked for the settlement of capital account contributions for refurbishing and updating movie houses,
which had remained blocked since 2008.
151
FUS report, year 2008, pag. 16.
152
The only exception is represented by the data collection system of the Regional Public Accounts set up
by the Ministry of Finance which, as we have seen, includes cinema and the live entertainment sector in a broader
macro-classification.
153
For more in-depth assessments see Andrea Morrone “Lo spettacolo dopo la riforma del Titolo V: idee per
una legge generale,” (The entertainment sector after the 5th Chapter reform: ideas for a general law) In «Le Regioni»,
1/2009, as well as Carla Barbati, “Lo spettacolo: il difficile percorso delle riforme (The entertainment sector: the difficult path towards reform)(from the Constitution of 1948 to the “new” Chapter V and “back”)”, in «Aedon», 1/2003.
154
The involvement of the Regions, which was initiated in compliance with the ruling of the Constitutional
Public investment in the cultural and telecommunications industry
253
The efforts to coordinate and share the various methodological approaches that have been
undertaken even at the regional level by the various Observatories so far have not achieved any
significant results155.
The difficulty in monitoring the stratification of public funding throughout the various
administrative layers is not only ascribable to the lack of systematic data (either not collected
or where collected not used to the best advantage in the process of subsidy definition)156. This
failure in the end reflects the polycentric situation and the absence of a co-financing logic
between the various channels of public support. In order to overcome this critical situation one
would have to gradually abandon the traditional vertical approach (top/down), which makes it
difficult to operate a uniform comparison between activities (even of the same kind) supported
at national and regional or local level and shift to a horizontal perspective by identifying a project
of common interest which then could be jointly funded. The State would take on the role of
investment accelerator in those situations where the share of national investment is effectively
dependent on a similar contribution being fronted by the local authorities. These would thus
be stimulated to make their resources available for projects conceived and designed on the
basis of established territorial requirements and subsequently shared and validated by bilateral
organisms which act as compensation chambers (such as the State-Region Conference) so that
national action policy can be maintained along with an efficient use of the available resources
and an increase in the effectiveness of the measures and their measurable impact. This, for
example, was the aim of the previously mentioned Entertainment Pact, an innovative funding
instrument based on a negotiated programming model already applied in the implementation
of the Framework Programme Agreements157 which established an equal footing collaboration
between central government and territorial institutions158. This initiative, which was set up “in
order to support actions in the field of cultural activities taking place on Italian soil in order to
implement co-financing agreements between the State and independent entities”, was the first
practical implementation of the principle introduced by the reform of Chapter V of the Italian
Constitution, which called for a harmonisation of the jurisdiction affecting the exploitation and
support of cultural and performance activities and true subsidiarity between different levels of
government, which was to extend to shared resource allocation as opposed to the methods
adopted in the allocation of ordinary FUS funds.
The Pact required the signing of specific planning agreements presented by local institutions
on the basis of the appropriate calls for tender bearing in mind a complex set of objectives set
by the Pact itself159. Each agreement set out the objectives to be pursued, priority actions to be
Court N. 285 of 2005, at the moment has not yet produced any significant results. This because if on the one hand
the Central Administration has supplied the territorial institutions with the data concerning the contribution requests forwarded, not all the Regions have performed the “virtuous exchange” of information. See Court of Auditors
Gestione delle risorse del Fondo Unico per lo Spettacolo destinate al settore cinematografico (Management of FUS
resources for the film sector), 2009.
155
It’s worth pointing out that the quoted Min Culture-ETI agreement which had assigned to the latter the
task of drafting the FUS Report included the objective of setting up more systematic collaborative agreements between the National Observatory and the regional observatories. It should be recalled that during the three-year
period 2007-2009 a project promoted by the Ministry (ORMA) was set in motion with the aim of facilitating the
coordination between the regional observatories in order to rationalise the operations and introduce economies of
scale.
156
The only two segments of the production process for which one can assess the financial support provided
by the various institutional levels are the public repertoire theatres and the operatic-symphonic foundations. The
individual sources of revenue were made public for the first time in the FUS Report for the year 2008.
157
For an in depth analysis of the Framework Program Agreements please refer to “L’evoluzione del sostegno
pubblico all’audiovisivo” (The evolution of public funding for the audiovisual sector), edited by Alberto Versace,
Lorenzo Canova, Tommaso M. Fabbri, Francesca Medolago Albani, in L’industria della comunicazione in Italia, XI
IEM Report, Guerini & Associati, Milan 2008.
158
The fund was activated by the 2007 Budget (Article 1, paraFig. 1136 and 1137, of Law N. 296 of 27 December 2009) and underwritten on 25 February 2007 by the State and the Regions with an allocation of 20 million
euros for each of the years 2007, 2008 and 2009. At the end of the three years of operation the Fund expired.
159
The upgrading of the entertainment system and the exploitation of territorial identities and vocations,
through the economic and organisational support for projects embedded in the local community; the diversification
of the cultural offer and the enhancement of programming connected to contemporary production, with particular
254
Public investment in the cultural and telecommunications industry
carried out, an action schedule, financial needs and methods of joint financing160. In 2010 the
Pact was no longer renewed even though it represented an innovative attempt to overcome the
traditional logic behind public investment by triggering virtuous incentive mechanisms and
bottom-up participation161.
It should also be ultimately pointed out how public funding is not confined exclusively to
“direct contributions” on behalf of public bodies but is also achieved indirectly by means of
credit relief and tax breaks, donations on behalf of juridical persons (companies) and, though
to a much lesser extent, by physical persons thanks to incentives. One need only think of the
recently introduced regulation for the film sector that has introduced the “tax credit” and the
“tax shelter”: companies that are both part or outside the film industry process may obtain
resources amounting to approximately 100 million euros a year. These are measures that in
the short term could generate a negative impact on State revenue in terms of reduced tax
income, but the stimulus to the market and the greater influx of private investments that they
are designed to guarantee should actually go beyond just compensating for the reduced tax
revenue expected in the first years of its application162.
4.3.2 Trends in FUS allocations and macro-tendencies
The General Entertainment Fund (FUS) was first set up by law in 1985 with the twofold
purpose of reorganising the financial measures in favour of the entire entertainment sector
and providing these measures with a systematic focus. The allocation of consistent funds to
provide for the financial support of the entertainment industry from that year on enabled
the sector’s activities to be scheduled with a much broader time scale, while providing the
operators benefiting from the subsidy with greater elements of continuity for the scheduling
and management of initiatives in the various sectors supported by the State163.
Every year, when passing the Budget, the Parliament quantifies the resources allocated to the
FUS for the following three-year period. The last approved Budget allocated 418.4 million
euros for 2010 and little more than 304 million for the years 2011 and 2012164.
attention paid to young and new authors and by acknowledging the importance of experimentation with new languages and the promotion of new talent; the exploitation of network projects that address areas that go beyond the
municipality or the province or involve more than one region; the promotion of actions designed to broaden the
audience base and the distribution of live entertainment among the younger generations and those segments of audience that have less access to it, with particular reference to public measures for the South of Italy; the introduction
of tools which enable a rationalisation of the plans of action involving the available State and territorial resources in
order to avoid their fragmentation and thus guaranteeing a greater effectiveness of the expenditure, even through
monitoring of the cultural offer for given areas and the mutual exchange of knowledge and information.
160
Each project has received at most 1 million euros, on condition that the institutions presenting the project
guarantee to match the same sum as that requested in the funding application. The co-financing sums could not
be raised through subsidies or contributions paid out by the Ministry for live entertainment activities to any of the
institutions or bodies which were in any way partners to the project.
Among the reasons that have led to the its interruption: the limited visibility of the results of the initia161
tives, the limited available resources and perhaps the conviction that three years were enough to trigger a virtuous
circle which would enable the coproduced initiatives to continue in the years to come exclusively thanks to its “regional legs”.
162
The regulations governing tax rebates for the film industry could be extended to the live entertainment
sector according to the prescriptions of the Framework Law for the live entertainment sector currently being examined by Parliament. For further information on the matter refer to Teodosi, Bruno Zambardino, Alberto Pasquale
(edited by), Il mercante e l’artista – Per un nuovo sostegno pubblico al cinema: la via italiana al tax shelter, (The
merchant and the artist – New public funding for cinema: the tax shelter in Italy), Spirali, Rome 2008.
163
For further details see Bruno Zambardino, Lo Spettacolo dal vivo: il quadro normativo, (Live entertainment: the regulatory frame work) Materiali Formez, February 2006. See also C. Tubertini, “La disciplina dello spettacolo dal vivo tra continuità e nuovo statuto delle autonomie” (Continuity and self-government as they apply to the
regulations governing live entertainment), in «Aedon», 3/2004, Il Mulino.
164
Law N. 191 of 23 December 2009. The three-year spending program is outlined in Table C attached to the
Financial Act. It should be noted that the funding refers to ordinary resources which, as we will see, are topped up
with additional resources. It should also be remembered that the funding allocated for the following years is often
changed in the subsequent Financial Act on the basis of the administration’s needs.
Public investment in the cultural and telecommunications industry
255
Even though it is subject to the general state of public finances and suffering a gradual reduction
in buying power due to inflation , the FUS – at least for a certain while – had guaranteed
support for the sector with a good degree of certainty for industry operators165. Its trends and
composition should be read – as has been pointed out in the previous paraFig. – bearing in
mind the supplementary funds for the entertainment sector which, particularly in recent
years, have provided limited yet essential additional financial resources, albeit in an ex-post
emergency logic, that have been used for the most part to make up the deficits accrued by a
number of public cultural institutions.
The distribution of FUS funds to the various sectors takes place on the basis of a yearly percentage
allocation originally established in the law which first set up the Fund. This percentage is based
on the financial requirements that central government believes to be necessary to fund the
various sectors. This calculation is based on a number of different factors ranging from the
evaluation of fixed production costs to estimates of the marketable value of the productions.
Fig. 1: FUS allocation, 1985
Musica e
Danza
13,0%
Prosa
15,0%
Cinema
25,0%
Circhi e
spett.
Viagg
1,5%
Fig. 2: FUS allocation, 2010
Osservatori
o dello
Spettacolo
0,0%
Comitati e
commissio
ni
3,5%
Fondazioni
Lirico
Sinfoniche
42,0%
Circhi e
spett.
Viagg
1,5%
Danza
2,3%
Osservatori
o dello
Spettacolo
0,2%
Musica
13,7%
Comitati e
commissio
ni
0,0%
Fondazioni
Lirico
Sinfoniche
47,5%
Prosa
16,3%
Cinema
18,5%
Source: IEM elaboration of Entertainment Observatory data.
The Law N. 163/1985 provided for a total of 700 billion lire to be allocated according to the
quotas shown in Fig. 1166. This original percentage allocation changed following the introduction
of Law N. 555/1988, which, by abolishing the quotas established in the 1985 law, assigned to the
then-Ministry for Tourism and Entertainment (now the Ministry for Culture) the task of setting
the allocation percentages for the Fund year by year167. In 1990, following the introduction of
this rule, a few changes were made to the original allocation percentages. More specifically,
music and dance were allocated 61.8% (with as much as 47.8% being assigned to the thirteen
Operatic Institutions which are essentially public opera houses) while the quota for film was
reduced from 25% to 19%.
In 2002 the Administration took action to redress the allocation balance after a series of special
measures (which had reduced the film quota in favour of theatre) had been introduced to
overcome the very complicated situation in which theatre found itself at the time. As can be
seen in Fig. 3, in that year the theatre sector suffered a cut of approximately 7% in favour of
film activities. Subsequently the percentages changed in a substantially irrelevant fashion, thus
perpetuating the benefits of stability but also the costs inherent in a lack of flexibility and the
inability to adapt to changing market conditions, which to some extent it was responsible for
straight-jacketing.
165
For a complete picture please refer to the general remarks included in the last annual Reports to Parliament which can be viewed on the Ministry of Culture website.
166
It is worthwhile pointing out that the resources assigned in 1985 (the year of the foundation of the FUS
fund) show an increase of almost 75% compared to the resources allocated for 1984, when public action was fed in
a totally inadequate manner through a number of different legislative decisions, often for specific initiatives of as
one-off contributions to face up to specific needs.
167
By issuing its own decree, with the approval of the National Entertainment Council (currently the Entertainment Problem Committee).
256
Public investment in the cultural and telecommunications industry
Fig. 3: FUS: evolution of the allocation quotas, 1985-2010
Op/Symph. Foundations
Cinema
Theatre
Music
Dance
Other
2010
47,50
18,50
16,27
13,74
2008
46,69
19,50
16,27
13,74
2006
47,81
17,97
16,66
14,07
2004
47,81
18,00
16,68
14,07
2002
47,81
2000
47,81
1990
47,81
11,08
24,00
18,87
13,78
16,73
18,87
14,45
16,26
14,02
1988
42,03
24,18
15,6
13,36
1985
42,0
25,0
15,0
13,0
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Note: dance acquired its own expenditure heading as of 1997. It had previously been included in the musical activities
heading.
418
471
457
441
465
427
519
500
531
513
495
479
25%
20%
15%
10%
300
7,7%
0%
-5%
100
6,8%
6,0%
5%
200
0
3,3%
1,1%
1,1%
0,0%
-3,0%
-3,6%
-3,4%
-3,9%
-7,1%
-10%
-8,0%
-8,4%
2010
2009
2008
2006
2007
2005
2004
2003
2002
2001
2000
1990
1999
2010
2009
2007
2008
2006
2005
2004
2003
2002
2001
2000
1999
1990
1985
-15%
1988
Million
31,8%
30%
1988
400
35%
363
500
460
600
501
Fig. 4: FUS allocation trend, 1985-2010 (in absolute and percentage values)
Notes: * Methodological note: in 1985 Dance was included in the Music allocation and the Supplementary Fund
was responsible for redistributing the remaining resources to the other departments. In 1988 the supplementary fund
heading also included the cost of the Observatory and the Committees. In 2002 BNL funds for 2.5 million euros were
pledged as interest account subsidies for music and theatre pursuant to Art. 13 of Law 163/85. The total for 2009 includes a additional allocation (decided in September of 2009) worth 60 million euros (for 2010 the Ministry envisaged
a compensatory allocation of 50 million, but, at the time of writing nothing has been formally agreed) subsequently
redistributed among the various sectors. The data for the Operatic-Symphonic foundations in 2009 includes a supplementary 20 million beyond the original funding granted.Source: IEM elaboration of data provided by the Entertainment Observatory, Min. of Culture.
The total funding trend (including additional funds) over the operating life of the FUS
(from 1985 to 2010) shows an initial upward tendency, despite the presence of rather broad
fluctuations ever since the beginning of the 1990s due to the difficult economic situation and
the problems afflicting State finance. The gradual recovery of the FUS, which took place in the
second half of the ’90s, with resource level peaking in 2001, the only year in which it exceeded
the 500 million euros threshold (in nominal terms), was followed, as of 2003, by heavy cuts,
with a downward spiral that saw it fall back to the values recorded at the end of the ’80s. This
second macro-phase records its lowest value in 2006, below the 430 million euros mark. In the
two subsequent years there was a brief moment of growth (in 2008 the resources exceeded 470
million euros). A look at the progress in percentage terms provides a more accurate picture of
the various swings that have taken place during the course of the 25 years under examination.
The funding trend for the individual sectors shows more significant variations for the Operatic
Public investment in the cultural and telecommunications industry
257
and Symphonic Foundation sector168: the first growth phase up to 2001, year in which it reached
the peak value of 250 million euros, is followed by a second recessive phase, which touches its
lowest level in 2006 only to climb back up in the subsequent years until it levels off in 2010 at a
sum just below 200 million.
Fig. 5: Evolution of FUS allocations by sector, 1985-2010
Op/Symph Foundations
Cinema
Theatre
Music
Dance
300
260
244
250
237
221
200
215
199
211
199
197
159
116
65
62
62
8
9
9
8
8
8
10
2002
2003
2004
77
70
61
84
63
68
57
52
9
8
2010
79
74
2009
8
91
78
75
77
70
2001
1990
7
2000
1988
7
1999
0
1985
0
0
84
83
56
47
0
90
72
68
65
65
93
92
71
2008
65
64
89
85
84
76
2007
55
75
99
95
2006
91
121
94
90
2005
100
Million
222
201
150
50
239
245
240
Note: for 2009 the resources deriving from the subsequent additional funding granted have not been included.
Source: IEM elaboration of Entertainment observatory and Min. of Culture data. The film, music and theatre sectors show a greater stability and are positioned in a bracket that
varies between 60 and 90 million, with the sole exception of 2002 when cinema and theatre
recorded mutually inverse deviations for the reasons outlined above.
The most worrying element is the growing gap between the current value and the constant
value of the annually assigned resources. Even though the law instituting the FUS included
provisions for a three-year indexing, it is readily observed how the deviation between the
nominal value of the resources allocated and the actual value which takes into account the
actual resource buying power has progressively broadened.
The following Fig. provides a clear representation of the twofold performance of public spending
depending on whether it is analysed statistically in monetary terms or by incorporating the
inflationary dynamics which have marked the 25 years of allocations since the year of the fund’s
institution.
Fig. 6: Variations in FUS allocations, 1985-2009
Euro 1985 constant
Euro current
600
531
500
411
400
519
495
479
513
501
500
471
465
460
427
363
441
397
349
363
300
269
265
273
258
255
241
220
200
198
201
208
174
100
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1990
1988
1985
0
Source: IEM elaboration of Entertainment Observatory data, Min-of Culture. Figures in millions.
168
It should be remembered that in 1996 and in 1998 legislation was passed in two different stages which
transformed them from public institutions into private law foundations.
258
Public investment in the cultural and telecommunications industry
Where the current values post an overall increase of nominal resources which, between 1985
and 2010, amounts to approx. 11%, in real terms any positive indication this might seem to
provide is denied by the currency’s drop in buying power. In the quarter of a century that has
passed, as it turns out, the deviation has gradually grown until it reached its peak in 2009: this
essentially means that there has been a strong drop in the actual resources available to the
world of entertainment, which in 2009 amounted to approximately 174 million if discounted
to present values compared to the 397 nominal million. The relationship between current euro
and constant 1985 euro for the period under examination shows an average deviation of more
than 50%. The FUS tendency would seem critical even when compared to that of the GDP
(Gross Domestic Product): while the latter has almost quadrupled (+3% on average per year)
its value, the incidence of national public spending for the entertainment business has on the
contrary suffered a strong decline moving from 0.083% in 1985 to 0.026% in 2009 with an
actual drop which comes close to 70%169.
The loss of buying power on the one hand and the decreasing growth compared to the GDP on
the other have sparked strong preoccupations among sector professionals particularly in the
light of the current stagnation and recession caused by the world financial crisis.
4.3.3 The most significant sectors: cinema, operatic and symphonic foundations,
musical activities and theatre
Moving on to the examination of the trends for the individual sectors, we must here reiterate
what we said earlier in the introduction concerning the difficulty in performing uniform
comparisons for the period under observation. What particularly stands out is the often very
broad spread between the allocations and the effective assignations (the object of the analysis by
sector that follows) due to the accounting deviations (for cash or accrual), special integrations,
supplementary funds allocated during work in progress, as well as the presence of surpluses,
factors that hinder a correct apportionment of the resources for each individual year.
Opera and music
For the period 1998-2008, the operatic and symphonic foundations along with the “other
musical activities” show a reasonable consistent funding trend. After an initial four-year
growth period which reaches its peak in 2001, the Foundations enjoyed a period of stability
with allocations remaining well above the 250 million mark until 2005. Even more stable is the
funding for the other musical activities sector, which on average hovers around the 60 million
euros mark with little change over the period in question, with a slight exception for 20032004, a two-year period when the funds exceeded 70 million.
169
See FUS Parliamentary report, year 2008.
Public investment in the cultural and telecommunications industry
259
Fig. 7: Allocations over the period 1998-2008 for Operatic and Symphonic Foundations and
Musical Activities
Op/Symph Foundations
Musical activities
300
263
250
268
262
270
253
237
248
236
229
217
200
240
230
71
1999
2000
2001
2002
77
72
69
63
63
63
2008
69
2007
67
2006
64
2005
62
1998
100
2004
150
50
2009
2003
0
Source: IEM elaboration of Entertainment Observatory and Min. of Culture data. Figures in millions of euros.
Going into the detail of the 14 Opera Houses, the picture that presents itself is very composite
and most of the Foundations are concentrated in a contribution bracket of between 10 and 20
million euros, with growth variations in recent years which particularly affect the Operatic
Theatre in Cagliari, the San Carlo in Naples and the Maggio Fiorentino, following a general
downturn during the 2004 – 2006 period.
The Scala of Milan and the Opera in Rome are the only theatres that can boast resources in
excess of 30 million euros and an increase over the 2007 – 2008 period. The only Foundation
that receives subsidies below 5 million is the last one to be set up, which begun its activities in
2004 (the Petruzzelli Theatre in Bari).
In the “other musical activities” macro area the institutions that receive the most funds, that
is to say the traditional theatres, the orchestral-concert institutions and the other subjects
involved in concert and choral activities are in the top bracket and account for 70% of the
overall resources.
With the exception of the Festivals, which are positioned in an intermediate bracket (around the
8 million euros mark), the other sectors, which include courses and promotional institutions,
standard opera production and activities abroad, are relegated to the lower bracket, which
exceeds the 2 million mark in only a few instances, with more or less significant fluctuations
that can be ascribed to special projects and government initiatives.
260
Public investment in the cultural and telecommunications industry
Fig. 8: Allocation trend 1998-2008 for Musical Activities
Promotional agencies
Venice Biennale - Music activities
Bands
Special projects and Admin.
Activities abroad
6
6
5
4
1
1,0
0,8
0,7
0,7
0,7
0,6
1
0,4
1
1,1
0,6
0,6
0,6
0,5
0,4
2008
0,7
2,0
2007
2000
1
0
2002
1999
0,7
0
2001
0
1998
0
0
1,1
1,1
0,7
0,0
0
1,3
2,2
1,5
1,5
1
0,7
0,7
2,3
2,0
1,1
1,0
0,9
1
2,4
1,7
1,1
2,5
2006
1,9
2,6
2,5
2005
2,3
2,7
2,7
2004
2
Million
2,7
2,6
2,3
2003
3
Traditional theatres
Concert and choral activities
Concert/Orchestral institutions
Festivals
Standard & experimental opera
Courses
Competitions
18
16,5
16
14
12
15,6
14,2
13,4
14,6
14,5
13,9
15,0
14,7
14,6
15,1
15,2
15,3
8
7,6
16,8
16,7
16,7
16,3
16,3
8,5
8,2
9,4
9,1
16,1
14,3
14,8
14,6
9,1
15,9
14,5
14,4
13,7
10
7,4
15,1
16,8
15,8
14,4
14,0
14,2
8,0
7,9
8,2
3,0
2,9
2,6
8,8
14,2
6
1,4
1,3
1,4
4,3
3,3
2,0
2,0
1,4
1,4
2003
2002
2001
2000
1999
0
1,8
1,2
3,3
1,6
1,1
1,2
0,9
1,2
1,2
0,9
0,9
2008
1,8
4,0
2007
1,3
1,6
1,7
3,5
2006
3,7
2005
1,6
1998
Million
2
3,8
2,9
2004
4
Source: IEM elaboration of Entertainment Observatory data, Min. of Culture. Figures in millions of euros.
Public investment in the cultural and telecommunications industry
261
Fig. 9: Allocation trend for 1998-2008 for Operatic and Symphonic Foundations
Scala di Milano
Maggio Musicale Fiorentino
Arena di Verona
Opera di Roma
Massimo di Palermo
San Carlo di Napoli
Carlo Felice di Genova
50
39,2
40
34,3
35
37,3
36,0
34,0
32,7
30
24,2
25
18,3
15
13,0
13,2
10
25,0
22,9
22,8
19,9
17,8 15,0
14,8
14,6
15,1
13,6
19,7
29,1
19,5
16,9
15,2
22,1
21,5
18,6
17,4
15,1
31,9
32,0
26,1
28,5
22,6
17,1
15,5
34,1
30,9
30,1
26,3
26,5
23,4
21,6
18,9
13,4
30,4
30,3
24,0
23,7
23,6
21,9
22,8
21,2
20
25,7
26,9
22,4
20,4
17,4
16,6
14,5
19,7
18,6
19,3
18,2
16,7
15,5
15,4
15,0
12,7
17,3
17,1
13,4
17,3
16,0
15,3
16,5
15,8
14
13,7
12
11,7
18,5
17,7
16,8 16,7
15,7
16,7
15,6
16,9
12,1
16,6
17,7
16,7
16,4
17,6
17,5
16,7
16,0
12,9
11,8
12,4
11,5
10,7
16,6
16,7
15,9
2008
2007
17,0
15,2
14,8
14,4
13,9
13,6
13,5
11,1
12,3
10,6
2006
2005
18,4
17,9
12,2
9,7
8,0
18,6
14,2
10
8
17,9
Lirico di Cagliari
Acc. Naz di Santa Cecilia di Roma
15,6
15,7
14,8
16,7
16,4
15,7
14,4
14,3
11,7
13,4
10,5
10,6
10,3
9,6
8,3
6
4,0
4
5,0
4,4
4,0
3,0
2
2007
2006
2005
2004
0,0
2003
2001
2000
1999
1998
0,0
2002
0,0
0
2008
16
17,9
2004
La Fenice di Venezia
Comunale di Bologna
20
18
2003
2002
2001
1999
2000
0
Regio di Torino
Verdi di Trieste
Petruzzelli e Teatri di Bari
Million
21,5
20,3
5
1998
Million
43,5
43,4
45
Source: IEM elaboration of Entertainment Observatory data, Min. of Culture. Figures in millions of euros.
Theatre
On the theatrical front taken as a whole one can pin point three different cycles in the decade
in question: a first gradual growth phase which culminated in 2003 when the funding almost
reached the 100 million mark, followed by a gradual drop in funding which ended in 2006, a
year when a slight recovery took place, bringing the funding back up to just short of 85 million
euros for 2008.
262
Public investment in the cultural and telecommunications industry
Fig. 10: Fund allocation trend 1998-2008 for Theatre
120
98,0
100
83,7
80
89,5
89,0
94,2
89,1
84,8
92,7
84,2
81,1
80,9
60
40
Million
20
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0
Source: IEM elaboration of Entertainment Observatory data, Min. of Culture. Figures in millions of euros.
If one then looks at the funding trends by individual sector it stands out how the stably funded
area (public, private and innovative repertory theatres) accounts for half of the overall funds
(in 2008 41 million euros) yet shows a very fluctuating progress during the course of the period
under examination.
In an intermediate bracket we find the production companies, that have suffered a drop starting
in 2003, and in 2008 stood at around 20 million euros.
Fig. 11: Fund allocation trends 1998-2008 for Theatrical Institutions and Companies
Repertory theatres
Touring
Puppet theatres
Production companies
Exhibition
Ente Teatrale Italiano
Promotion
50
44,0
45
40
38,1
39,6
42,7
39,6
41,1
44,1
40,4
39,6
35,4
41,1
35
30
23,7
23,2
24,9
23,9
24,9
24,2
22,3
24,2
19,7
20
20,1
2,0
0,6
4,6
1,8
0,6
11,1
4,8
4,8
1,6
0,6
1,7
0,6
1,7
0,5
2008
0,6
1,9
0,5
5,9
11,7
8,7
2007
1,7
6,5
9,0
2005
1,7
0,6
6,5
5,9
10,2
2004
1,5
0,6
5,9
2003
0
2,0
0,6
5,9
10,7
2002
0,5
1998
Million
2,0
9,0
10,8
2001
5,9
5,7
5
8,8
2000
10,1
1999
10
19,8
13,9
15
2006
25
Public investment in the cultural and telecommunications industry
263
Istituto Naz. Dramma Antico
Festivals
Venice Biennale (theatre)
Special projects
Silivo D'Amico National Academy
Abroad
2,5
2,1
2,0
1,8
1,7
1,7
1,5
1,5
0,9
1,0
0,9
0,5
0,8
0,6
0,5
0,5
0,4
0,2
0,0
0,8
0,8
1,1
1,0
1,1
1,0
0,9
0,8
0,9
1,2
1,2
0,8
0,8
0,8
0,7
0,7
0,8
0,8
0,7
0,5
0,4
0,4
0,4
0,7
0,5
0,2
0,2
0,3
0,6
0,8
0,8
0,7
0,7
0,6
0,3
0,2
0,3
0,1
1,2
1,0
0,1
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
0,0
1998
Million
0,5
0,7
0,7
0,6
0,9
0,9
0,8
0,7
1,7
1,5
Source: IEM elaboration of Entertainment Observatory data, Min. of Culture. Figures in millions of euros.
Besides the Ente Teatrale Italiano (The Italian Theatre Institute, abolished in July of 2010, see
above) which accounts for resources in excess of 10 million euros and the touring system,
which received approximately 5, the other activities, such as the promotion, the running costs,
funding for work abroad and the other institutes of national importance are all included in the
lowest bracket and account for funds which are almost always below the 1 million euro mark.
Cinema
The film sector presents entirely atypical characteristics compared to the other sectors supported
by the FUS. The competent authority (Italian Film Board) uses public funds to distribute
widely differing subsidies not only in terms of their purpose, which can include promotion,
production, distribution, exhibition, etc., but also where procedures and co-financing are
concerned, seeing that a considerable share of these resources (allocated under heading 8571
of the budget of the previously mentioned Ministry) are routed through the Production Fund,
whose financial management is currently entrusted to Artigiancassa (Bnl-Bnp Paribas Group).
It should also be noted that in film, unlike the other sectors, a fair share of the subsidies, those
assigned to production, are paid out in the form of reimbursable loans170.
The national public expenditure in favour of film activities, partly for the reasons outlined
above, shows a very fluctuating performance with significant swings in the period under
examination.
The highest peak was reached in 2003, when as much as 250 million was actually paid out.
As of 2004-2005, the year when the so called Urbani171 reform gradually came into operation,
170
In 2008 the so called “securitisation” of the debts of film companies was first set in motion with regard to
the State funding of film projects of cultural interest which had been granted up until 31 December 2006. Article 20
of the Min. Decree 12.4.2007 “Production funding” has actually established a procedure which will quickly solve the
age old problem of unreturned loans by introducing a mechanism that might lead to either the 100% acquisition of
the film on behalf of the company through payment of a lump sum (based on specific calculation tables) or the “sale”
of all film exploitation rights entirely to the State (in the event that the producer involved decide not go along with
the securitisation procedure). In 2008 the Ministry of Culture set in motion the complex procedures which, through
Cinecittà Holding and the management of the funds for Cinema Artigiancassa S.p.A., have involved hundreds of
production companies, which had in the past been granted State funding.
171
Reference here is made to the Legislative Decree n. 28 of 22 January 2004, which among other things
introduced more stringent production funding procedures limiting the public contribution to 50% of the overall
264
Public investment in the cultural and telecommunications industry
the resources suffered a cutback until 2007 before levelling out in 2008 at around 125 million
euros172.
Fig. 12: Fund allocation trend 1998-2008 for Cinema
300
268,9
250
234,0
200
192,1
186,5
180,6
150
170,4
164,6
132,7
155,3
100
124,6
116,0
111,2
50
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0
Source: IEM elaboration of Entertainment Observatory, Court of Auditors and Min. of Culture data. Figures in millions of euros.
Besides mirroring the strong fluctuations mentioned earlier, if we look at the various segments
of the film production process separately we gain further confirmation that public funding for
production (a heading which here includes feature films of cultural interest produced nationally,
directing debuts and second films, shorts, screenplay development, box office subsidies and
quality awards) is the segment that accounts for the largest share of public funds (in 2008 it
represented a 59% share of total funding). During the course of the period in question the
support for production has experienced a marked decline as of 2003, which had dropped to just
under 74 million euros by 2008. The same fate was suffered by subsidies for film distribution
in Italy and abroad (reduced in 2008 to little more than 1 million euros), while the support
for technical industries (post-production suites and film studios) through ten-year subsidised
loans has essentially been phased out. Sharp fluctuations have also affected contributions for
capital or interest expenditure in the modernising and refurbishing of cinemas due to the long
delays in payments of the contributions actually awarded173. Even this kind of support has been
dwindling in recent years174. Support for promotion (awards to art film theatres, publication,
budget (80% for first and second films).
172
One should remember here that even for cinema the sums calculated do not correspond to the allocations but (as for almost all activities), to the payments actually deliberated. The deviations and time displacements
depend on the actual cash availability for the year in question, to the presence of lack of usable surpluses and the
contorted mechanisms of many of the funds (Action Funds, Guarantee Funds, Special Funds managed by the Credit
Section of BNL). As we already pointed out in the introductory paraFig., the delays in resource attribution to the
various sectors make an effective assessment of the qualitative and quantitative performance of the Administration for each year particularly complicated. This phenomenon is obvious for example in the attribution of quality
awards: the excessive duration of the evaluation procedure implemented by the Commissions and the unavailability
of the resources has led to delays stretching beyond the year in the acquisition of the benefit compared to the years
when the works were actually shown. To this one has to add a further distorting element connected to the presence
or lack of special funds made available during the course of the year. It should be further underlined that from a
methodological point of view for certain years it was impossible to allocate specific sums to each expenditure heading. This makes any kind of comparative analysis over the years almost impossible.
173
It’s worth specifying that as far as cinema running costs are concerned, up to 2004 the only data available
is the overall of sums on which one can calculate the interest and capital account subsidies. To achieve a uniform
comparison with the previous years we have therefore proceeded to make an estimate by applying the projection for
the two year period 2005-2006.
174
Thanks to the introduction of the tax credit regulation (2008 Budget), cinemas have the opportunity
of benefiting from a “de minimis” tax credit (up to 500,000 euros with a maximum of 50,000 per screen), which
amounts to 30% of the costs incurred for the digitalisation of the projection systems. The fiscal aid regime expires
on 31.12.2010.
Public investment in the cultural and telecommunications industry
265
conservation and restoration, promotion abroad, associations and special projects) and to
institutes of national importance, which essentially refers to Cinecittà Luce, Venice Biennale
Film Festival and Centro Sperimentale di Cinematografia-National Film School, on the other
hand has remained pretty much stable. Moreover these latter subjects are also among the
main beneficiaries of extra-FUS funds (Lottery), which account for a significant volume of
resources, in the neighbourhood of 32.5 million euros on average per year over the period
under examination (considered as a percentage of the total resources allocated in 2008, these
institutions secured 22% of this total).
The Italian film market ought to benefit from a strong influx of financial resources – calculated
in the order of 80/100 million – as a result of the introduction of tax credit and tax shelter
measures which finally introduce tax rebates into the Italian system as a way of supporting the
film production sector as a whole175. More specifically, for income tax purposes, a first Decree
acknowledges a tax credit (“internal” tax credit) for film production companies, which is set at
15% of the overall cost of production for film productions recognised as Italian. This tax credit
is granted up to a maximum annual contribution of 3.5 million for each tax year176.
For executive production companies and technical industries that perform activities
commissioned by foreign clients the tax credit rises to 25% of production costs up to a
maximum of 5 million euros per film177.
Fig. 13: Fund allocation trends 1998-2008 for Cinema
Production
Nationally important bodies
Promotion
Distribution in Italy and abroad
Technical industries
Exhibition
180
160,4
160
149,1
140
120,4
120
121,2
95,7
100
89,1
95,5
86,4
75,6
60
31,7
29,7
2008
2006
2005
27,1
22,9
17,8
15,6
19,8
18,1
14,4
22,8
8,214,1
15,7
14,5
11,9
10,7
2,0
1,7
1,6
0,0 1,1
4,8 1,3
1,1
0,0 0,0 0,0
0,0
0,0
0,0
2004
17,9
73,5
42,4
37,4
2003
12,5
14,0
6,3
35,9
2002
35,9
2001
15,1
2000
0
3,1
24,8
18,7
13,3
13,4
4,4 2,3
0,2
0,0
1999
20 15,3
12,4
32,3
17,2
1998
Million
25,8
30,5
73,6
20,3
16,5
0,0
0,0
2009
43,4
40
71,0
2007
80
Source: IEM elaboration of Entertainment Observatory, Court of Auditors and Mibac data. Figures in millions of euro.
A second Decree has included further incentives which take the shape of tax reductions
175
The complex procedural process of the measure was first begun in the 2008 Budget approved on 24 December 2007. After receiving the go ahead from Brussels in 2008 for a first package of regulations and the signature
of the competent Ministers (Economy and Culture) on 7 May 2009, the first inter-ministerial decrees were published
in the Official Gazette on 15 July. In September 2009 the implementation regulations were issued along with the relative forms. A second package of regulations was approved by the European Commission in July 2009.
176
The benefit in any case hinges on production expenditure taking place on the Italian territory for a total
that cannot be less, for each production, than 80% of the tax credit obtained for said production.
177
The tax credit to technical industries ensures an enhancement of Italian territory (even in terms of induced tourism and employment) making it more convenient for major foreign production companies to take advantage of the services of national productions, of Italian labour as well as film locations, which to this day seem still
very underused, despite the widespread presence of the Film Commissions promoted by local authorities.
266
Public investment in the cultural and telecommunications industry
(“internal” tax shelter) on production company profits (one can even cut taxable income by as
much as 100%), for films that are acknowledged as Italian productions. The overall expenditure
limit for this specific form of tax rebate amounts to 30 million euros over a three-year period178 .
These two measures are not cumulative, and can be applied retroactively from 30 June 2008.
Both these instruments must refer to film products that have a cultural significance, as they are
subject to specific “cultural tests”, which will enable the Italian State (under certain conditions
and subject to certain limitations) to waive the European regulations that forbid State Aid when
it is seen to negatively affect competition179.
The first measures to be approved concern breaks exclusively in favour of production companies,
executive production companies and technical industries (“internal” tax credit and tax shelter)
and from September 2009, with the publication of the application forms, these are already in
operation.
On 22 July 2009 the European Commission, after further compatibility verifications, approved
a second package of tax breaks in favour of other categories that operate within the film
production industry such as the distributors and (to some extent) the theatre managers, but
more importantly for entrepreneurs outside the sector, the true cornerstone of the entire
legislative structure that is meant to guarantee an influx of outside capital into the sector.
The tax breaks for subjects not operating in the sector have been approved for investments in
the production of films that are of manifest “cultural interest” or that qualify as being Italian
national productions. The “external” investors many benefit from a tax credit amounting to
40% of the sums paid out up to a maximum sum of one million euros for each tax year.
For film distribution companies two different percentages and relative maximum thresholds
have been established depending on the kind of film: 10% up to a maximum of 2 million euros
for expenses incurred in supporting the national distribution of Italian titles; 15% and up to 1.5
million euros if the film in question is also of cultural interest180.
Both the distributor and the cinema managers can underwrite joint venture contracts (as can
the external subjects) and support the production of Italian films that are acknowledged as
being of cultural interest. In this instance, the tax relief is set at 20% of the sum supplied up to
a maximum of 1 million euros per tax year.
The companies that do not operate in the sector may additionally benefit from a tax reduction
on profits (“external” tax shelter) up to a maximum limit of 30%.
In two years of application (June 2008 – June 2010) the sector operators have taken advantage of
tax credits for 114 films requesting benefits for approximately 48 million euros, of which close
to 10 million came from foreign producers. In 2009 alone 7 important foreign productions
came to Italy attracted by the new tax incentive scheme. Overall it has been calculated that on
an annual basis, in the face of reduced revenues amounting to 77 million euros, the induced
effect has generated increased revenue for the State for about 173 million euros. In September
2010, the Ministry had already assigned 21 million euros to cover 71 approved requests.
The approved measures mark a change of approach in public funding strategy, with the
emphasis now having shifted from direct contribution to automatic and indirect mechanisms,
which reduce the discretional power of the Committees and reward the entrepreneurial ability
of the producers, in the awareness that it is no longer sufficient to wager on the redressing
of the minimum levels of public funding provided by the FUS (though this is of course very
important), but one must instead open up to the market and gain the trust of investors and
178
More specifically 5 million euros for 2008, 10 million for 2009 and 15 million for 2010.
179
The cultural testing consists of tables containing specific eligibility criteria, linked to a maximum and
minimum points system for each film as assigned through a procedure which is to all intents and purposes automatic. Implemented by the National Authorities, the “tests” are screened by the European Commission, in order to
verify the actual and effective connection between the aid granted and the cultural product which benefits from it.
180
Pursuant to Art. 7 of the Legislative Decree 22.1.2004, N. 28.
Public investment in the cultural and telecommunications industry
267
banks181.
Consistently with this new approach, the Ministry for Culture has guaranteed the operators a
three-year renewal (2011 – 2013) of the tax relief measures but – bearing in mind the currently
available resources and new priorities in terms of funding strategies - it also announced a reform
of the support system that was first instated in 2004. The innovative measures, announced at
the end of July 2010 but still to be agreed with the sector operators, provide for:
•
direct state support being limited to director’s first and second films only (including
documentaries and short films);
•
a revision of the current system that governs access to subsidies based on box office
performance and to capital account contributions to cinemas;
•
State support for promotional actions being limited to institutes and events of international
or national significance.
Besides the public resources supplied by the State and delivered via the FUS (and those disbursed
by ARCUS and the Lottery, see below), one must also consider the precious role played by RAI
Cinema182 in supporting Italian film production, in compliance with the obligations prescribed
by Law 122/98 and 112/04 (subsequently assimilated in the Code of 2005) and the constraints
indicated in the three-year service contract agreed with the Ministry of Communications. The
company which is 100% owned by the public broadcaster invests approximately 80 million euros
in production and purchase, a significant volume of resources if one considers that the overall
investment in the sector for 2009 was approximately 300 million euros. RAI Cinema’s efforts in
the film sector during the course of these ten years has led to the production of over 250 films
with the deployment of resources for approximately 400 million euros. It has collaborated with
200 companies operating in the sector and with close to 300 directors (including shorts and
documentaries).
4.3.4 Public investment in favour of national TV drama production and regional funds
for the audiovisual sector
In order to complete the picture of the public resources earmarked by RAI in favour of the
audiovisual sector, one needs to highlight the strategic role played by the public service licensee
in supporting national drama production on the basis of the previously mentioned investment
obligations in European programs established at European Community and national level.
The annual Budget allocated to this sector in 2010 dropped to 190.4 million euros and has
been decreasing constantly since 2008. The resources are distributed among fifteen or so
independent production companies183, from which RAI commissions works of various kinds
divided into three different formats, from TV movies (single episode) to series usually aired
during television prime time on RAI Uno, to extended daytime series (soap operas). The cost
of each drama production can vary in average between 4 million for a 2-part miniseries (the
most widespread format in the 2010 production plan, with 15 approved productions) to the 8
million for a 6-part series and up to 14.5 million for a long 13-part series.
181
The introduction of the tax credit, as a first immediate effect and with economic conditions equal, entails
an automatic reduction of tax revenue which is estimated by the Ministry to amount to approximately 77 million euros, considering the effects of the internal and external tax credit which would effectively cut the current tax revenue
for the sector which stands at around 290 million euros (with only indirect taxation being taken into consideration).
See Agevolazioni fiscali per il cinema (Tax relief for the cinema), I Quaderni dell’Anica, December 2008.
182
RAI Cinema, first set up in 2000 as a spinoff of the ex RAI Division “Drama Purchase, Film Production
and Products Sales”.
183
According to community and National regulations an independent production company is an audiovisual
production company that is not controlled by a majority or binding interest possessed by a television broadcaster,
both in terms of shareholding or in commercial terms. A majority or binding interest is seen to exist when more
than 25% of the company’s shareholding belongs to a single television station (50% when more broadcasters are
involved) or when, for a period of three years, over 90% of the company’s turnover is produced with the same television broadcaster.
268
Public investment in the cultural and telecommunications industry
Fig. 14: RAI investment in National TV drama production, 2006-2010
300
250
270
282
275
250
190
200
150
100
50
0
2006
2007
2008
2009
2010
Source: IEM elaboration of data from the RAI TV drama production plan. Figures in millions of euros.
A form of regional public support for film and the audiovisual media was present, in a
rudimentary and fairly unstructured form, even before the administrative decentralization
process which took place in Italy between the second half of the Nineties and the early years
of the 21st Century, particularly in the form of support for promotion, through the funding of
local film and audiovisual festivals.
It was however with the devolution reform introduced to Chapter V of the Constitution (2001)
that the overall legislative authority on entertainment was entrusted to the Regions, leaving
central government with the regulatory role.
The process followed in the wake of a growth of interest by Regions for film and audiovisual
media and their economic and marketing impact on the territory, which has led to the setting
up of the Film Commissions, public agencies (occasionally private or joint public-private)
designed to attract audiovisual production activities towards certain territories, facilitate
administrative matters and often act as intermediaries between demand and offer for all
professional roles/workers involved in the production chain.
The blossoming of the Film Commissions was followed by a move towards further
rationalisation and consolidation, which has led to a collaborative relationship between
different local administrative levels and the merging of certain regional and municipal Film
Commissions in the regional capitals.
The next stage after 2001, therefore, saw many Regions set up Film Funds, designed to back
production and generally bound to territorial investment clauses (meaning the production
company is required to spend part of its budget on the Financing Institution’s territory). These
funds are often managed by the Film Commissions themselves, which use them as a tool to
expedite their mission, or directly by the Region through a specifically appointed department.
The first fund to be set up, by the Friuli Venezia Giulia Region, dates back to 2003 through a
donation of 900,000 euros for a three year period (which has grown in time), followed by the
Salento Film Fund (now assimilated by the Apulia Film Fund) and by the cinematoFig.ic fund
of the Region of Sardinia184.
An initial quantification of regional resources available for audiovisual production was carried
out by the Fondazione Ente dello Spettacolo185 (Entertainment Institute Foundation). In 2009
the resources managed by the regional Film Funds totalled 15 million euros, a threefold increase
compared to the 4.9 million of 2007. These funds have almost compensated for the drop in
184
See Alberto Versace, Lorenzo Canova, Tommaso M. Fabbri, Francesca Medolago Albani ,“L’evoluzione
del sostegno pubblico all’audiovisivo” (The evolution of public funding in the audiovisual sector), edited by, in
L’industria della comunicazione in Italia, XI IEM Report, Guerini & Associati, Milan 2008, also for a historical account of regional financing for audiovisual production, both at Italian and European level.
185
Ente dello Spettacolo Foundation Il mercato e l’industria del cinema in Italia. Rapporto 2009 (The market
and the film industry in Italy. 2009 Report).
Public investment in the cultural and telecommunications industry
269
FUS financing for film production (without, however, taking into consideration extra-FUS
funds) and are paid out, for the most part, by the Film Commissions, through a considerable
share of these sums (6.4 million, over 40%) is still managed directly by the Regions.
Table 1: Regional funds for audiovisual production, 2009
Fund
M€ 2009
Film Commission funds
8,57
Sicilian Region F.C.
3,00
Friuli Venezia Giulia F.C.
2,09
Campania Region F.C.
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 funds
6,44
Tuscany Region
4,50
Lazio Region (via FILAS)
1,29
Sardinia Region
0,65
Regional Fund Total
15,01
Source: Ente dello Spettacolo. Note: figures in millions of euros.
A more recent quantification of the resources invested at the regional level in the entire
film production process (development, production and distribution) was carried out by the
entertainment industry association ANICA, in the context of a research project promoted by
the Italian Film Board at the Ministry of Culture186. On the basis of the first estimates that
have transpired from the research, the total made available from 2003 to 2010 amounts to
116 million euro. In 4 years (2006-2009) the resources absorbed by the audiovisual sector
have almost increased five times. In 2009 the budget stood at 29.6 million euro (including the
resources from the Framework Program Agreement “Sensi Contemporanei”187 (Contemporary
Senses), of which at least 40% was awarded to cinema.
4.3.5 Extra FUS funds
Beginning in 2004 the entertainment sector began to benefit from “extra FUS” State funds,
which supplemented ordinary allocations, thanks to the institution of the ARCUS company
(entirely backed by public finance) and the dispositions that guaranteed a share of Lottery
revenue to the cultural activity and heritage sector, as well as the pre-tax charitable donation
refunds (“8 per mille” and “5 per mille” system)188.
By 2008, these resources topped the 32 million euro mark, a considerable sum equal to 7% of
the overall allocation for that year in favour of entertainment activities between ordinary and
186
ANICA research projects, “Mapping the regional film support tools”. A first presentation, entitled “Evolution of regional funding for film and audiovisual production: constraints and opportunities”, took place at the Venice
Film Festival on 8 September 2010.
187
The Contemporary Senses projects “The development of the audiovisual industry in the South of Italy”
was first started in 2005 by the Department of Development and Economic Cohesion (MISE) of the Italian Film
Board (Min. of Culture) as an innovative policy tool to experiment with different forms of audiovisual expression
as a way of promoting the territory. The projects benefited from national and regional FAS resources and were produced through Framework Program Agreements (APQ) between the State and the Regions. The Regions involved
so far have been Puglia, Sicily and Basilicata.
188
Over the course of the years, albeit sporadically, the sector has also benefited from funds from the film
and theatre credit fund of the Banca Nazionale del Lavoro (now managed by Artigiancassa) as well as additional
resources from either Finance Acts, purpose specific bylaws and even from other ministry departments.
270
Public investment in the cultural and telecommunications industry
special funds (471 million euros)189. In 2009 the resources, entirely originating from the revenue
of the midweek lottery draws, amounted to 15.3 million, which were allocated essentially to the
Petruzzelli Lyric Theatre in Bari, the Cinecittà Holding and ETI (Italian Theatre Institute). The
trend for these funds during the course of the last years has been very irregular, mirroring the
un-systemic nature of the measures implemented.
Fig. 15: Extra FUS contributions, 2005-2009
35,0
32,2
29,7
30,0
25,0
25,2
23,3
20,0
15,3
15,0
10,0
5,0
0,0
2005
2006
2007
2008
2009
Source: IEM elaboration of Entertainment Observatory and Min. of Culture data. Figures in millions of euros.
If on the one hand these additional funds have helped to remedy certain very critical situations
connected to the impossibility of accessing constantly dwindling ordinary funds, on the other
it has made the appraisal of public funding even more complex, particularly with regard to the
funding of institutions of national interest operating in the entertainment sector190, the main
beneficiaries of these kinds of funding. A share of the extra FUS funds also flow in through the
special projects organised directly by the Public Administration191 or through the emergency
measures that have followed one upon the other in recent years to stem the chronic financial
disarray of the Operatic and Symphonic Foundations192 or to remedy the long-term delays in
the granting of box office subsidies to film producers.
Table 2: Allocation trend for extra FUS funds by sector and number of projects (2005-2008)
2005
Sector
Sub-sector
Operatic-Symphonic Foundations
Music
2007
2008
2009
sum
n.
sum
n.
sum
n.
sum
n.
1
4.380
1
3.000
1
4.000
14
20.000
1
6.000
1
621
1
4.621
20.000
1
6.000
Institutions
1
654
Promotional Institutions
4
2.291
5
7.325
Special projects
sub-total music
2006
n.
1
300
1
3.300
189
It should be highlighted here that of the 32.2 million paid out as many as 20 were assigned with varying
sums to the 14 Operatic-Symphonic Foundations.
190
The reference here is to institutions such as the Ente Teatrale Italiano (Italian Theatre Institute) – ETI;
the Accademia Nazionale di Arte Drammatica “Silvio D’Amico” (“Silvio D’Amico” National Theatre Academy); the
Venice Biennale Foundation; the National Institute of Ancient Drama Foundation – INDA; the National Dance
Academy, The National Opera Dance Academy Foundation; Cinecittà-Luce; the Fondazione Centro Sperimentale
di Cinematografia-National Film School.
191
According to the regulations in force for the various arts (dramatic theatre, film, music etc.), subsidies
can be granted to exploitation and promotional initiatives or even initiatives focusing on particular celebrations or
events, even when they are arranged directly by the Administration, providing they take place exclusively during
the year for which the request is presented.
192
On 19 April 2010 the Council of Ministers approved a decree which, according to the Ministry for Culture, should lead to a more efficient management of the Operatic Foundations, rationalising their expenditure and
favouring productivity and qualitative improvement of their productions. The text provides for different degrees
of independence beginning with the Scala in Milan and the Santa Cecilia Academy in Rome and tighter rules on
employee turnover and recruitment. We should point out that in the last years the Ministry has been forced to put
5 Foundations under compulsory administration.
Public investment in the cultural and telecommunications industry
271
Dance
Institutions
2
281
1
sub-total dance
2
281
Theatre
Institutions
3
11.415
4
5.416
Special projects
2
240
3
424
5
11.655
sub-total theatre
Box office subsidies
Institutions
Cinema
2
10.400
7
5.840
18
7.058
1
7.000
Abroad
Production
1
sub-total cinema
1
62
3
10.462
20
1
77
2
11.302
1
5.000
2
11.302
1
5.000
2
8.ooo
11.000
1
3.000
1
80
2
1.150
5
9.230
11.000
1
3.000
14.188
1.223
Institutional requirements for film and
sdv
Total
2
130
Special projects
Promotion
77
16 29.723 29 23.328 10 25.230 16 32.223
1.287
15.287
Source: IEM elaboration of Entertainment Observatory data, Min. of Culture.
This analysis indicates a very remarkable element of discontinuity of the choices made by the
competent authority regarding the entity and nature of the projects to be supported, which
appear to be outside the original systemic vision one can trace in the setting up of the FUS.
The policy guidelines behind the measures - as the Ministry itself has admitted – seem dictated
more by the situation at the time and a basic need for immediate cash rather than any kind of
broader strategic intent. What’s more, in 2008, one notices a greater concentration of resources
in favour of certain institutions (Operatic Foundations and Cinecittà) compared with the
previous years.
Over the course of the years, the practice of supporting institutions of national importance with
non-ordinary resources has made the functional and economic picture even more unstable and
uncertain, starting with those very subjects which “should embody the essential structure at
the service of the entire entertainment system, and which instead, when they are led outside
the natural funding channels, risk finding themselves in a very complicated condition of
instability”193.
4.3.6 ARCUS resources for culture and entertainment
The ARCUS company “Società per lo sviluppo dell’arte, della cultura e dello spettacolo”
(Company for the development of art, culture and entertainment), was set up in 2003194 but
only became operational on 16 February 2004. It aims to promote and provide financial,
technical, economic and organisational backing for projects and other investment initiatives,
and to restore and recover the country’s cultural heritage as well as other actions in favour
of cultural activities and entertainment, in line with the constitutionally assigned functions
of the Regions and the local authorities. The company capital is entirely underwritten by the
Ministry of the Economy, while the company operation is based on its policy programs, which
are dependent on the annual decrees adopted by the Ministry of Culture in collaboration with
the Infrastructure Minister.
ARCUS’ regulatory structure originates from the Budget of 2003195, which included the
allocation of 3% of infrastructural funding to actions in the field of culture and national heritage,
on the basis of criteria and methods to be included in specific regulations to be issued by the
193
See FUS usage report, year 2008.
194
Pursuant to Article 2 of the Law N. 291 of 16 October 2003. Instructions in matters relating to cultural
goods and activities, sport, universities and research and the setting up of Companies for the development of art,
culture and entertainment – ARCUS S.p.a.
195
Law N. 289/2002 Chapter V “investment funding” and Art. 60 “development investment funding”.
272
Public investment in the cultural and telecommunications industry
Culture Ministry, in conjunction with the Ministry for Infrastructure and Transportation196.
With these regulations, the legislator had introduced a different and novel approach to cultural
funds, qualifying them expressly as investments, emphasising their virtuous connection
with the territorial infrastructures and exploiting their use as a positive economic and social
development factor.
In order to implement this regulatory framework and as an alternative to direct ministerial
action, steps were taken to set an independent company which, by applying cost effective
management and best organisational practices, could ensure the most efficient and effective
pursuit of the generally accepted objectives indicated by the founding law.
The Company’s main institutional mission is to act as a “facilitating” body by engaging in
promotional and support activities for projects and investment initiatives designed to restore and
salvage the nation’s cultural heritage and other actions in favour of cultural and entertainment
activities. In order to perform these tasks, ARCUS is authorised to allocate resources for
projects presented according to certain parameters and requirements while complying with
precise expenditure limitations, defined in specific inter-ministerial regulations197.
From its very inception, the company has encountered serious management and organisational
difficulties due to the lack of precise policy instructions from the competent Ministries (the
Ministry for Culture and the Ministry for Infrastructure and Transportation) and especially
due to the absence of the aforementioned implementation regulations, which were meant
to provide the allocation criteria and methods in spite of the reiterated warnings issued by
the Court of Auditors which on several occasions pointed out the company’s lack of clear
direction198.
Only towards the end of 2008, four years after its constitutions, was an inter-ministerial
decree199 finally issued by the Ministries of Culture and Infrastructure, introducing the longawaited Regulations, which was followed on 13 January 2009 by an inter-ministerial policy act,
which provided the guidelines for the action program.
From the very beginning, the actions taken by the company have been governed by temporary
emergency instructions that have remained operational for a long time, with negative
repercussions on the institution’s implementation methods and management, which were
always marked by an extremely discretionary project selection process and a growing allocation
fragmentation. These factors “have essentially reduced the Company’s actions into becoming
a mere promoter of self-determined initiatives, which have often ended up being replacing or
supplementing the ordinary ones pertaining to the Ministry of Culture”200.
196
Subsequent decrees, extended until the end of 2007, have assigned ARCUS a supplementary share of 2%
of the allocations prescribed under Law 443/2001 (so called Legge Obiettivo – Legislation on Strategic Infrastructures).
197
ARCUS operates as a management and fund raising tool for financial means calculated on a share of the
state allocations for infrastructural works; the acquired resources are necessarily, given their origin, in the form of
investments, seeing as the sums are obtained through 15-year loans contracted with the Cassa Depositi e Prestiti (a
kind of public loan institution) and accounted for as capital in the State’s accounting system.
198
The extended delays in the adoption of the regulations and the consequent defaults have effectively “prevented any verification of the actual capacity of ARCUS to fulfill the originally assigned mission and the important
innovative role it was supposed to embody for the promotion and development of significant actions, as conceived
by the legislator and the main motivation behind the institution’s original founding”. See Court of Auditor’s report
on ARCUS, year 2007.
199
The Decree N. 182 of 24 September 2008 “Organisation of the criteria and methods for the use and
allocation of a percentage share of infrastructure funding to be earmarked for actions conceived for the protection and promotion of the cultural heritage and cultural activities.” published in the Official Gazette N. 270 of the
18/11/2008, and became effective on 3 December 2008.
200
According to the Court of Auditors, a characteristic trait of the resource provision mechanism should be
that the main part of the company’s action be charged to State debt, seeing as it is the State’s accounts which are responsible for returning the sums loaned over a fifteen-year period. This system, although it “facilitates the retrieval
of immediate funds, can only be justified if it translates into a faster and more economically viable selection and
promotion of suitable measures, which must however involve investments which can clearly be labeled as innovative and therefore objectively different from those promoted by the public administrations operating in the sector”.
Public investment in the cultural and telecommunications industry
273
Further failings by the responsible Ministries concern the appointment of the Company’s
regular governing bodies, which have operated with a complete complement of appointments
only during the first year of their institution. As of November 2006, as it turns out, a prolonged
period of special administration (which included two periods of compulsory administration)
set in, with extremely negative repercussions on the company’s effectiveness201.
As repeatedly denounced by the Court of Auditors, the temporary regulations left the
Ministries involved plenty of discretionary room for manoeuvre, gradually restricting the role
of the company into that of a mere tool and executive arm for self-determined decisions in the
absence of any form of thorough integrated programming202. In spite of the findings of a special
Committee appointed by the watchdog Ministry in August of 2006, which broadly concurred
with the critical observations of the Court of Auditors and suggested a more suitable legal form
for the company, nothing has essentially changed in terms of ministerial attitude or regulatory
implementation.
The main issue at stake here is the limited impact that the investments have produced in the
territories where the projects have been carried out: in practical terms the funds allocated
have not acted in any way as a driving force and multiplier of further resources, nor have they
generated any direct or indirect social and economic benefits for the country.
The Court of Auditors has gone as far as to suggest that the company be closed, a decision that
cannot be avoided if the actions implemented by ARCUS should continue along the same lines
where they are nothing more than replacements or supplements of the actions funded by the
Ministry of Culture.
As has already been mentioned, in February of 2009, following the publication of the
implementation regulation, the competent Ministries have presented ARCUS with new policy
directives in which the program of actions is divided into three different areas:
•
promoting the support and requalification of State, non-State and religious cultural
heritage through actions related to the impact of the existing infrastructures on the context
of reference;
•
guarantee refurbishing and protective actions for the landscape aimed at safeguarding and
preserving the specific and particular features of the landscape;
•
promoting other actions in favour of cultural and entertainment activities.
As far as this last area is concerned – which is the object of this Report – the act identifies
two specific objectives: the updating and exploitation of the theatrical, musical and cinematic
infrastructures and activities; the promotion of investments in major shows, events and high
profile meetings that might act as a driving force for tourism and for the economic, social and
cultural development of the Italian territory. These actions could also take place abroad.
Before outlining the program of investments envisaged for the three year period 2010-2012,
it’s worth while providing an illustration of the funding so far paid out by ARCUS, stating
from the outset that this is a complex operation due to the procedural mechanisms connected
to the loans entered into with the Cassa Depositi e Prestiti (a joint-stock company owned by
the Italian State and Bank Foundations which provides “specific-purpose” loans for public
See Court of Auditors report on ARCUS, year 2007.
Up to 18/06/2008 the management as for the previous year, had been entrusted to a monocratic body
201
represented by the Special Commissioner Arnaldo Sciarelli, who had taken over on 01/04/2007 from the previous
Commissioner Guido Improta. From 19/06/2008 to 16/10/2008 the management was assigned by Ministerial Decree to a new monocratic body represented by the Special Commissioner Salvatore Italia. From 18/11/2008 a new
Board of Directors was appointed, once again by Ministerial Decree, chaired by Salvatore Italia. On 18/12/2008 the
Board of Directors took office, thus ratifying the Company’s return to ordinary administration. 202
The critical comments made by the Court of Auditors included reference to the fact that the annual programs and the connected three-year agreements had essentially been reduced to “a mere listing of individual events,
growing in numbers and fragmentation, often approved too far in advance or too late, concerning projects that for
the most part had already taken place and often devoid of any significantly innovative nature, in contrast with the
policy directives to which reference was made in the actual decisions issued”.
274
Public investment in the cultural and telecommunications industry
investments), but particularly owing to the reallocation of funds during work in progress for
projects that were never completed.
As can be inferred from the summary table of the figures allocated and invested by ARCUS year
by year, the data shows a strong growth in annual allocation from 2004 (first year of operation)
to 2006, moving from 57 million to 80 million euros. The decision-making activity is totally
defined for the years 2004 and 2005, and even takes advantage of a few reallocated sums of
modest dimensions.
The phenomenon however grows in magnitude in 2006, when it concerns almost half the
budgeted allocations, for which reason only a minor amount is left to be allocated. The figures for
the years 2007 and 2008 are the result of further reallocations, which provide a clear indication
of a lack of ministerial programming, due to difficulties and delays in procedures connected
to the allocations assigned to the decentralised bodies by the Ministry of Infrastructure and by
the same Ministry of Culture.
Table 3: Funding trends for ARCUS (2004-2008)
Year
Sum identified
in the action
program
2008
7.918.794 (**)
2007
48.435.144 (*)
2006
80.161.000
2005
60.317.000
2004
57.370.000
Totale
254.201.938
Loan sum granted by
the Cassa DD.PP (net
of Arcus investment
expenses, interestonly payments and
extra revenue on the
2005 loan)
Reallocation of
sums related
to projects not
successfully
completed or
definanced
pursuant to DL
16/03/2007
-
Reallocation of
sums related
to projects not
Allocated
successfully
sums
completed or
definanced
pursuant to DL
24/09/2008
Sums
still to be
allocated
-
-
-
7.918.794
-
-
3.415.000
43.320.000
1.040.144
78.650.000
38.210.000
1.220.000
39.220.000
0
58.300.000
5.000.000
300.000
53.000.000
0
55.560.000
2.650.000
2.189.100
50.720.000
0
-
-
-
186.260.000
-
Note: (*) The sum is equal to the sum of the reallocations relative to the previsions of the D.I. 16/03/2007, to which
one has to add the extra income relative to the loan for the year 2005, amounting to €2,575,144. (**)The sum is equal
to the sum of the reallocations relative to the previsions of the D.I. 24/09/2008 (as shown in the table, to which is
added: €17,183 expected residual interest only payments pursuant to P.I. 2004; b) €17,000 expected residual interest
only payments pursuant to P.I. 2005; c) €11,000 expected residual interest only payments pursuant to P.I. 2006; d)
€749,511 for extra income relative to the loan for the year 2006. Source: IEM elaboration of ARCUS and Court of
Auditors data.
Fig. 16: ARCUS allocations and payments (2004-2008)
90
Allocations
80,2
80
Disbursements
70
60
60,3
57,4
50,7
53,0
48,4
50
44,4
39,2
40
30
Million
20
7,9
10
0,0
0
2004
2005
2006
2007
2008
Source: IEM elaboration of Arcus and Court of Auditors data.
Public investment in the cultural and telecommunications industry
275
In the five years taken into consideration 73.2% of resources made available in the action
program have been actually allocated, amounting to a little more than 186 million euros, with
an annual average of 37.2 million euros203.
For the first 4 years of activity (2004-2007) one can retrace the distribution of the resources
within the individual sectors. Over half the amounts have been assigned to Heritage funding
(53.6%) while 43.3% (approximately 20 million euros) have been used to finance culture and
the entertainment sector. It is worthwhile pointing out how the two areas show an almost
mirror tendency, with a strong growth in heritage projects during the 2006-2007 period to the
detriment of investments in culture and entertainment. The actions for the protection of the
landscape appear to be residual.
At the end of 2009, a Decree of the Ministry of Culture in collaboration with the Infrastructure
Ministry204 allocated 200 million euros to the new actions (208 projects) managed by ARCUS
for the 2010-2012 three-year period.
Fig. 17: ARCUS resource distribution by investment sector (2004-2007)
Heritage
Culture and entertainment
Other
Landscape
35,0
30,0
29,6
28,4
28,1
25,0
21,9
18,4
20,0
17,4
18,1
15,0
14,5
10,0
5,0
3,1
1,7
1,0
0,0
2004
2005
0,2
2006
2007
Source: IEM elaboration of ARCUS and Sole 24 Ore data.
The budget includes 3 million euros for instrumental investment expenses and operating costs.
The program will be implemented according to the following guidelines:
•
increasing the value and public awareness of the National cultural heritage;
•
enhancing the added-value produced by closer links with the cultural industry and the
productive and financial sectors located in the area;
•
ARCUS, within the context of the plan, must undertake a support and coordination role
for the performance of certain strategic programs such as:
- experimental management and exploitation plan of the Archaeological Parks,
- a promotional program to exploit cultural heritage,
- the development of cultural basins,
- co-partnership projects with other public or private entities (such as Regions and
Bank Foundations) in order to finance particularly costly and ambitious projects;
•
exploitation and expansion of the new company Cinecittà-Luce SpA.
On the basis of the provisions of the 2008 Regulations (Min. Decree 182/2008), the resources will
203
The figures for the payments made in 2008 have not yet been made public.
204
Ministerial Decree of 1 December 2009 containing the Program for actions concerning the protection of
cultural heritage and activities and live entertainment for the years 2010, 2011, 2012, to be funded with resources
identified pursuant to Art. 60 paraFig. 4 of the Law N. 289 of 27 December 2002. Official Gazette of the EU, 11 February 2010.
276
Public investment in the cultural and telecommunications industry
be sub-divided among three macro-areas according to the following amounts and percentages:
•
100.3 million equal to 50% of resources will be used to fund 119 support and requalification
actions on the cultural heritage:
•
59.6 million equal to 30% of available resources for the recovery and protection of the
landscape;
•
40 million equal to 20% of available resources for cultural and entertainment projects.
Fig. 18: Fund allocation 2010-2012 by activity sector
140
100
Allocations
119,0
120
Projects
100,3
80
59,6
60
56,0
40,0
40
33,0
20
0
Cultural heritage
Landscape
Culture and entertainment
Source: IEM elaboration of Min. of Culture data. Cultural heritage; Landscape; Culture and entertainment
Fig. 19: ARCUS fund allocation
2004-2007
Culture and
entertainm
ent
20%
Other
3%
Culture and
entertainm
ent
43%
Fig. 20: ARCUS fund allocation
2010-2012
Heritage
54%
Landscape
30%
Cultural
heritage
50%
Landscape
0%
Source: IEM elaboration of Min. of Culture data.
Compared with the allocations for the previous years, this new programming plan pays more
attention to the landscape, reducing the funds for actions in support of the entertainment sector,
which drop from 43% in the previous period to 20% in this one. The investment plan envisages
that the 40 million for the support of culture and entertainment be all made available in 2010
and distributed among 33 projects, which would seem to indicate that this is, to some extent,
emergency funding. Most of these resources, in fact, amounting to 54% (21.6 million euros),
will be entirely assimilated by 7 promotional measures managed by institutions of national
importance (including the funding of ARCUS’ expenses) and as such cannot be distributed on
a regional basis.
Among the most substantial actions the one that stands out the most concerns the subsidy
for the enhancement and strategic revival of Cinecittà Luce, which alone will account for
approximately 16 million euros: this support meets a specific aim of the Ministry for Culture,
which in its position as sole shareholder, has explicitly called for supplementary funds to be
provided for film promotion activities both in Italy and abroad and technical/financial support
Public investment in the cultural and telecommunications industry
277
from ARCUS205.
Still within the context of the film sector, the new ARCUS funds will also be used to finance
the “Quality Screen” project promoted by industry association AGIS, with 3.5 million euros
in favour of a cinema circuit that schedules Italian and European art films. On the theatrical
promotion front, by the same token, ARCUS will fund a few national and international projects
of the Ente Teatrale Italiano, for a sum of 1.3 million.
Fig. 21: ARCUS fund allocation for culture and entertainment, 2010
Sud+Isole
5%
Interventi
regionali
46%
Enti e
attività
nazionali
54%
Centro
43%
Nord
52%
Source: IEM elaboration of Min. of Culture data.
The remaining 18.4 million, which amounts to 46% of the resources allocated for culture and
entertainment, are divided as follows: 51.7% to the North, 42.9% to Central Italy and only 5.4%
to the South of Italy and the Islands for a total of 26 projects. If one excludes the resources
allocated to actions in favour of institutions and projects of national relevance, the detail of the
allocation of the remaining funds for the individual Regions shows a greater attention paid to
the geoFig.ic areas of the North and Centre, which respectively account for 52% and 42% of the
sums, leaving only 5% to the South and the Islands.
Fig. 22: Regional allocation of ACRUS funds for culture and entertainment, 2010-2012
25
21,59
20
15
10
0,60
0,59
0,40
0,30
0,29
0,12
Umbria
Veneto
Marche
1,50
Puglia
2,00
Piedmont
2,75
Sicily
3,90
Tuscany
Lombardy
Liguria
Emilia Romagna
Lazio
0
National interv.
Thousands
6,00
5
Source: IEM elaboration of Min. of Culture data.
Among the 11 regions that receive contributions, Lazio tops the list with 6 million euros of
contributions, followed by Emilia Romagna with 3.9 million and Liguria with 2.7206. The sums
205
More specifically the Ministry has meant to “ensure that the merger lead to the best possible integration
between the two structures in order to exploit the prerogatives, the continuity of action, even with the aim of guaranteeing the broadest distribution of Italian cinema, taking advantage as far as possible of the technical and financial
assistance of ARCUS, on the basis of its statutory regulations and with a view to setting up collaborative strategic
and operational actions aimed at enhancing the cultural offer of both companies”. See Min. of Culture Policy Act for
Cinecittà Luce Spa, 3 April 2009.
206
Below are listed a few examples of the 26 entertainment projects backed by ARCUS in 2010: Ravenna
Festival (1.5 million euros; Verdi Festival (1.8 million euros); Festival Pucciniano (1.4 million euros); Accademia
Nazionale Silvio D’Amico (500 thousand euros); Reate Festival di Belcanto (Flavio Vespasiano Foundation, 1.5 mil-
278
Public investment in the cultural and telecommunications industry
allocated to the individual projects show a very broad deviation, which varies from 1.5 million
to 40,000 euros for minor initiatives.
The analysis of the ARCUS financial statements for the years 2004 – 2008 carried out by the
supervising authorities confirms a role that does not go beyond the “advance preliminary
judicial/bureaucratic verification activities, allocation of the funds listed in the joint ministerial
decrees and project monitoring”. And it has to be noted that the initiatives undertaken within
the entertainment sector tend to be completed at very short notice – which essentially indicates
that what we are looking at here are mere financial contributions, particularly for those projects
that have already taken place before the funding is received, in contrast with the nature of the
investment of resources based on loans, both in terms of origin and destination – and a very
minimal share of co-funding paid out by other subjects, with funds which were in any case
already earmarked at the time of project presentation, but had not been verified in their reality.
The stabilisation of the administrative organs after the long period of special compulsory
management and the consolidation of the regulatory set up with the new rules, along with the
renewed political intent (as proven by the policy guidelines provided in January 2009 and the
operational program for the three year period 2010-2012) should bolster the role played by
ARCUS and enable a revival of the company’s mission.
The main critical areas that need to be addressed concern the preliminary vetting and allocation
procedures, which still do not guarantee sufficient transparency and impartiality and the
programming of the activities, which requires a greater integration between the various levels
of government (State and local) and a more active support from the main public and private
players operating in the sector.
A greater effort is required if ARCUS is to be exploited as a development organisation and a
catalyst for resources, capable of providing innovative forms of backing for ambitious projects
that can rightfully hope to have a significant impact on the cultural sector and have strong links
with the local infrastructures, factors which, on the contrary, are not to be found in the “minor”
initiatives, particularly within the scope of this research, which is limited to the entertainment
sector.
The company should therefore concentrate its attention primarily on those initiatives that
depend on the ability to bring different territorial subjects and resources together, rewarding
those institutions that are capable of combining efficient company processes with a high degree
of innovation. The highly “purpose specific” contribution that this structure can provide must
have a multiplier effect at the cultural, social and economic level, acting as a driving force for
development in the sector. It is obvious that for these strategies to be implemented one must
first develop a reliable set of performance indicators, which should enable the measurement of
the impact of the actions (an element that is also missing within the ordinary funding system),
which can thus add proof of the added value produced by the Company’s actions and thus
justify its existence.
4.3.7 The Lottery resources for the entertainment sector
An additional source of public funding for culture is represented by the revenue generated by
the Lottery, introduced with the 1997 Budget207. The law, integrated and modified by further
lion); Cultural and Communication policy department of the Rome Municipality (1 million euros); Carlo Felice
in Genoa (2.3 million); Teatro dell’Archinvolto in Genoa (450 thousand euros); Mantua Chamber Orchestra (600
thousand euros); Summer Festival of the Cantiere Musicale of Santa Croce (40 thousand euros); Rodolfo Valentino
Film and television Studios of the Abulia Theatre cultural Association (400 thousand euros); International Festival
of the Noto Valley (400 thousand euros); Todi Art Festival (300 thousand euros); Celebration of the third centenary
of the birth of Pergolesi (500 thousand euros); and the International Spirituality Festival “Divinamente 2010” (200
thousand euros).
207
Article 3, paraFig. 83 of Law N. 662 of 23 December 1996 “Rationalisation measures for public funding”.
The law, which was conceived during the terms of the ministers Visco and Veltroni (who were respectively at Finance and Culture at the time), followed the lead of the cultural contributions made by the British National Lottery,
Public investment in the cultural and telecommunications industry
279
legislation in 2001 and 2003, includes specific provisions for the attribution to the current
Ministry of Culture of a quota of the tax revenue generated by the Lottery up to a maximum of
154.9 million euros (300 billion lire), earmarked for the recovery and preservation of cultural,
archaeological, historical, artistic, archive and book heritage as well as landscape restoration
operations, cultural activities and to fund the actual operation of the entertainment sector. The
Ministry’s resource allocation mechanism prescribes that the tax revenue from the Lotteries be
assigned at the beginning of each year, as an advance, calculated as 50% of the final allocation
for the previous year (which usually means a six-monthly sum of 77.4 million euros)208.
From 2004 to 2010, as we shall see, the actual allocation has led to reduced annual sums
compared to the maximum legally prescribed threshold, due to measures revoking the sums
not invested (failure to start the projects) and cuts connected to public finance requirements.
The renewable and non-emergency nature of this kind of funding has enabled the Ministry of
Culture to use these resources within an activity programming strategy for the conservation
and exploitation of the country’s cultural heritage over a three-year period and therefore with
a broader perspective compared to the limits imposed by the “conservative emergency” so
typical of the FUS, using different reference parameters compared to those used for ordinary
programming.
The merit lies in the supplementary nature of these funds compared to ordinary resources
which, as is well known, particularly with regard to the protection and exploitation of cultural
heritage and activities, are grossly insufficient to manage the many emergencies found in the
territory, but also because they make it possible to set up co-financing agreements with the
various Regions and local authorities involved where (particularly in the South) Framework
Programming Agreements or other European Community structural funding is already in
place.
The administration has attempted to select the actions that were most clearly significant both
in terms of their financial size and the project’s close relationship with the specific territorial
context, rewarding those actions that relied on forms of partnership and, where possible, cofinancing209.
By 30 June each year the percentage of tax revenue generated by the Lottery, to be paid out by
the licensee Lottomatica to the Ministry of Culture is established, which for 2010 amounted to
roughly 3.8% of the amount paid over to the State.
The programming for the three-year period 2004-2006 provided for an allocation of 66 million
euros, which was halved after a year to just 35 million euros, owing to the previously mentioned
public finance requirements.
The reduced funding availability restricted the field of action to the protection of cultural
heritage and led to the exclusion of the projects related to entertainment and cinema.
For the following three-year period 2007-2009, the 2007 Budget210 prescribed a cut in funding
allocation of 30.9 million euros, with a consequent adjustment to the financial availability for
each year on a sum of 124 million euros.
This endowment suffered a further curtailment owing to the need to allocate funds to the single
investment fund, thus reducing the lottery fund resource availability that could be allocated for
the 3 years to 356.4 million instead of the 465 million (maximum threshold) that had originally
which earmarked 28% of its revenue to socially beneficial works and museums.
208
Art. 24 paraFig. 30 of the Law N. 449 of 27 December 1997, which included “Measures for the stabilisation
of public finance”. In 1998 the initial allocation amounted to 150 billion lire.
209
A few important initiatives were backed with Lottery funding and have enabled the restoration of large
complexes whose functional allocation will be managed directly by the institutes that are co-financing the actions.
Without the Lottery for example, there would have been no restoration of the Scrovegni Chapel, the Vittoriano
Palace Complex, and the Royal Palace in Genoa. See VI Annual Federculture Report, 2009.
210
Law N. 296 of 27 December 2006 – Budget 2007 “Dispositions for the formation of the annual and longterm state budget”.
280
Public investment in the cultural and telecommunications industry
been anticipated, to be equally distributed over the three years. These sums suffered a further
modification during work in progress which, for the three-year period 2007-2009, led to actual
funds being paid out worth 274 million approximately, for an average annual expenditure of
91 million euros.
The very considerable endowment did in any case enable a considerable quota to be assigned
to the entertainment and film sectors, amounting to 72.5 million euros, more than a quarter on
average of the total sum paid out for the period in question (26.3%).
It should be noted that in the modification action, the resources available to the abovementioned sectors increased quite considerably: live entertainment moved from 28.8 million
to 49.8 million euros while film climbed from 14.7 to 22.7 million euros.
In 2010, the overall resources have dropped to 60.8 million, of these 16.3%, amounting to
9.9 million, have been earmarked for live entertainment and cinema, which respectively will
receive 3.5 million and 6.4 million euros.
Starting in 2010, after 10 years of three-year programming, it has also been decided to plan the
actions relative to this allocation on an annual basis in order to guarantee, as has been stated by
Ministry of Culture, a greater stability for the fund and to avoid the problems connected with
works already begun.
Table 4: Lottery funds for entertainment sector and film (2007-2010)
Live Entertainment
Board
Activity/Institution
Theatre
Ente teatrale italiano
-
-
-
10.566.000
Institutional activities
Petruzzelli and Bari
theatres
-
-
-
4.000.000
Institutional activities
Theatre
-
-
-
736.000
Institutional activities
Dance
-
-
-
77.000
Institutional activities
Music
-
-
-
621.000
Institutional activities
Sundry/Entertainment
-
-
-
600.000
Institutional activities
Music, Theatre, Dance
-
6.142.130
6.087.620
-
Institutional activities
Petruzzelli di Bari
-
6.000.000
-
-
Institutional activities
Operatic and
Symphonic Foundations
-
-
15.000.000
-
Entertainment
Spoleto festival
Entertainment
Teatro festival Italia
Film management
and exploitation
Integrated project
Sub-total L.E.
2010
2009
2008
2007
900.000
-
-
-
2.000.000
-
-
-
600.000
-
-
-
3.500.000
12.142.130
21.087.620
16.600.000
Cinema Board
Institutional activities
Cinecittà Holding
-
-
8.000.000
5.000.000
Institutional activities
Venice Biennale
-
-
-
3.000.000
Institutional activities
Film activities
-
-
-
400.000
Institutional activities
Cinecittà Holding and
Venice Biennale
-
3.164.130
3.136.040
-
Institutional activities
Cinecittà Luce
5.800.000
-
-
-
Film management
and exploitation
Integrated project
600.000
-
-
-
Sub-total Cinema
6.400.000
3.164.130
11.136.040
8.400.000
Entertainment and
Cinema total
9.900.000
15.306.260
32.223.660
25.000.000
60.860.584
78.669.102
89.228.322
106.028.882
16,3
19,5
36,1
23,6
Culture total
% Entertainment and
Cinema
Source: IEM elaboration of Min. of Culture data.
Public investment in the cultural and telecommunications industry
281
In 4 years, from 2007 to 2010, the funds allocated to entertainment have dropped considerably,
moving from the 25 million of 2007 to the 9.9 of 2010, recording a drop of approximately
60%. As can be seen from the Fig., most of the resources available in 2010 (62%), equal to
37.7 million euros, have not been used to support territory based action in the various sectors,
but have instead been assigned to the Ministry’s General Directorship for Organisation and
General Affairs as supplementary funds for personnel stabilisation contracts and to produce
management and exploitation models211.
Fig. 23: Lottery fund allocation for 2010
Spettacolo
dal vivo
6%
Regioni e
prov
autonome
5%
Arti
7%
Antichità
5%
Archivi
2%
Beni Librari
2%
Cinema
11%
Fig.24: Lottery fund allocation for 2007-2010
35
32,2
30
25
25,0
20
15,3
15
DG OAGIP
62%
9,9
10
5
0
2007
2008
2009
2010
Source: IEM elaboration of Min. of Culture – DG OAGIP data.
4.3.8 The distribution of national public spending at regional level
In this final part, we intend to provide a concise picture of the trends of national public financing
for the entertainment sector (FUS and extra FUS) divided by individual regions, in order to
assess the level of territorial distribution of the resources for the various sectors.
The criteria identified for the localisation of the contributions takes into consideration the stated
legal headquarters (or the residence, where physical persons are concerned) of the beneficiary
of the subsidy: in certain cases, therefore, the data has the limitation of not being indicative of
the activities actually carried out in the area to which we have assigned the contribution. This
is certainly the case for travelling shows or touring theatre, dance and orchestral institutions
which, by their very nature, operate in various parts of the country, even though they have
their legal base in a specific region, or, once again, of contributions on box office returns
which, with Rome being the city where many authors and producers chose to reside, tend to be
pooled towards this particular area although the actual box office revenue was not necessarily
generated in the city.
To partially offset this misrepresentation and so as not to distort the overall picture, the data
processed by the Entertainment Observatory does not take into account the subsidies paid out
to institutions that operate throughout the national territory, nor to those operating abroad or
to special projects212.
The allocation by geoFig.ic micro-areas shows a gradual reduction of resources to the eight
regions in the North. Where they accounted for 47% of the overall funds available in 2002, by
2008 this share had dropped by 4 points and levelled off at 43%. This margin differential had
gone to the advantage of the Centre, whose share had increased by as much as 8%, rising from
32% to 37%. The most stable overall trend is the one posted by the eight Southern most regions
(Islands included), which in 7 years have lost just 1 percentage point (from 21 to 20%).
211
General Directorship for Organization, General Affairs, innovation, budget and personnel. The stabilisation contracts have concerned what was previously referred to as the Socially Useful Work Force.
212
The analysis does not consider the subsidies paid out for indirect actions in favour of film production and
cinemas as they are not economically comparable.
282
Public investment in the cultural and telecommunications industry
Fig. 25: FUS and extra-FUS fund distribution by macro-area (2002-2008)
North
2008
Centre
222.822.123
2007
191.492.733
198.793.761
2006
South and islands
106.327.547
165.069.891
182.314.657
86.321.647
162.242.166
80.881.490
2005
201.179.596
118.295.682
90.960.747
2004
208.132.824
122.323.038
94.055.004
2003
214.033.781
140.290.472
96.491.979
2002
211.295.276
139.815.086
91.483.984
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
IEM elaboration of Entertainment Observatory and Min. of Culture data.
If we take a closer look at each Region over the period under examination we note a generalised
tendency towards stability, and in certain instances, a growth trend. The most striking figure is
the one posted by the Lazio Region which, in recent years, has recorded an exponential growth,
moving from the 80 million of 2005 to the approximately 145 million euros in 2008 (equal to
27.6% of the FUS fund for that year) thanks to the high level of beneficiaries located in the area.
The second region in terms of funding importance is Lombardy, which, since 2006 has acquired
additional resources for about 10 million euros, accounting for 11.3% of FUS resources in 2008,
equal to approximately 80 million euros. Only one other region manages to top the 50 million
contribution bracket, Veneto, with FUS “collections” more than 10% (partly due to the fact that
it has two Operatic and Symphonic Foundations). Lazio, Lombardy and Veneto alone account
for almost half of the 2008 FUS (49.2%). The remaining Regions are all below the 40 million
mark. Among these we can identify a second group that top the 30-million mark comprised
of Emilia Romagna, Campania, Tuscany and Sicily, which respectively account for 7.2%, 7.1%,
6.8% and 5.8% of the overall FUS funds for 2008. They are followed by a third group, which
clear the 10-million euro mark comprising Piedmont, Liguria, Friuli, Sardinia and Puglia. In
the lowest bracket, below 5 million euros, we find seven Regions (Abruzzo, Basilicata, Calabria,
Molise, Trentino, Umbria and Valle d’Aosta) which, in 2008, were all below 1% of the overall
available resources.
To sum up, both the three-year resource programming prescribed by the “Mother Law” that
instituted the FUS, which has to withstand the yearly constraints imposed by budget laws which
have often modified the original allocations programmed the previous year, and the reduced
dimensions of a fund with a negligible impact on public finance as a whole, would seem to
call for a review of expenditure for the entertainment sector and its inclusion among capital
account investments (and not current expenditure) in order to guarantee greater funding
continuity over time for the operators and thus freeing these investments from economic
trends. Moreover, the influx of greater extra-FUS resources, instead of performing a precious
complementary role during the phases when there is a greater contraction of the ordinary
resources has turned out to have a series of limitations connected with a tendency towards
emergency programming, which is in no way consistent with the overall structure of the public
funding system.
Public investment in the cultural and telecommunications industry
283
Fig. 26: FUS and extra-FUS fund allocation by Region (2002-2008)
70
62,0
62,4
57,5
60
41,1
42,4
20
53,1
44,7
40,3
40
30
53,7
48,1
50
27,0
36,9
27,1
20,6
21,3
36,4
20,5
20,7
Lombardy
59,1
56,7
35,5
26,2
38,7
21,3
37,7
33,0
34,3
25,5
22,4
26,1
23,7
22,6
20,2
Emilia Romagna
40,9
32,2
23,8
23,2
19,9
21,2
17,6
17,6
19,0
Piedmont
Liguria
Friuli Venezia Giulia
Trentino Alto Adige
10
Million
Veneto
3,3
3,5
3,5
3,4
3,2
3,4
3,6
2002
2003
2004
2005
2006
2007
2008
Valle d'Aosta
0
160
143,9
140
120,6
Lazio
119,2
120
100
90,1
90,0
Tuscany
73,7
80
72,0
60
Million
40
20
0
Marche
38,0
37,5
36,1
34,3
7,9
7,5
30,6
34,5
35,7
7,2
7,5
Umbria
7,6
7,6
4,7
2002
4,7
2003
4,6
2004
7,0
4,5
2005
2006
4,5
4,1
4,0
2007
2008
40
35
Campania
35,1
33,8
37,0
30,9
30
28,6
27,1
30,7
30,3
Sicily
30,3
29,5
28,8
Sardinia
28,1
25
27,6
25,5
Puglia
19,9
20
15
14,6
13,7
13,6
10
Million
5
0
4,3
1,8
1,2
2002
Abruzzo
13,2
12,1
Calabria
11,7
11,2
10,8
6,9
6,4
13,4
9,7
9,2
5,3
5,1
4,9
4,3
4,4
4,8
Basilicata
3,1
1,4
2,7
1,0
2,7
0,9
2,0
0,5
2,2
0,4
2,1
0,4
Molise
2003
2004
2005
2006
2007
2008
Source: IEM elaboration of Entertainment Observatory and Min. of Culture data.
284
Public investment in the cultural and telecommunications industry
4,8
4,5
3,6
2,1
0,4
0,3
0,1
Umbria
Trentino Alto
Adige
Calabria
Basilicata
Molise
Valle d'Aosta
7,5
Marche
Puglia
Sardinia
Friuli Venezia
Giulia
Liguria
Piedmont
Sicily
Tuscany
Campania
Emilia Romagna
Veneto
Lombardy
Lazio
Million
150 143,9
140
130
120
110
100
90
80
70
59,1
60
53,1
50
37,7 37,0 35,7
40
30,3
26,1 23,2
30
19,9 19,9
20
11,7
10
0
Abruzzo
Fig. 27: FUS and EXTRA-FUS distribution by Region (2008)
Source: IEM elaboration of Entertainment Observatory and Min. of Culture data. Figures in millions of euros.
A final consideration on the relationship that ties the State to the Regions in matters of
entertainment. Ten years down the road since the reform of Chapter V of the Constitution that
has included entertainment among the issues subject to joint legislation (assigning the Central
State with the task of providing the general guidelines and the Regions as the regulatory and
administrative authority) and we are still awaiting an in-depth reform of the public funding
system. Only by passing systematic legislation based on a loyal and collaborative approach
can one hope to rationally assign the tasks, functions and resources to the various levels of
government and thus overcome the centralised and inadequate FUS management, while
correcting the conditions of heavy imbalance that are highlighted by the data on the distribution
of national resources within the various regions213.
A first important test bed has come around in April 2010 with the Legislative Decree of
the Ministry of Culture reforming the Operatic and Symphonic Foundations which, as we
have seen, account for more than 47.5% of FUS financing214. The decision aims to ensure an
appropriate containment of staff costs, by tackling the system of collective bargaining through
the appointment of a single, centralised employee trade representation, suspending the
turnover mechanism and falling back on more flexible forms of employment. Bearing in mind
the specific nature of the various subjects, further regulations will be entrusted with the task of
complying with the following criteria:
•
rationalisation of the organisation and operation on the basis of efficiency, correct
management, cost and business effectiveness in order to facilitate contributions by public
and private subjects in favour of the foundations;
•
drafting of the guidelines that must inform the decisions reached within the statutory
independence of each foundation and concerning the composition of the foundation’s
directive bodies, the management and supervision of all activities and operations and the
participation of private funders, which must not however undermine the foundation’s
213
For a more complete discussion of this issue please refer to Andrea Morrone “Lo spettacolo dopo la riforma del Titolo V: idee per una legge generale,” (The entertainment sector after the 5th Chapter reform: ideas for a
general law) In «Le Regioni», 1/2009. On 22 February 2010 the VII Cultural Commission of the Chamber of Deputies unanimously approved the code (framework code for entertainment sector) which, having overcome the hitch
of financial backing, could become legislation within the year.
214
The legislative decree was approved as a necessary and emergency action by the Council of Ministers on
16 April 2010 and is currently being presented to Parliament for conversion into law.
Public investment in the cultural and telecommunications industry
285
independence nor determine its cultural objectives;
•
measures for the institution of efficient methods of supervision of the foundation’s
economic and financial management;
•
stimulating improvements in management results through re-evaluation of the allocation
criteria for State contribution;
•
systematic regulation of the collective bargaining system;
•
possible definition of special forms of organisation for Operatic-Symphonic Foundations owing to their specific nature, their undeniable international relevance, their exceptional production capacity, their considerable internal revenue or for the significant and continued financial support by private subjects.
The decision also contains measures designed to rationalise the entire State funding system
for live entertainment organisations, redefining the selection criteria for the allocation of
contributions to live entertainment organisms, bearing in mind the activities performed and
accounted for, the quantitative level and cultural importance of the productions presented, the
consistency of the management organisms, as well as the figures on audience attendance. The
intention is to make the criteria for funding of musical, dance and theatre activities as well as
circus and travelling shows even more selective and transparent.
On 31 May 2010, in the context of the corrective austerity measures introduced to shore up
the public deficit by 24 billion euros for the two-year period 2010-2011215, which had become
essential following the worsening of the international economic crisis and the European Union’s
request for decisive action in the curtailment of public spending to reduce the deficit/GNP ratio,
the government decided to “de-finance” a series of cultural bodies and institutions including,
by way of example, the Centro Sperimentale di Cinematografia-National Film School, the
Rossini Foundation, the Festival dei Due Mondi in Spoleto, the Institute of Ancient Drama and
the Arena in Verona and to abolish a few public institutions such as the Ente Teatrale Italiano.
The list comprising 232 entities operating in various sectors of entertainment, culture and
sciences which in 2009 had received 21.5 million euros overall, was subsequently removed
from the Act. But the Ministry of Culture was assigned the task, within two months, of reducing
its transfers by 50% (equal to 10.7 million), following a careful assessment of the value of the
activities conducted by the individual subjects called into question.
4.4.
Public incentives for telecommunications infrastructures
4.4.1. Introduction
At the present state of play, there are various types of development incentives aimed at creating
telecommunications infrastructures with the goal of overcoming the digital divide through
action on two fronts; in terms of both network distribution, through the implementation of
fibre optic, copper and wireless technologies, and in the field of computer literacy, through
policies that stimulate the use of e-government services in local administrations.
Reducing the digital divide can produce varied and beneficial effects for all. First off, an
increase in the level of social cohesion. The spread of the ‘Web’ actually guarantees cultural
growth as flows of information, social norms and best practices are exchanged more easily and
can also be accessed and involve participation by every citizen. At the same time, the spread
of broadband allows the Public Administrations (PA) to provide e-government services at all
levels, improving the range and efficiency of public services as they become more accessible
to individuals and introducing obvious savings in management costs, as well as important
215
Legislative Decree “Emergency measures in matters of financial stabilisation and economic competitiveness” Official Gazette N. 125 of 31.5.2010.
286
Public investment in the cultural and telecommunications industry
elements of fairness and transparency.
The spread of broadband obviously also brings immediate advantages to the private sector.
Through the dissemination of new communication technologies, it is easier and cheaper
for small and medium-sized businesses to access services previously available only to big
businesses (e.g., the sale of products abroad), thereby improving their ability to compete. A
symbolic example is provided by the banking sector where the advanced nature of modern
data processing instruments has allowed for a new type of bank which, no longer based on the
traditional physical presence in the territory such as the local branch, favours the increase of
digital services (phone banking and home banking). This tendency can be extended to other
sectors of the economy operating in distribution and services, such as electricity, transportation,
insurance etc..
Intent on the goal of strengthening broadband and reducing the digital divide, public spending
is flanked with appropriate policies of support and incentives for the telecommunications
sector, which are also capable of encouraging private investment.
The policies required in the telecommunications sector branch out into at least three directions:
•
Regulation policies, intending to stimulate competition and therefore bring new competitive
entities into the market. These interventions should not only reduce the prices of services
but also help to maintain a high level of efficiency and quality in the service;
•
Cultural policies, aimed at reducing computer illiteracy in the population to a minimum
and thereby increasing the request for advanced information services;
•
Infrastructure policies, to reduce the physical isolation of the population without access to
broadband connections.
The infrastructure policies are particularly essential to eliminating the digital divide in Italy: the
territory comprises both mountainous ranges and under-populated areas, which make certain
zones unattractive prospects for private operators, who tend to concentrate their investments
in metropolitan areas where a higher density of population and advanced services provide
higher economic returns. This outlines a classic case of market failure, a context where the role
of public investment is essential to providing access to services in the areas of little interest
to private investors or by creating incentives for private entities so that telecommunications
services can be properly established across the whole country.
Support policies for the telecommunications sector, ushered in with the start of the new
millennium, have been advanced through different levels of intervention including:
the simplification of procedures for setting up electronic communication networks and
infrastructures; the establishment of specialised bodies such as the Interministerial Committee
for the Diffusion of Broadband, the Broadband Observatory and Infratel; and, on the financial
front, the creation of infrastructures (directly or through regional co-financing following a
public tender)channelled through Infratel; the approval of agreement protocols between the
Communications Ministry, Infratel and the larger telecommunications operators (Telecom
Italia and Fastweb); and other forms of regional and European Union funding216 and agreements
between Regions and operators.
Given the considerable complexity of the subject matter, this Report will look specifically at
the policies related to the creation of broadband infrastructures. Relative to the analysis of
the incentives in the ICT sector and services such as e-health and e-government, the Institute
216
European Union resources, EAFRD and ERDF, should be noted. The European Agricultural Fund for
Rural Development (EAFRD), introduced with the reform of EU Agricultural policy (CAP) in June 2003 and April
2004, is a single funding and programming instrument established by EC Regulation N. 1290/2005 to support rural
development policies in the Union and to make their implementation simpler. The European Regional Development
Fund (ERDF) was established by EC Regulation N. 1783/1999 by the European Parliament on 12 July 1999. This
regulation outlines the ERDF targets, in the context of Objectives 1 and 2, of Union support of transnational, crossborder and interregional cooperation (Inter-reg. III), of the economic and social renovation of the cities and areas
in crisis (Urban II) and technical innovation and assistance, as outlined in the general regulations.
Public investment in the cultural and telecommunications industry
287
of Media Economics-Rosselli Foundation has established a specialist Observatory to monitor
policy actions and investments in these initiatives at central and, particularly, at individual
regional administrative levels. The results of this monitoring will be published during 2011.
4.4.2. The main institutions promoting the spread of broadband
There are many bodies involved in the process of public funding for telecommunications
infrastructures in Italy, many which have been created especially for the operational
management of these investments.
The most important is Infratel Italia, a company created to set up broadband telecommunications
networks and reduce the digital divide in underdeveloped areas of the country, to meet the
service needs of the public administrations and support development of industrial areas.
Infratel Italia was set up in 1999217 by the Ministry of Communications (now a part of the
Ministry of Economic Development) and Sviluppo Italia as a special purpose company with
the aim of attracting business investment and development (99% reports to Sviluppo Italia and
1% to Sviluppo Lazio). It has been operational since June 2004.
In 2005, Infratel was charged with implementing the Broadband Programme (Law N. 80/2005
(Art. 7), which outlines the destinations for targeted funding from the Interministerial Economic
Planning Committee (CIPE) (see below). This outline follows a Programme Agreement
stipulated with the Ministry of Communications in December 2005. The same instrument, the
Frame Program Agreement, was proposed by the government to support Infratel’s work on the
ground.
The Interministerial Economic Planning Committee (CIPE) is an economic and financial
decision making body that acts as coordinator for economic policy programming on a national,
European and international level. In particular, it is responsible for allocating financial resources
to development programmes and projects and for evaluating the country’s principal public
funding initiatives. It is chaired by the Prime Minister and the other Committee members
include the ministers for Economy, Foreign Affairs, Economic Development, Infrastructure
and Transport, Employment, Agriculture and Forestry, Environment, Culture, Education,
European Policies, Regional Relationships and Tourism, as well as the President of the
Conference of Presidents from the Regions and Autonomous Provinces.
The Committee meets in session periodically and deliberations on the decisions taken are sent
to the Court of Auditors for registration and publication in the Official Gazette.
Among the main issues examined by the Committee, those most directly connected to the
public funding of telecommunications infrastructure are:
•
the Public Funding Decision, the programming and planning Report, the national statistics
Programme;
•
The Strategic Infrastructures Programmes, part of the so-called “target law” (N. 443/2001)
for which the committee approves individual projects and assigns funding;
•
the implementation of the National Strategic Framework 2007-2013;
•
the allocation of public financing from the Underutilised Areas Fund (FAS), and its
derivative funds, operating in the sectors of transport, social policy, business support,
research, technological innovation, environment, safety and education.
The Committee establishes and allocates tailored funding for Infratel for the implementation of
the Broadband Programme (Law N. 80/2005, Art. 7) annually through the Underutilised Areas
Fund (Art. 61, L. N. 289218 27 December 2002), in accordance with the previously mentioned
217
2000.
218
288
Legislative Decree N.1 9 January 1999 as integrated into Art. 1 of Legislative Decree N.3 of 14 January
The Underutilised Areas Fund (FAS) was set up with the establishment of the two funds referred to in
Public investment in the cultural and telecommunications industry
Programme Agreement stipulated in December 2005 between Infratel and the Ministry of
Communications.
This funding is allocated annually by the Committee and can be reformulated by later decisions
or Budgets (as happened in 2005, 2006 and 2007).
The Broadband Programme was approved with Committee resolution N. 83/2003. The first area
of action, which was specifically aimed at the regions of Southern Italy (Abruzzo, Basilicata,
Calabria, Campania, Molise, Puglia, Sardinia and Sicily), intended to link the commercial
operators’ central hubs by laying 1,800 km of fibre optic cables in 265 Municipalities. This
scheme was provided with financing amounting to 150 million euros for the three-year period
2003-2005. The Broadband Programme has two objectives: to create a public infrastructure to
link commercial operators and to promote computer literacy in the population by stimulating
the use of digital services (with e-government at the top of the list). The first of these goals was
assigned to the Ministry of Communications (through Infratel) and the second, encouraging
the request for digital services, was given to the Ministry for Innovation and Technology (which
lead to the creation of Innovation Italia within Sviluppo Italia).
The Ministry for Economic Development is the body directly concerned with promoting
policies for reducing the digital divide, while AGCOM (Italian Communications watchdog),
as the overseeing body, analyses the telecommunications market, supervising to ensure no
imbalances disturb its correct functioning. However, the relationship between these two bodies
is considered controversial because specific policies to tackle the digital divide were not included
in the criteria for the allocation of infrastructures and frequencies in the present Code of
Electronic Communications. If the Ministry, given the European Union’s approval of State help
for the development and implementation of public service television and data processing219 and
the government’s support of the spread of e-government, can use reduction of the digital divide
as a criterion in allocating resources following indications from the government, AGCOM, as
an independent non-governmental institution, must follow the precise criteria listed in the
Code. The most important criteria being: the improvement of benefits for users; development
of competition; sustainable investment with regards to market needs; technological nondiscrimination and neutrality; and transparency and consultation between the parties. The
discrepancy in the criteria for resource management is critical when it comes to assigning usage
rights to some of the frequencies in the spectrum which, as is well known, are public property
and of limited capacity. In these cases, AGCOM220 has the task of issuing criteria for assignment
as it did, for example, when the Wi-Max frequencies were allocated and as it will presumably
do again when the broadband mobile frequencies will be published. However, because of the
lack of appropriate legislation, these criteria will not directly include tackling the digital divide
but are based on the principles of transparency and the guaranteed correct application of the
principles of competition. Consequently, when issuing the competition tender along AGCOM
guidelines, the Ministry will have to limit its scope to the remit designated by the Authority,
in spite of the need to favour those operating in areas lacking in infrastructure. In the case of
the assignment of Wi-Max frequencies, the problem was partly resolved by AGCOM which
published guidelines that, while aimed at prioritising competition, provided the Ministry with
a wide margin of interpretation that allowed it to support initiatives to reduce the digital divide
at the same time.
It becomes extremely clear, therefore, that cooperation between national and local bodies
must be implemented to create a single strategy for combating the lack of telecommunications
infrastructures in certain areas of the country, which are, at the moment, regulated through
the Ministry and Regional Programme Agreements. The role of the Regions in promoting and
Arts. 60 and 61 of Law N. 289/2002 (Government 2003 Budget), which were later combined in Art. 4, commas 128
and 129 of Law N. 350/2003 (2004 Finance Act) as the Underutilised Areas Fund, with a four-year time frame, to
allow for the period of financial planning to coincide with the use of resources, while accommodating the different
speeds of spending.
219
European Commission Communication N. 2001/C320/04.
220
Ex Art. 29 Legislative Decree. 259/2003.
Public investment in the cultural and telecommunications industry
289
implementing direct action for the development of telecommunications has been boosted in
recent years. The central role of regional actions was confirmed in the “eGovernment 2012”
plan, which focuses on the reduction of the digital divide, with a strong emphasis on the aspects
relative to the distribution of e-government services to individuals and businesses, which is one
of its priorities. As stated in the Extra-Ordinary Plan 2010, adopted in agreement by State,
Regions, Autonomous Provinces and Local bodies in preparation for eGov2012, “innovation
of society and administration requires that every regional territory provides availability of
infrastructure services sufficient to service every area, especially those with less access to
traditional infrastructures, with adequate levels of service in terms of quality and quantity”.
An important role is played by the availability of resources deriving from European Union
sources (structural funds and additional national FAS resources) which are an essential channel
for leverage in promoting direct action in favour of the telecommunications sector, especially
for the regions of Southern Italy. This becomes particularly clear from an analysis of the regional
development programs (Regional Operative Programmes – POR 2007-2013) that identify the
drivers for redressing the underuse of territorial resources and promoting growth to reduce
the gap with the more advanced regions in telecommunications and, more generally, in the
development of an information society. However, at present, there is still notable uncertainty
regarding the consistency and, therefore, the real availability of these resources for the Regions,
particularly regarding the FAS funds, that have already been affected in 2008-09 by urgent
measures which called for the concentration of resources on goals considered priorities for
restarting Italy’s economy, such as strategic infrastructures (with particular emphasis on
networks for mobility and support for production activities) and the employment crisis.
Two more bodies were also created specifically to help the spread of broadband: the
Interministerial Committee for the Spread of Broadband and the Broadband Observatory.
The first, formerly “Executive Inter-ministerial Committee for the Adoption of a National
Plan for the Development of Broadband” (2002-2005), was reactivated on 20 December 2006
to support the creation of networks and communications infrastructures for the provision
of broadband services. It also had the double task of coordinating and monitoring ongoing
initiatives and identifying the most urgent interventions needed to reach a state of technological
preparation across the country, by activating representatives of local administrations, users
and operators in the telecommunications sector. On 20 September 2007, the Committee’s
Technical Group published Guidelines for the Regional Broadband Plans, later approved by the
Permanent Commission for Technological Innovation in Local Entities and Regions, and also
by the Unified Conference, which identified the development models for funding broadband
infrastructure actions nationwide.
The Broadband Observatory was created to monitor all the undertakings in broadband
infrastructures across Italy. Established in 2002 by Between, a business offering specialist
strategic and ICT technological services, with the Executive Committee for Broadband, the
Observatory continuously monitors the availability of broadband infrastructures and services
across the country, as well as implementation processes and local development models.
The Observatory’s principal functions lie in charting the offer for broadband infrastructure
and services, mapping the requests for broadband connectivity and services from households,
businesses and public administrations and analysing local development models and international
best practices. The Observatory’s work is particularly important when seen against the lack
of in-depth monitoring at a government level on micro-infrastructure activities, which are
operated by minor operators, especially those using alternative technologies.
4.4.3 The main interventions on the national scale
There are two distinct kinds of State interventions to tackle the digital divide: legislative
measures aimed at simplifying procedures to benefit local public policy; and the provision of
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Public investment in the cultural and telecommunications industry
resources allocated for the diffusion of new technology and the creation of infrastructures.
On the legislative side, the first measure dates from 2002 and approval of the so-called Gasparri
Decree (Legislative Decree 198/2002), which simplified and speeded up the authorisations
for the installation of fixed and mobile communications infrastructure, by issuing a unified
procedure for local institutions. This was followed by a second intervention which entailed
the provision for a unified, single procedure for the creation of electronic communications
networks and infrastructures (including, therefore, those necessary for broadband) within
the framework of the Electronic Communications Code, regulated by Clause V of the Code
(Arts. 86-95). This legislation was particularly relevant to the work of local bodies in issuing
authorisations for establishing infrastructures and allowing the implementation of civic works,
including digs and public soil occupation, and AGCOM’s powers and procedures with the aim
of sharing infrastructures and coordinating the work.
The guidelines issued by the Broadband Committee also highlighted the presence of bureaucratic
obstacles at a local level that are slowing down the establishment of infrastructures. To this end,
the Legislative Decree. N. 112 (Art.2) was issued in 2008 to introduce measures to simplify
and accelerate the procedures for installing fibre optic networks, the most important of which
offers the possibility of using publicly owned or managed civic infrastructures to lay cables free
of charge.
The document highlights four essential areas of action to bridge the digital divide in Italy:
1. Agreement between the authorities and operators for the implementation of
reciprocal undertakings in terms of broadband investment
This model provides authorities and operators with common obligations, in particular:
- Sharing the goal of reducing the infrastructural digital divide;
- The administration, preparation and sharing of broadband investment plans (the
authorities in terms of multimedia content and web services and the operators in terms of
updating their TLC infrastructures to reduce the digital divide);
- Negotiation of the content of the respective plans, to ensure their compatibility and
reciprocal suitability;
- Coordination of the implementation and management of the agreement (through
initiatives like establishing coordination and control structures, monitoring actions,
communication initiatives etc.).
Furthermore, the authorities should make agreements with all the operators present in the
territory interested in investing in infrastructure in areas suffering from the digital divide,
in order to protect competition in the broadband market.
The strengths of this model stand in guaranteeing the utmost reciprocal respect for the
roles of those involved, by making the operators responsible for developing the networks
and the public administrations responsible for providing web services and promoting the
development of multimedia content and in the open and conciliatory approach between
local institutions and operators.
The instrument normally used to set up this model is the protocol agreement.
2. Contributions to businesses in areas of market failure
This is commonly known as the “Scottish model” because it is based on characteristics of
the “Broadband in Scotland” project which was evaluated by the European Commission
as compatible with State Aid in Art. 87, Para 3, Letter C of the EC Treaty (State Aid N.
307/2004). It outlines the possibility for the authorities to provide public funding for
Public investment in the cultural and telecommunications industry
291
operators in areas of market failure, that is where “revenues are not capable of supporting
management expenses” or where “breakeven cannot be reached if management expenses
are added to investment expenses, or where it can be reached but on timelines that are
not compatible with operators’ policy, which normally consider a return on investments
within 3 years”.
The model has two phases: selection, through public evidence procedure, of one or more
telecommunications operators wishing to co-invest in the territory to provide connective
services for individuals and businesses, and the provision of economic incentives for the
work of the selected operators. Funding is contingent on the verification, ex-post, of the
effective market failure during the time frame of the validity of the incentive (3-5 years).
This type of intervention can take place exclusively in those areas where it is actually proved
to be necessary, that is where there are inhabited areas or businesses, and must be carried
out in such a way as to avoid distortion of competition (e.g.. the regional authorities can
divide the territory into various ‘lots’ for intervention where there are local, sub-regional
operators capable of intervention in these segments).
Funding must respect criteria of proportionality and be limited to the necessary quota
for reaching the expenses/revenues balance for each of the infrastructural interventions
needed. For this reason, the operator must keep separate accounting, and capital fund
repayment mechanisms must be in place if the investment turns out to be more profitable
than forecast.
This intervention model does not involve any public property asset and has been applied
in Italy to date only in Tuscany and Sardinia.
3. The establishment of public backhaul infrastructure made available to operators
Backhauling is the intermediate network infrastructure that lies between the backbone (i.e.
the “spine” of the broadband network) and the sites that host the equipment needed for
user access (whether xDSL or wireless). In this case, therefore, the public sector (directly
or through an intermediary) creates passive infrastructures (conduits or inactive fibre
optics) to link access gathering sites (hubs, antenna bases, etc.) to the operators’ backbones,
renting the infrastructure (in IRU mode) to one or more operators who complete the
network with the installation of apparatus to activate the connection service. In this case,
the administration shoulders the part of the process that is usually the biggest entry barrier
for operators, because the intermediate network (backhaul) represents approx. 70% of the
costs for implementing a new cable network, 40% for a wireless network.
Furthermore, since public ‘interference’ ends at the passive infrastructure stage, the
opportunity for the operators to handle activation and organisation and customise the
services allows for an increase in competition at the highest levels of the value chain ( the
network, technologies, services and contents level). To conform with European legislation,
the conditions laid out in the Altmark sentence must be respected, which outline that the
compensation must not exceed the amount necessary to balance (entirely or partially) the
costs of public service and that the choice of private operator should be made through a
public job tender procedure, which permits the selection of the business able to provide
the services at the lowest cost. The relative funding is configurable as compensation for a
Service of General Economic Interest.
This model has been adopted by Infratel in Italy for the completion of several tracts of
interest to various operators and to link some Telecom Italia hubs with fibre optic. In some
cases, the intervention was included in a systematic Regional programme. Other Regions
have constructed public backbones (with the principal aim of linking the local public
authority with high speed fibre optic access), which were subsequently made available to
alternative operators. Where this has already been implemented, the impact in terms of
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Public investment in the cultural and telecommunications industry
increase of broadband cover has not yet been demonstrated.
4. Creation of a public access structure managed by a private operator
This type of model is appropriate for the more marginal areas and in situations where
investment is particularly inconvenient for operators, as it provides for the establishment
of an access network infrastructure and backhaul by the public authorities, while
management is entrusted to an operator, selected through an open tender. The model was
created for areas of market failure, those areas where network infrastructures would never
be set up, if not through an intervention of this type. The guidelines suggest that the model
can only be considered usable after verification of the impossibility of implementing the
other models and only in the areas where market failure is at its highest. In this case too,
the intervention is not considered state aid if the conditions of the Altmark sentence are
respected (i.e. that compensation does not exceed the effective cost borne by the operator
and the most efficient operator is selected through open tender).
In this model, the public sector intervenes at a higher level in the value chain and the
planning has to include the selection of operators willing to provide the service, undertaking
to handle the network, and carry out regular maintenance. In fact guidelines advise that
the public authorities should not attempt to manage the service directly, even if through
a company.
Another type of intervention relates to the protocol agreements between the
Communications Ministry, Infratel and two of the biggest telecommunications operators
in Italy, Telecom Italia and Fastweb. The first, signed with Telecom Italia on 18 December
2007, provides for a shared action to outline a plan to reduce the number of areas with no
broadband access, sharing information regarding the planning in “digital divide” areas,
while accounting for the infrastructure plans adopted by the Ministry with the Regions
and company investment programmes, improvement of the timeframes for access to
the completed infrastructures, definition of the technical and financial requisites for
Telecom’s acquisition of the telecommunications infrastructures (fibre optics and laying
the conduits), identification of possible areas of synergy to follow up across the territory
and the use of innovative technology capable of reducing costs and timeframes in setting
up infrastructures. The creation of a coordination table was also proposed, to favour
dialogue between the signatories of the agreement and thereby to ensure a more efficient
and productive operation.
The agreement signed with Fastweb on 7 April 2008, to support development of broadband
infrastructures across the national territory, outlines similar functions in a Memorandum
of Understanding whose goals are to share information, create a definition of technical and
financial requisites for Fastweb’s acquisition of telecommunications infrastructures and
establish a technical table to coordinate the parties.
From the standpoint of resources allocated for the spread of new technologies, the first
intervention was created as a request incentive, promoting the use of broadband in households,
following the previously mentioned European Union Communication, which allowed the
State to reserve resources for the implementation of public service radio television or data
transmission.
Eighty seven million euros were allocated in total between 2003 and 2005221, as 75 euro
incentives to buy ‘equipment for the broadband transmission and/or reception of data via the
Internet”. However, there was no criterion to provide priority to the digital divide areas and the
allocations took the form of incentives to encourage users to subscribe to the broadband offers
present in the market.
In terms of reserves for infrastructures, the first and most important intervention was the debut
221
Source: Ministry of Communications/Ugo Bordoni Foundation.
Public investment in the cultural and telecommunications industry
293
of the Broadband Programme (2003), which included provision, through the Interministerial
Committee for Economic Programming (CIPE), of funding for broadband development in
eight regions of Southern Italy. Resolution 83 in 2003 allocated a total of 900 million euros, of
which 150 million were assigned to broadband, divided into 5.22 million euros for 2003-2004
and 144.78 million for 2005.
Funding for the Broadband Programme was assigned to Sviluppo Italia which was tasked,
through its company Infratel, with its implementation through agreements with Regions and
operators for the building of conduits for rent by operators for laying fibre optic222 networks.
To this end, a four-year convention between the Interministerial Committee for Economic
Programming and Sviluppo Italia was stipulated, which outlined the delivery of the funds that
Sviluppo Italia would pass onto Infratel as the operating partner.
The intervention outlined was estimated at 230 million, of which 70% was born by central
government and the remaining 30% by Regional authorities. To this end, Infratel published an
open tender in 2005 for the implementation of broadband infrastructures in Southern Italy. The
tender, worth approx. 127 million euros, was divided into 7 lots, each related to a framework
agreement, which was followed by activation contracts for the single tracts for a total of 1800
km of fibre optics reaching 265 Municipalities in the specified regions223.
Table 1: Infratel tender, 2005
Region
Investment
(millions of
euros)
Municipalities
involved
Km of fibre Digital divide population
optic network
reached (thousands)
% reduction of
digital divide
Sicily
49.85
105
690
400
43%
Puglia
26.53
44
350
131
20%
Campania
17.99
40
260
184
38%
Basilicata
6.30
10
90
42
14%
Calabria
12.35
25
180
105
12%
Abruzzo
& Molise
7.90
21
110
79
12%
Sardinia
6.05
20
110
68
10%
126.97
265
1790
1.009
22%
Total
Source: Ministry of Communications, ISBUL
Table 2: Outcome Infratel tender, 2005
Lot
Auction base
(millions of euros)
Reduction (%)
Final lot price
(millions of euros)
Sicily
49.85
5,63
47,13
Puglia
26.53
5,50
25,11
Campania
17.99
5,05
17,11
Basilicata
6.30
3,50
6,09
Calabria
12.35
4,30
11,83
Abruzzo & Molise
7.90
4,15
7,58
Sardinia
6.05
2,93
5,88
126.97
265
120,73
Total
Source: Ministry of Communications, ISBUL
In December 2005, a 20-year Programme Agreement was stipulated with the Ministry of
Communications which assigned Infratel with responsibility for management of the networks,
their ordinary and extraordinary maintenance and with the necessary technological updating.
This followed the previously mentioned Law N.80/2005 (Art.7), which charged Infratel with
222
223
294
Cfr. ISBUL Report 3.3 pp 26
Cfr. ISBUL Report 3.3 pp 30
Public investment in the cultural and telecommunications industry
implementing the Broadband Programme. On this front, it is opportune to note how Infratel, in
its policy of framework agreements, prefers the instrument of the “rights to temporary use”224,
which allows for the possibility for the grantor to lay the base structures for the NGN within the
infrastructures built by the tender winner. Specifically, once the infrastructure has been created
by the winner of the tender, this infrastructure remains in concession to its constructor for 15
years (renewable), while Infratel is the owner with the option of updating the network, renting
out the transmission capacity and linking the cables with other infrastructures.
Following the approval of multiple programme agreements between Infratel and individual
regional authorities - including Emilia Romagna (December 2007), Lazio (February 2008)
and Marche (March 2008) - between 2009 and 2010 Infratel published 5 open tenders for the
financing of the following interventions:
•
in the Region of Basilicata, the so-called Basilicata fibre optics tender, for the continuation
of implementati225 work, for the executive project planning and construction of fibre optic
telecommunications network infrastructures and their maintenance226, for a total value of
6,266,000 euros227, won by a temporary merger of businesses Valtellina and Alcatel Lucent228.
The work was financed by ROP Funds for Basilicata – ERDF 2007-2013;
•
in the Region of the Marche, the so-called Marche fibre optic tender, for the planning
and implementation of fibre optic infrastructures for a broadband network, including all
supplies and laying of the fibre optic cables and successive maintenance of the infrastructure,
worth 16.5 million euros229;
•
the acquisition of rights to the use of infrastructures appropriate for laying fibre optic
cables for integration into the telecommunications network established by Infratel (the
areas of interest are limited to the territories privy of fibre optic infrastructures, the amount
estimated for the acquisition is 1,200 km)230: worth 14 million euros;
•
the so-called Centre North Tender for the executive planning implementation of fibre optic
infrastructures for a broadband network, including all supplies and the laying of fibre optic
cables and maintenance of the infrastructure worth 71,555,000 euros was divided into two
pan-regional lots:
- Lot 1. Emilia Romagna, Liguria and Lombardy: worth 36,530,000 euros including a part
financed by funds from the Emilia Romagna Region amounting to 3,835,000 euros and a
part financed by funds from the Lombardy Region amounting to 4,395,000 euros231;
- Lot 2. Lazio, Marche and Umbria: worth 35,025,000 euros, including a part financed by
funds from the Lazio Region, amounting to 5,145,000 euros and a parte financed by funds
224
“IRU”, Indefeasible Rights of Use, cfr. ISBUL Report 3.3 pp 30
225
The precise nature of the tender, a framework agreement and not a specific contract, was outlined on the
Infratel site in answer to questions from the tender participants.
226
G.U.C.E. Tender of 5 November 2008 and G.U.R.I. of 12 November 2008.
227
1,266,000 euros excluding VAT of which 36,710 euros for security obligations not subject to rebate and of
which 30,000 euros for spending on planning, with the ability for the inning tenderer to substantiate a further figure
for the work equal to 5,000,000 excluding VAT of which 145,000 euros for security obligations not subject to rebate
and of which 54,000 euros for planning; for an overall total of 6,266,000 excluding VAT.
228
The value of the tender was not publishd on the Infratel site, however according to Valtellina the overall
worth is approximately 6 million euros.
16,590,900 euros, excluding VAT, of which 481,136 euros for security obligations not subject to rebate and
229
627,600 euros for planning expenses. The work was financed by ROP Funds – EDRF 2007 – 2013. the tender was
won by RTI Ciet Impianti I.CO.T.TEC.. and Mazzoni Pietro. Total value of the contracts amounts to 11,476,049.93
euros +VAT.
230
The procedure for the institution of framework agreements relative to the acquisition of rights for use of
the infrastructures appropriate for laying fibre optic cables for integration into the telecommunications broadband
network established by Infratel and its successive maintenance. The work was financed by funds deriving from State
budgets, CIPE deliberations and ROP – EDRF Funds 2007-2013.
231
The final total value of the framework agreement for Lot N. 1 was 30,743,676.13 excluding VAT. Date of
tender assignment: 24/6/2009. The name of the operator winner of the tender: RTI between Sirti (commissioner)
and Sielte.
Public investment in the cultural and telecommunications industry
295
from the Umbria Region amounting to 3,305,000 euros232.
•
The so-called National Fibre Optics Tender, for the executive planning and implementation
of fibre optis infrastructures for a broadband network, including supplies, laying the fibre
optic cables and maintenance of the infrastructures, worth approx. 99,528,051 euros,
divided into 3 pan-regional lots:
- Lot 1. Tuscany, Abruzzo, Molise and Sardinia: worth 39,144,667 euros, including a part
financed with EAFRD funding from the Abruzzo Region amounting to 2,107,333 euros, a
part financed with EAFR funding from the Sardinia Region amounting to 7,771,333 euros
and a part financed with ERDF funding from the Tuscany Region amounting to 6,250,000
euros;
- Lot 2. Piedmont, Lombardy, Veneto and Friuli: worth 37,768,000 euros including a part
financed with EAFRD funding from the Piedmont Region amounting to 5,260,667 euros,
a part financed with EAFRD funding from the Lombardy Region amounting to 5,313,333
euros, a part financed with EAFRD funding from the Veneto Region amounting to
4,367,333 euros and a part financed with ERDF funding from the Friuli Region amounting
to 6,266,668 euros;
- Lot 3. Campania and Calabria: worth 22,615,385 euros including a part financed with
EAFRD funding from the Campania Region amounting to 8,693,333 euros and a part
financed with ERDF funding from the Calabria Region amounting to 6,666,667 euros233.
4.4.4 The main interventions at a regional level
Many regions have already adopted policies for combating the digital divide as independent
decisions or following the guidelines for the Regional Broadband Plans, issued by the
Committee for the Diffusion of Broadband in Italy. As the interventions for the spread of
broadband vary in individual territories given their unique geoFig.ical characteristics and
different rates of urbanisation, each region has adopted the approach that works best in the
areas where needed, in several cases combining different types of intervention. To date, these
are the most significant:
•
agreement protocols with operators for the establishment of infrastructures (Liguria,
Piedmont, Valle d’Aosta and Lombardy);
•
funding for operators for the establishment of strategic infrastructures (Tuscany);
•
establishment of integrated systems of broadband services by the local bodies of the Region
(e-government) (Sicily, Veneto, Marche, Piedmont, Lombardy, Valle d’Aosta, Emilia
Romagna and Tuscany);
•
agreement on a Programme with the Communications Ministry for the direct establishment
of infrastructures (Liguria, Piedmont, Sardinia, Emilia Romagna, Marche, Umbria, Lazio,
Calabria and Campania);
•
Direct establishment of broadband infrastructures (Autonomous Province of Trento and
Friuli Venezia Giulia).
As can be seen from the outline created by ISBUL, there are various types of intervention (all
however within the guideline limits), adapted to specific regional characteristics, and in some
cases the Regions have used several types of intervention to meet their territorial needs.
232
Tender winner of Lot. N. 2 was a consortium created by Ericsson Telecomunicazioni (commissioner),
Site, Alpitel and Ceit Impianti. For a framework agreement worth 28,696,894.20, excluding VAT. Date of tender win:
24/6/2009.
233
For all the lots mentioned, the custody of the shares attributed to the subjects mentioned above who win
the tender are subject to the signing of an operational agreement between the Ministry of Economic Development
and the Region concerned.
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Public investment in the cultural and telecommunications industry
Relative to the approval of agreement protocols with telephony operators, the Liguria Region
signed three contracts between March and April 2008, with Ericsson (4 March), Telecom (23
April) and Fastweb (24 April). This type of agreement, featured in the wider ranging Triennale
Operating Plan for the Spread of Information Technology 2006-2008, which was established
to support the spread of broadband connections across the region of Liguria. The plan lays out
four lines of intervention. Signing Agreement Protocols with telecommunications operators is
included in the third type, which requires two main conditions: that the operators are active in
the regional and local area, and that there are no financial costs for the regional authorities. The
agreement with Ericsson regards the supply of services for different types of mobile and fixed
channels (Internet, TV, telephony), while the agreements with Fastweb and Telecom regard
the extension of broadband coverage to regional areas without access, allowing individuals,
businesses and the Public Administration to use the service, with special attention to sectors
like health and social assistance, transport, logistics, tourism, security of persons and the
territory, development of e-government and e-democracy, plus the education of individuals
and businesses. The agreement with Telecom, in particular, regards the extension of broadband
network coverage to a further 33 Municipalities, reaching about 96% of the active fixed phone
lines in the territory by end 2009, a total of 208 Municipalities.
The method of funding operators for the establishment of strategic infrastructures was used by
the Tuscany Region in the “Broadband for rural areas Project”, aimed at reducing the digital
divide in the area between 2007-2010. The mechanism includes the selection, through open
tender, of one or more telecommunications operators to co-invest in market failure areas and
to supply connectivity to individuals and businesses. The Region provides specific incentives
to balance the negative result between revenues and estimated costs, while the operator
creating the infrastructure may chose to select the most efficient technical solution and, once
the work is finished, remains owner of the network. Operator obligations include supplying
connectivity to individuals and retail businesses, to other communications operators who wish
to be present in the area (wholesale), whose right to access is guaranteed by Art. 40-52 of the
Legislative Decree N. 259 of 1 August 2003 and under AGCOM’s regulations. The broadband
project aims to reach over 200,000 citizens and approximately 15,000 businesses located in the
market failure areas. It was preceded by an analysis of the area that was carried out to identify
the financial reasons preventing communications operators from covering the areas not yet
reached by broadband, identifying the places that would have been left without coverage even
in the medium to long term. The results proved the need for intervention in several areas to
guarantee the services mentioned in the e-Europe plan.
In this way, the Project remains within the limits outlined by the European Commission after
the approval of the “Broadband in Scotland” Project, deemed compatible as State Aid. The
tender process was concluded with Decree n. 841 of 26 February 2008, which approved the
final listings. All the lots were assigned, with at least two operators for each provincial lot. The
overall public investment amounted to 20 million euros, provided by the Tuscany Region, the
Provinces and the European Community.
Examples of the establishment of integrated broadband services system by local authorities in
the Region (e-government) can be found in Valle D’Aosta and Piedmont.
Valle D’Aosta signed agreements with operators present in the region, Telecom234 in particular,
and also promoted a policy for the reduction of the digital divide, the “Valle D’Aosta All Digital
project”, which focused on computer literacy in the population, intending to spread the use of
e-government services among individuals.
The Piedmont WI-PIE project was launched to spread broadband connectivity throughout
the Municipalities, through the construction of a fibre optic backbone and the spread of
234
The Region signed a protocol agreement in 2007 with Telecom Italia, the main operator in the market,
to set out the relationship between the parties in order to define the actions needed to guarantee a reduction in the
digital divide across the territory by extending broadband services to 100% of the Municipalities and at least 96% of
the population within 2 years of approval of the agreement.
Public investment in the cultural and telecommunications industry
297
wireless connections for the most difficult areas. Measures were also introduced to support the
development of digital services and content from the regional local authorities. As the project is
aimed at providing cover for several Municipalities through an agreement programme with the
then-Ministry of Communications and with others through a special protocol agreement signed
with Telecom, the development policy for content, services and e-government applications will
be carried out to the benefit of both Telecom and the other operators, who will be granted
access to pre-existing networks through this kind of agreement.
The Programme Agreement with the Ministry of Communications for the direct establishment
of infrastructures was one of the most widely used models, adopted by the Regions of Liguria,
Piedmont, Sardinia, Emilia Romagna, Marche, Umbria, Lazio, Calabria and Campania. The
agreement generally includes the goal of strengthening networks with fibre optic and wireless
connections to guarantee an average capacity of 2Mb/s download for individuals in digital
divide areas. The interventions necessitate the direct establishment of infrastructures and both
State and Regional funding, which is the basis for the property rights to the intervention itself.
This means that the tracts set up with regional funding will remain the property of the Region,
while those created with State funding will remain the property of the central authorities and
entrusted to the regions in concession.
Lastly, direct establishment of broadband infrastructures was an option used, in some cases
without specific programme agreements, by the Emilia Romagna Region, the Autonomous
Province of Trento, the Friuli Venezia Giulia Region and the Provinces of Genoa and La Spezia.
The projects include the implementation of interventions by private businesses with co-funding
from the Region and the rental concession for the management and supply of services without
Infratel intervention.
4.4.5 Resources allocated to bridge the digital divide
Given the multiple financial mechanisms involved in the implementation of interventions aimed
at covering the various territories, and the complex nature of allocating resources between
central, regional and European community authorities, and the wide range of interventions
needed because of specific regional and territorial characteristics, it is difficult to try to estimate
the resources allocated for bridging the digital divide and problematic to divest the issue of
its shortcomings and simplifications. In view of the difficulty in separating out the resources
invested in broadband policies for the territories from the State and Regional balance sheets,
and in identifying resources allocated, in reserve or actually in use, we propose to provide a
quantification based on the study of the job tenders published by Infratel in the past 5 years.
As the table demonstrates, the total of resources used were over 312 million euros (net of VAT),
197 of which have already been disbursed or are being disbursed to the contractors through
infrastructure implementation agreements235.
Central government has allocated over 228 million euros (net of VAT), of which nearly 127
million come from the 2005 Broadband Programme. Funding activity intensified between
2009 and 2010 with the allocation of 54.8 million euros for the Centre Northern Tender and
46.8 million for the All Italy fibre optic tender.
Regional and Municipal resources amount to over 91 million euros (net of VAT). This includes
the 15.3 million set aside for Calabria and 10.8 for Veneto (ERDF and EAFRD All Italy fibre
Optics tender); 11.5 million were assigned to the Marche (Marche Fibre Optic Tender, a base of
16.6 million, funded by ROP-ERDF 2007-2013 funds); 9.7 million were set aside in Lombardy
(4.4 from Regional funds and 5.3 from EAFRD funds); 7.7 million in Sardinia (EAFRD funds,
All Italy Fibre Optics Tender); 6.2 million in Tuscany (ERDF funds, All Italy Fibre Optics
235
The Infratel site published the names of the winners of the Basilicata Fibre Optics Tender -Alcatel Lucent
and Valtellina but not the value of the tender. However, a document published by Valtellina notes the value at approximately 6 million euros.
Cfr. http://www.valtellina.com/convention/pdf/ValtellinaSpa_progetti_realizzati.pdf
298
Public investment in the cultural and telecommunications industry
Tender); 5.2 million in Piedmont (EAFRD funds, All Italy Fibre Optic Tender); 2.1 in Abruzzo
(EAFRD Funds, All Italy Fibre Optic Tender); while the regions of Lazio, Emilia Romagna and
Umbria have allocated respectively 5.1, 3.8 and 3.3 million for use in their territories (Centre
Northern Tender).
Table 3: Funding for broadband infrastructures: tenders for European, State and Regional
resources
ROP - ERDF,
EAFRD or
other regional
funds
Infratel
resources
TENDERS
Southern Italy (March 2005)
Total
resources
Resources
disbursed (sale
value)
Note
126.970.000
0
126.970.000
120.729.890,37
Fibre Optic Basilicata (Jan
2009)
0
6.266.000
6.266.000
6.000.000*
Fibre Optic Marche (Apr
2009)
0
16.590.900
16.590.900
11.476.049,93
n.d.**
n.d.**
14.000.000
n.d.
Lot 1
28.300.000
8.230.000
36.530.000
30.743.676,13
3,835,000 Emilia +
4,395,000 Lombardy
Lot 2
26.575.000
8.450.000
35.025.000
28.696.894,20
5,145,000 Lazio +
3,305,000 Umbria
All Italy Fibre Optic (March
2010)
Centre
Northern
Italy (May
2009)
Acquisition of infrastructure
usage rights (Apr-2009)
Lot 1
23.016.001
16.128.666
39.144.667
2,107,333 Abruzzo
EAFRD+ 7,771,333
n.d. Sardinia EAFRD+
6,250,000 Tuscany
ERDF
Lot 2
16.560.000
21.208.000
37.768.000
5,260,667 Piedmont
EAFRD + 5,313,333
Lombardy EAFRD+
n.d.
4,367,333 Veneto
EAFRD+ 6,266,667
Fruili ERDF
Lot 3
7.255.385
15.360.000
22 615 385
n.d. EAFRD + Calabria
92.233.566
312.294.567
197.646.510
8,693,333 Campania
ERDF 6,666,667
Total***
228.676.386
Source: IEM elaboration.
Notes: *The value of the tender is not published on the Infratel site, the overall value is provided by Valtellina; ** The
work was financed by funds deriving from State budgets, CIPE deliberations and ROP- ERDF 2007-2013, so it is not
possible to distinguish between State and Regional resources; ***the tender value amounts to approximately 6 million
euros. Figures net of VAT.
With regards to Regional funding in particular it should be noted that the resources allocated
through the many intervention instruments listed in paraFig. 1.3 are obviously more consistent
than those listed here (e.g. Lombardy alone has 3 projects with an overall investment of 93
million euros236) but are difficult to identify. Given this, the Rosselli Foundation Institute
of Media Economics has set up an observatory to monitor the situation and create a more
efficient and complete estimate of all the regional resources employed in the development of
infrastructures and ICT and media services.
236
This refers to the framework programme agreement ‘Information Society’ of the regional tender for the
reduction of the digital divide and rural development plan. Together the three projects involve 630 Municipalities
with investment of 93 million euros, laying almost 3,000 km of fibre optic cables.
Cfr.http://www.regione.lombardia.it/cs/Satellitec=News&childpagename=Regione/Detail&cid=1213346248980&p
agename=RGNWrapper.
Public investment in the cultural and telecommunications industry
299
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Public investment in the cultural industry
Additional considerations by Carla Bodo, Maurizio Decina, André Lange and Mario Morcellini
1. Notes on the State of the Arts
by Carla Bodo237
The study conducted by the Rosselli Foundation on Public investment in the cultural industry,
is a substantial contribution to the building the foundations of an edifice – that is, the Italian
information and statistical system on culture – which advances very slowly and with much
delay. Let us first of all examine the state of the arts today, also within an international context.
It is well known that the legitimate inclusion of culture within social and welfare policies – right
next to education, assistance and healthcare – is a fairly recent accomplishment, a process that
only really started to take shape in the second half of the last century, thanks to the intuition
and initiative of farsighted figures such as John Maynard Keynes (1946) and André Malraux
(1959). However, half a century later, the fact remains that in most countries the information
and statistical system in place to monitor cultural phenomena and the results of the underlying
policies, is still quite backward and absolutely inadequate considering that culture is a proven
driving force for a country’s social and economic development.
It was not until 1997, that the European Commission tried to remedy this huge gap in
information, by setting up, albeit with some hesitation, a Working Group on Cultural Statistics,
which would operate within Eurostat. At first it was experimental238 then subsequently ratified,
and its objective was to persuade Member States to integrate and develop their statistical
systems on culture and also render them more comparable. After having operated actively
between 1997 and 2004, the WG was put to sleep for the entire sixth legislature, only to be
resuscitated in another guise in 2008.
In the first phase of its work, the Eurostat WG on Cultural Statistics used a Task Force
Methodology to find an agreement on a common definition of culture among the Member
States. In theory it was not starting from scratch but from a somewhat broad definition,
which included the environment and sports, and to which it had adhered during UNESCO
conferences in the ’80s - when it adopted the Framework for Cultural Statistics239. Nevertheless,
the extreme diversification existing between the extended statistical systems in the various
countries was immediately evident; modelled as they were on the ever variable administrative
clusters existing at a State level (Ministries of Culture, of Culture and Communications, of
Culture and Sport, Arts Councils, etc...), and on their own specific priorities (heritage, artistic
creation, cultural industries...).
In the end, a common definition for culture was found which was both broad but also strictly
pertinent, and encompassed the “activities of conservation, creation-production, distributiondiffusion, marketing, of goods and services that pertain to culture: artistic and historical
heritage, the libraries and archives, the visual arts, live entertainment, book publishing and the
press, cinema, audiovisuals and new media240)”.
Contemporaneously with this TF, another three task forces, working closely with the first,
concentrated on following themes : Employment, Cultural Expenditure and Financing and
237
Vice-President of the Association on Cultural Economics.
238
See Eurostat, Final Report the LEG on Cultural Statistics in the European Union, Luxembourg, 2000.
239
The 1986 UNESCO Framework has recently been the object of long process of revision, culminating in the
adoption of the UNESCO Framework for Cultural Statistics 2009, that has at the same time restricted and further
extended the definition of culture to oral traditions and intangible heritage, festivals and fairs, and to fashion, etc).
240
V. Final Report of the Leg Luxembourg 2000. Note that the insertion of the press, TV and new media in
the definition of culture was not easy, in that it had long been contested – as “extension to trash” from the more
traditional countries. At the same time, in the formulation of the definition itself, it is implicit that cultural statistics
include activities concerning software, but not hardware, for example: the attention, or financial support, for the
production of records and DVDs, but not computer hard drives or TVs.
302
Public investment in the cultural and telecommunications industry
Cultural Participation.
And here we finally come to the nub of the problem under discussion in this study. In 2004, at
the end of the legislature, Eurostat maintained that while the works of the other Task Forces
had definitely made advances in the production and comparability of data, the results obtained
by the Financing Task Force were still essentially of methodological and taxonomic nature. The
attempt to concrete gather and process statistical data concerning public spending on culture in
Member States, carried out in 2003, was considered in fact “an improvement in the knowledge
base of a very complex area241, but with results that were still non-homogeneous and not fit for
publication.
The main reasons for the difficulties encountered were singled out as follows:
•
the need to take into consideration spending on culture by all tiers of government, in view
of the low significance of comparability limited to State spending and the major differences
between countries, its role and its incidence (oscillating between 15 and 60% of total
expenditure);
•
the high fragmentation of the funding centres to take into consideration: a) tiers of central,
regional and local governments (from 2 to 4 depending on the countries); b) the plurality
of Ministries involved at the central level; c) the plurality of the competent administrative
offices for culture at the regional and local levels;
•
the difficulty to come to a sectional classification of spending according to Eurostat’s wellconstructed nomenclature, in particular for the lower levels of government;
•
the problems posed by the consolidation of the total expenditure, extracting it from
transfers, in order to avoid double counting.
Eurostat insisted that since the task force on Financing still had not figured out such complex
problems, this group was the one that really needed to continue its work. This suggestion was
embraced by the new European Statistical System Network Project/ ESSNET, which revived the
old Working Group in 2008 and took its place242.
If at the European level we are still at the preparatory stage of research, it is useless to deny
that when the EU statistical system on culture comes into full swing, Italy will have serious
difficulties facing this new commitment. Due to the fragmentation, lack of systematic approach
and incompleteness of its data. In fact, Italy’s statistical system on culture today is, on average,
behind that of other major European countries. This is true not only for individual sectors,
where statistical data alternates between highs and lows, but in particular for statistics
pertaining to the cultural field as a whole i.e., cultural employment and the financing of
culture. All of which is certainly due to the delayed and not yet perfected standardisation of the
main State competences in culture within the Ministry of Culture, while the competences for
media – audiovisual and publishing – are now split between two Ministries. Furthermore, the
accentuated conflict between the State, the regional authorities and local bodies all vying for
jurisdiction in this field certainly does not help the exchange of data and information sharing.
With particular regard to public spending on culture, while in other countries the bodies that
are generally responsible are the national statistical institutes and/or the Ministries of Culture,
in Italy, this subject is in no man’s land, left to the voluntary or random initiative of individual
scholars or single organisations, public or private, as the case may be. And it must be pointed out
that even if some items of expenditure are adequately examined, rarely is financing to culture,
and its multiple offshoots, analysed completely. Among the bodies that have contributed, at
least in part, to fill this gap are: ISPE/ISAE, UVAL (Public Investment Evaluation Unit) and
241
See Working Group on Cultural Statistics- Short conclusions. Doc. ESTAT/D5/2004-CULT
242
The other TF’s are Framework and definitions (which must be clearly defined and subject to integrations)
and Cultural participation and social aspects, which is supposed to measure the role of culture in cultural inclusion.
Employment TF which had already reached exhaustive results was substituted by the new TF –Cultural Industries.
Public investment in the cultural and telecommunications industry
303
the Association for the Economy of Culture, with its two Reports243. So the Rosselli Foundation
is most welcome, which, with this study, becomes part of the small circle of experts on this
subject.
The mission of the Rosselli Foundation shapes its definition of culture, which is at the base of
the study, but it must be said that it does not coincide with that of Eurostat; in that it includes
telecommunications while excluding cultural goods, obviously of great interest within the
Italian context. For this reason, Chapter 3 Public spending in culture raises questions, both for
its slightly unorthodox conceptual definition at the heart of the analysis, but also because the
source of the data, the State Accounts, is based on groupings that are not sufficiently broken
down and that do not always allow us to isolate expenses that are specifically cultural from those
that are not pertinent, i.e., spending on religion, whose unquantifiable impact in a country like
Italy’s could be surprising. National accounting on the whole is certainly a potentially valuable
source, whose codifications need further work, together with UVAL, to render it workable for
the classification of spending on culture as defined in Europe.
In my opinion, the main virtues of the study lie in the chapters related to specific sectors. In
some, we actually find cultural goods, which having been kicked out of the front door, making
a return through the back door, in that, they are the principal recipient of two types of relatively
new funds, in addition to the ordinary expenditures of the Ministry of Culture: the funds from
the Lottery and the investments managed by ARCUS. In this latter, case the funds are fed by a
percentage withdrawal taken from investments infrastructure, and are managed (also according
to the Court of Auditors) using rather discretionary criteria and given out “indiscriminately”.
So thank goodness for a study that finally sheds light on the amount, its destination and its
patterns of growth.
Finally, I found the chapters dealing with the financing of the press and television by the
Prime Minister’s Office and the Department of Communications in the Ministry for Economic
Development, quite relevant. They are particularly important because they deal with a subject
that is currently centre stage and controversial but rarely explored exhaustively and in-depth.
This kind of financing, even for European institutions, comes under state expenditure for
culture but is systematically ignored in all estimates, including the slipshod international
comparisons concerning these expenses that one hears in Italy.
243
See the two Reports on the Economy of Culture in Italy 1980-2000, published respectively, by the Publishing Department of the Prime Minister’s Office and the publisher il Mulino, Bologna. The methodology used for the
analysis of spending in the second report coincides with that of Eurostat.
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Public investment in the cultural and telecommunications industry
2. In Italy there are two digital divides
by Maurizio Decina244
In Italy there are two digital divides (that is the rift between those who can access the Internet
and those who cannot). The most obvious regards the lack of infrastructures to allow access,
the other, but not less important, is related to people’s level of training (the “cultural” digital
divide). Looking at the figures: there are 60 million individuals and 25 million households. In
an initial approximation, 50% of these households possess a computer and access the Internet
through fixed and mobile connections, while the other half is illiterate (in computers) and
not connected to the Internet. Comparing these figures with the “infrastructural” digital
divide what we see is, that about 5.5 million Italians (9%) do not have the possibility to access
broadband, that is a connection of at least 2 megabits a second.
One needs to read over the National Broadband Plan being put before the United States
Congress to understand what Italy should have planned and done to develop the Internet in the
country. There are four main issues: the digital divide in rural areas, computer literacy, ultrabroadband in big cities and the use of the television spectrum to access the Internet. Reflecting
on the first two aspects relating to the digital divide, 16 billion dollars have been foreseen for 10
years to fund the development of broadband in rural areas with the objective of guaranteeing 4
megabits a second to homes and a gigabit to institutions like schools, hospitals and libraries. In
addition, the plan foresees the transformation of the Universal Service Fund, another 16 billion
dollars in 10 years to spread computer literacy (the Internet Geek squads) and disseminate
VOIP telephony (Voice over Internet Protocol).
In Italy the government has other priorities and resources allocated for access to the Internet
and computer literacy are minimal, in spite of the country’s dramatic underdevelopment
compared with its European partners. Let’s leave aside the well-known North - South divide for
the moment, and the fact that even in Lombardy, Veneto and Piedmont one million people are
excluded from the Internet. Rather, let’s concentrate on those 40% of Italians (compared to the
60% average for European citizens) who do have Internet access and can hence use the Internet,
and yet do not. Why? Because they don’t feel the need to, they don’t have the technical skills or
even more trivially, they simply don’t know what to do on the web. Only 12% of Italians buy
goods or services online, compared to European average of 37%. Only 4% of Italian businesses
sell online, while the average in Europe is at least triple (12%)!
Can this situation be remedied? Yes it can; if investments in infrastructure are combined with
incentives to use the Internet and its services. For investment in areas with an infrastructural
digital divide, the study conducted by the Rosselli Foundation reports that only 300 million
Euros have been allocated by the Italian Ministry of Communications in the past 5 years, of the
1.4 billion needed in the next 5 years! And what’s more, for the incentives to use the Internet,
only a few million euros have been allocated as incentives to buy computers!
What practical measures can be taken? Three examples: firstly, fix a specific date (i.e. by 2020)
by which all public administrative bodies will become paperless and all procedures will be done
only online; secondly, ensure that all new buildings are connected to fibre optic networks; and
thirdly, supply all school children with computers on every desk. They’ve done it in Uruguay
and families pay 5 dollars a month. The problem in Italy is that, in order to propose such a
monthly payment, first everyone would have to be given an explanation as to why computers
are important.
244
Milan Polytechnic.
Public investment in the cultural and telecommunications industry
305
3. Analysing public investment in culture: an issue of European
importance
by André Lange245
The study Gli investimenti pubblici nella filiera culturale edited by the Istituto di Economia
dei Media (Institute of Media Economics) is not only an important contribution to the
understanding of cultural policy in Italy but also represents an interesting model for Europe.
Understanding the evolution of cultural policy in Italy (and in particular of film and television
policies, which are my field of specialisation as an expert at the European Audiovisual
Observatory) has always been a challenge for the non-Italian observer, even when he or she is
familiar with the language, the institutions and the protagonists. Political commentaries and
the traditional Italian exercise of dietrologia are a common practice, but they generally eschew
precise references, technical and in-depth presentations and explanations of laws, regulations
and public accounting systems. Despite the progress resulting from the online publication of
official documents, key reports cannot always be accessed easily. In this context, the present
study is invaluable to the foreign observer: it provides a clear and rigorously referenced
presentation of a rather complex system.
One of the main qualities of the study is the detailed analysis it provides of regional and local
investment in support of culture. In the audiovisual sector, this includes support to regional
and local television, but also an increasing amount of regional support to film production.
From a European point of view, portraying the regional and local dimension of the audiovisual
sector is among the most difficult exercises. I will mention just two examples:
•
According to the MAVISE database managed by the European Audiovisual Observatory,
no less than 2,900 regional or local television channels operate in the European Union in
2010. However, very little data is available on the public finance sources and revenues of
this category of broadcaster.
•
In 2004, the European Audiovisual Observatory published a comparative analysis of public
funding for film and audiovisual works in Europe. 118 regional and local funding bodies
were identified in the report, representing around 248 million euros of support or 19.5%
of total public funding in Europe in 2002. Since then, the number of regional and local
initiatives has multiplied and a systematic census has become more and more problematic.
In this context, it would certainly be useful to have reports like this one for other European
countries, allowing a clear comparative approach to the evolution of public investment in the
cultural sector. This would be particularly useful for countries where the regional dimension of
public funding is of increasing importance.
245
306
Head of Department for Information on Markets and Financing, European Audiovisual Observatory.
Public investment in the cultural and telecommunications industry
4. Investments for culture and culture as investment. A critical note
by Mario Morcellini246
No matter what your perspective, it’s impossible not to note the centrality of culture in
contemporary society. There are numerous variables which support this: economic growth in
the arts and entertainment sector, the expansion of migratory phenomena on a global scale
(which brings with it, dialogue, interaction and understanding), consumer goods that made
ever more aesthetic and resilient, the growing spread and impact of the generalist media,
and hence the radicalisation of their social function, turning political action into spectacles
or media events, or the social and communication transformations being brought about
by more recent technology. Naturally, one must settle on what we mean by culture and go
beyond the political definitions that are often so broad they blur the edges, especially if we
adopt a formative style that emphasises the dynamic notion of the concept. The erosion of
the borders between culture and telecommunications that emerges from documents used by
Barca, Marzulli, Murrau, Principali and Zambardino in their paper can generate distortions
and ambiguity, in spite of the fact that we cannot negate the weight that media culture has
on the social and communicative dimension. In fact, the cultural practices they describe and
analyse, broken down in economic and legal terms, include: cinema, theatre and musical
activities, but also the sphere which includes artistic heritage and museums, sports and more
generally recreation, and any initiative or service concerned with “construction, expansion,
betterment, functioning and maintenance of communication systems (postal, telephone,
telegraph, wireless and satellite)”. It is an intentionally broad definition, nevertheless coherent
with the idea that culture is that sphere of social dimension determined by the presence of
symbols and communicated meanings of which art and the entertainment sector only make up
one branch, even though it is the most visible one (Santoro, 2008).
In any case, what emerges from the study concurs with the notion that culture is at the
centre of the negotiation processes between economic–productive and extremely complex
professional structures, new cultural products, new modes of use, representations, symbolic
universes, behaviours, interpretative keys and knowledge which, especially within complex
societies, revolve around the media. In addition, it is evident that the cultural sphere cannot
be confined within the rigid boundaries of a definition. A case in point is the sensitivity of the
European Union, as is well documented in the paper, to the evolution of the concept of culture,
to the extent that it has, for the first time, allowed tax credits to be given to French companies
producing video games, recognising this sector of the cultural industry as an unquestionable
resource with appreciable educational value.
Ever since the mid-1990s, data on cultural behaviour in Italian society in the course of its
modernisation reveals some characteristics of no return with regards to cultural space. It
was as if some processes of dilation and expansion of the impact of the generalist media had
reached saturation point in terms of social penetration. This historic novelty is exceptional not
only because it involves more than one medium, but various sectors of the generalist package.
The “reduced inflammation” of television currently underway, represents the first important
indicator of the reorganisation and “diffusion” of cultural wealth in Italy, especially in light
of the fact that the traditional contribution of generalist television to the country’s processes
of development and cohesion today also appear guaranteed by qualitatively new forms of
consumption, like those that travel along broadband or to be found in live shows.
The weakening of television is unexpectedly accompanied by the decline of the remaining
generalist offer. In fact, cultural consumption of those products, which in other countries work
as a driving force of modernity (radio, publishing, newspapers, weeklies, magazines, etc.),
has decreased. Concurrently, socio-cultural change has come about through those cultural
products for which a more elevated quality and competence in choice is required: the fruition
of that culture which defined itself as elite has gone through a radical process of enlarging its
246
Dean of the Faculty of Communication Science, University of Rome, “La Sapienza”.
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307
social bases, hinged for the most part on the breakdown of the traditional boundaries of what
is a public.
In search of places in the city and a new concept of social relations, nowadays people find
shared symbols of aggregation in their passion for theatre, cinema, live shows, reading or
the freedom to choose from a wide spectrum of contents that travel on broadband, through
spaces and instruments traditionally employed to unite reality and imagination. Trained in
new media, today’s players continue their virtual paths moving from the Net of Nets to the net
of metropolitan and cultural relations, equally representative for the construction of imagined
communities.
In light of such trends, one cannot ignore the distance between the social value of culture and
communication and the economic value attributed to such spheres through public investment.
For years funds were allocated automatically and in ever increasing measure. From 2000 to
2008, public spending in culture and recreational services was cut (from 14,263.81 million
euros in 2000 to 10,668.64 in 2008). In addition, the authors of the text reveal that “in spite
of the importance given to investments in telecommunications for the competitiveness and
growth of a nation, the figures on public expenditure for the sector in Italy show a steady
decline in public spending on telecommunication starting from 2001, while capital accounts
underwent a drastic reduction starting from 2005.”
The different perspectives between Italy and Europe are also relevant: in Europe, investments to
newspapers, cinema, theatre, opera concerts and much more, which were often seen as grants
and hence extraneous to the market laws of supply and demand, are guided by the steadfast
principle of not limiting competition. It is not unusual that funds for culture are allocated
deviating from the principle of incompatibility between public funding and a free market. In
Italy, the disinvestment in culture seems like a novelty and the recent economic manoeuvres
impose an awareness of the mechanisms of a market that has a hard time standing on its own
two feet (perhaps only because of a lack of habit or attitude). So, the choice of drastically
rationalising the system of public contributions to culture with a view to radically containing
costs is unbalanced and not without consequence. There are some exceptions to the substantial
cuts: increased spending for the press and information services, a sector that was already
significantly supported by the State in the past in the face of evident criticism. This sector has
however been hard hit by the haemorrhaging of readers of late.
In times of crisis, it is clear that the appropriate use of public resources becomes a strategic
issue, but there is also the need to avoid aberrations that lead to the funding of entities of
questionable socio-cultural appeal. Cuts that can have a positive systematic effect, lose vigour
and usefulness if they don’t discriminate, are concentrated in key sectors that are essential for
the development of the country, or if they ignore the value (not only economic) of deposits
of culture and communication in spheres such as the Internet or live events, which require
maintenance and revitalisation because they at the base of that cultural process of exchange
and sharing a common sense of belonging.
At this point, it is legitimate to ask if economic figures alone can restore the complexity of
social experience. Certainly, it is necessary to assign meaning to the concept of value, which
aside from its economic, social, cultural and even symbolic aspects, possesses noteworthy
polyhedric semantics. For this reason it would be advantageous to diffuse the seductive powers
of a traditionally economic interpretation grounded on price and turn to one looking at worth.
The terms are similar and move from a model based on the usable value and exchange of goods
to the commercial and hence material value of goods made available on the digital circuit, and
culminating in the intrinsic value of economic desirability.
Within this context, the laws of supply and demand do not fully grasp the dynamics of a digital
economy due to its inability to highlight the relational and intangible characteristics in an
economic connotation of communication. A case in point is the economics of education, where
the economic advantage is considered deferred utility and hence a long-term social instrument.
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We must use the same perspective to understand the indiscriminate policies of investment in
culture of the remote past and the prospect of drastic cuts to culture of the recent past.
If one reflects on what drives public support for the cultural life of a country, the motivations of
the past seem to be true today, despite some subtle distinctions: the extension of the privilege of
cultural growth through the accessibility to places and cultural sits to the community at large,
is a principle that has passed the test of time; protection from the inertia of the market and
profit mechanisms, as well as irrational and anachronistic choices for certain sectors, in order
to guarantee a certain level of civility, which would not otherwise survive; and the need to have
informed and cultured citizens with solid moral principles and cultural references is an idea we
hope is still with us today.
Nevertheless, these old but still valid exigencies must be set within the surrounding landscape.
In other words, although it is important to support activities such as opera, theatre and classical
music, we must not abolish economic watchdogs for cultural operators, nor limit the activity of
private subjects. Moreover, there are true bastions of culture in urgent need of funding which
is not forthcoming. A case in point is the educational system; this is where we have the real
country and where cultural identity is built. This cultural training today seems to vacillate and
this lag is somewhat made up by theatrical programming, visits to museums, festivals, fairs and
events.
It would be more interesting and courageous to invest in television content that doesn’t take
into account audience ratings, to a time when Benigni’s reading of Dante – which attracts
audiences anyway - becomes a less exceptional and heroic enterprise.
Cuts imposed by the recession are most welcome when these put an end to a waste of public
money and incoherence. So then, it is time to accept what is still for many considered taboo that is, private investment. It has happened in good measure in publishing. Private investment
is very common in other countries. It tries to combine business and culture, where one does
not exclude the other. It’s a real hurdle to overcome in Italy but one that would open up great
potential for profit, especially if the groundwork is laid for private enterprises that does not
exclude public funding and is free from moralist and anachronistic attitudes.
In any case, today more than ever, we need a new and more flexible “Paradigm of interpretation”,
so that what is thought of as a technical problem is seen as a cognitive revolution, which can
paint a more credible picture of the passions of modern-day humans and favour the passage
from the Middle Ages to a potential cultural Renaissance.
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5. The importance of good data to support public policies
by Mariella Volpe247
Public decision-makers and analysts who study public finances demand explicit, accurate and
clear data on the flow of public monies, above all at the regional level. Knowing when and
where to spend, and above all, how to spend, is fundamental to guaranteeing transparency in
public management and ensuring that the criteria of feasibility and equity are adopted.
The constraint that comes from the lack of an adequate database becomes worse when we
try to analyse individual areas, with a view to understanding what spheres have received
most funding and the trends over the past few years. This is particularly true for the cultural
sector. The economic characteristics of this sector are consolidated within public accounting;
nevertheless, despite the wealth of literature and applied research, decisions are not always
backed by an adequate information base248.
The awareness of such needs and the existence of a substantial information gap led to the
creation of the Regional Public Accounts249, guided by the principle that statistics are a public
good. The underlying conviction being that the availability of an adequate database can
influence and orient policies in many ways: incrementing the competences of policymakers in
central government and their responsibility at the local level, and guaranteeing the opportunity
to set sound and verifiable objectives that support and guide the decisions made.
These aims place great responsibility on the producers of data. Information in and of itself,
doesn’t constitute knowledge. In order that this is possible, quality data is needed; data that
is complete and reliable, timely, flexible when harmonised and able to be broken down and
analysed in detail according to diverse criteria and statistically adequate methods, but also
increasingly perfected, transparent and accessible. They are all essential conditions to allow end
users to justify their choices on the basis of clear, precise and reliable information.
The end users of the data have great responsibility as well; they must be informed and fully
aware of the weight of the data, especially when using an information base that is vast and
composite, as is the RPA database. Perfect knowledge of the complexity, theoretical aspects and
flexibility of data is essential to formulating questions and perfecting hypotheses for research
in various sectors.
The sectorial analysis of public expenditure, based on a list of 30 categories put forth by the
RPA, is coherent with the COFOG classification adopted by international bodies and, allows us
to interpret public intervention in the regions, in an accurate way. At the same time however,
sectorial analysis is affected, more than in other types of analyses, by the existing lack of
adequate information derived from public budgets.
The following examples related to the analysing potential in the Culture and Telecommunications
sectors, clearly illustrate the message.
The RPA sector “Culture and recreational services”, encompasses expenditure related to both
247
Head of Regional Public Accounts (Conti Pubblici Territoriali) Department for the Evaluation of Public
Investments – UVAL-DPS-MISE.
248
B. Stratta, “Spesa pubblica per la cultura nelle regioni italiane dinamiche recenti e modelli” Public expenditure in culture in Italian regions: recent models and dynamics. Economia della cultura, N.2 2009.
249
The RPA data base (http://www.dps.tesoro.it/cpt/cpt.asp) allows us to reconstruct total revenues and expenditure at the regional level for both capital and current accounts in the “Enlarged Public Sector”. Since 2004, the
database forms part of the National Statistical System (SISTAN)- a network of entities that supply public information, guaranteeing the status of official statistical information to all data collected and ensuring replies from all
entities. The network of data producers is quite complex and capillary; comprising in addition to the Central Unit
operating at the UVAL, 21 Regional units operating in each region in Italy. It includes not only a physical network of
all funding bodies but also a uniform method of operating. Various breakdowns are available according to different
variables for year (years available 1996 – 2007); economic category, sectors funded, and entities (all public administrations and EPS). All the various factors that can be examined guarantee versatile information and breakdowns for
each universe (PS or EPS) and obviously according to each region. Also see methodology notes in Chapter 3.
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functions, in that the boundary between culture and recreational services is very blurred
and discretional in the public books250. Perfecting sectorial data thus becomes necessary (i.e.
purifying it of all unneeded items such as recreational services) and must aim at the specific
scope of analysis – identifying which policies one need to examine.
Within an economic classification, RPA’s choice to adopt one financial approach can be
a constraint to the analytical objective of evaluating the economic impact of some items of
expenditure.
It then becomes the job of the end user of the data to discern what needs to be excluded,
especially if the producer permits this by rendering the data rich and flexible.
Hence, in the present case (i.e. the cultural sector) studies can be carried out by eliminating
items that contaminate the actual dimension of the sector, as well as isolating territorial flows
and their impact. The typical case is that of financial bookkeeping, corrective and set-off entry
accounting and also transfers to certain entities that can make data very variable (i.e. Lottery
winnings).
Nevertheless, correctly identifying the best framework for one’s analyses within RPA breakdown
tables is not easy, especially considering the multitude of entities that operate in the sector, as
well as the lack of sufficient information (in the Regions and Provinces) to allow for a detailed
and in-depth analysis of the types of interventions carried out.
250
In particular spending figures refer to: safeguarding and improvement of artistic and cultural heritage;
museums, libraries, galleries and cultural centres; cinemas, theatres, and musical activities; funding for opera bodies; recreational and sports activities, such as swimming pools, stadiums, sports centres; marketing, promotion and
funding of structures; gardens and zoological museums; State archives, academies, antiquities and fine arts.
Public investment in the cultural and telecommunications industry
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About the authors
FLAVIA BARCA, curator of this volume, is the coordinator of the Rosselli Foundation’s
Institute of Media Economics – IEM. She has worked as a consultant and lecturer at universities
as well as for public and private organisations and is the author of a variety of audiovisual
projects. She has published articles, essays and books about corporate structure and strategy
and on the communications industry, with particular reference to the media. Her most recent
works include L’industria della comunicazione in Italia. Dodicesimo Rapporto IEM (Guerini e
Associati, 2009); and Le Tv invisibili, (RAI Eri, 2007).
DANIELA CIAVARELLI (Teramo, 1983) graduated from Teramo University in Publishing,
Multimedia Communication and Journalism. She has been working as a collaborator at the
Institute of Media Economics since 2009.
ANDREA MARZULLI (Rome, 1970), who coordinated this volume, is a researcher in the field
of media and the cultural industry. He graduated in the History of Cinema at Rome University
and has a Master in Audiovisual Management and in Digital TV Management and Marketing.
He has planned, coordinated and written research papers and provided consultancy on the
Italian and international audiovisual market for some of the major players in the sector. He has
written about the media and audiovisual industries for various newspapers and contributed to
collective publications. He is current head of the research department for strategic and market
studies at the Rosselli Foundation’s Institute of Media Economics and is a consultant for the
UNESCO Institute of Statistics.
LUCA MURRAU has worked for a number of years as a consultant at the Public Investment
Evaluation Unit (UVAL) of the Department for Development and Cohesion Policies (DPS) at
the Italian Ministry of Economic Development. He is a lecturer at Calabria University’s Faculty
of Economics, teaching the economics of local development and development policies. He has
undertaken post-graduate studies both in Italy and abroad. He has collaborated on various
research studies and contributed a variety of articles to Italian and international scientific
magazines.
LORENZO PRINCIPALI is a researcher at the Rosselli Foundation’s Institute of Media
Economics. A graduate in Communication Sciences, since 2006 he has been working with
Professor Alberto Marinelli, who holds the Chair of New Media Theories and Techniques at
“La Sapienza” University in Rome. During the two-year period covering 2006-2007 he was
on the staff of the under-secretary for Communications. Since 2009 he has been in charge of
managing the digital communication strategy for the parliamentary activities of Senator Luigi
Vimercati. He predominantly works in the field of new communication technologies such as
the Internet, digital TV and mobile phones.
WILLIAM RICCI (Pescara, 1982) graduated in Communication Sciences at Teramo University
and is now attending a specialised degree course in Advertising and Business Communication.
He has been collaborating with the Institute of Media Economics since 2008.
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About the authors
PAOLA SAVINI (Milan, 1979) graduated in Institutional and Business Communication
Sciences at “La Sapienza” University in Rome (2003). She has an International Master in
European Studies and Global Affairs from the Postgraduate School of Economics and
International Relations at the “Università Cattolica” in Milan (2005) and a Master in Antitrust
and Market Regulation from Tor Vergata University (2008). After winning a grant from the
Mario Formenton Foundation in 2006 she collaborated with Gruppo Espresso until October
2007, when she started work as a researcher at the Rosselli Foundation’s Institute of Media
Economics. She is a PhD candidate in Economics, Marketing and Corporate Communication
at Milan’s IULM University and is a board member of the Youth Press Italia association.
ROBERTO TRIOLA (Rome, 1971) is an expert in digital economics. He graduated in Political
Sciences at “La Sapienza” University in Rome and holds a Master in Journalism and Corporate
Communication from Luiss University in Rome. In the second half of the 1990s he lead the
digital communication project in the Young Entrepreneurs Movement within Confindustria
(the main organisation representing Italian manufacturing and services companies). From
2000 to 2005 he followed the ICT lobby in the Confederazione’s Research and Innovation
department. Since 2006 he has been responsible for the Research Department in Confindustria
Innovative and Technological Services (previously known as Federcomin), coordinating work
on the Federation’s publications on digital innovation.
CHIARA VALMACHINO is a senior independent media consultant. Since 2005 she has been
researching scenarios in the Italian and European media markets (with a specific focus on
Germany) and studies on the television sector, specialising in the “kids” target. She holds a
PhD in Education, is an expert in media education and also collaborates with the “Università
Cattolica” in Milan, where she was a educational coordinator for post graduate courses until
2008. She has written various essays on learning technologies, media education and information.
BRUNO ZAMBARDINO (Naples, 1968) is an expert in economic studies and strategic analysis
in the audiovisual and entertainment sector. He has been working as a senior researcher
and project head at the Rosselli Foundation’s Institute of Media Economics since May 2009.
From 2003 he has worked as a lecturer in Entertainment Organisation and Economics on
the Arts and Sciences of Entertainment Degree course at “La Sapienza” University in Rome.
Since March 2010 he has been serving as a member of Scientific Board at the International
Audiovisual and Multimedia Observatory at the Roberto Rossellini Audiovisual Foundation in
Rome. Between 2009-2010 he served as a Director for the Italian Theatre Institute (ETI) with
responsibility for audiovisual and new media. His recent publications (as a co-author) include:
Cinema di qualità. Analisi del progetto Schermi di Qualità, a cura di Ufficio Studi ANICA,
2009; Il mercato della fiction italiana nel contesto internazionale, IEM-Rosselli Foundation
and Sviluppo Lazio research for the RomaFictionfest 2009; Il mercante e l’artista. Per un nuovo
sostegno pubblico al cinema: la via italiana al tax shelter”, Spirali, 2008; L’occhio del pubblico.
Analisi dei 5 maggiori sistemi televisivi pubblici europei, IsICult research for RAI Strategic
Marketing, RAI-Nuova Eri, 2008.
About the authors
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