Italy's state TV pulls channels from Sky

ROME, July 31 Fri Jul 31, 2009 10:31am EDT

ROME, July 31 (Reuters) - Italy's public broadcaster RAI is pulling most of its channels from Rupert Murdoch's Sky Italia and launching a satellite TV alliance with Mediaset (MS.MI), which is owned by Prime Minister Silvio Berlusconi.

Contract talks between RAI and Sky broke down this week, the two companies said, with each blaming the other for the collapse of negotiations. The existing contract ends on Friday.

Sky Italia said it had offered 350 million euros "minimum guaranteed" to RAI to keep the channels on its satellite pay television. Corriere della Sera daily said RAI had asked four times as much.

RAI is instead creating another satellite platform with Mediaset, the private broadcaster which is supposed to be RAI's main competitor, and Telecom Italia (TLIT.MI) to broadcast in areas not covered by digital terrestrial services as the country switches to the new technology.

This service will, at least initially, be free.

RAI's three main free-to-air (FTA) channels will remain on Sky at least for now. RAI, in common with other state broadcasters like Britain's BBC, is contractually obliged to make its FTA channels available on all platforms -- satellite, digital and via internet.

Critics of the deal with Mediaset say RAI's talks with Sky broke down for political reasons. [ID:nLH84367]

The cash-strapped public broadcaster, whose top executives were appointed by Berlusconi's government earlier this year, can hardly afford to snub Sky's offer, they say.

"This affair has political rather than industrial overtones," TV critic Aldo Grasso wrote on Friday.

"With the switchover to digital and pay-TV, the battle is not between Mediaset and RAI, but between Mediaset and Sky. And RAI seems to have decided to side with Mediaset," he said.

Relations between Berlusconi's government and Murdoch's News Corp. (NWSA.O), Sky Italia's owner, have deteriorated since the doubling of value added tax on Sky Italia's pay television. Even RAI's President Sergio Zavoli, who is close to the centre-left opposition, said on Thursday that breaking off with Sky was "a big favour" to Mediaset.

For Italian viewers, the showdown on satellite TV and the move to digital mean that they will need at least two different decoders, and in some cases three, to see all the channels available. (Editing by David Cowell)

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