A Symbol Of Austerity Anxiety

Michael Hedges May 9, 2013 Follow on Twitter

Only so much internal austerity can hold together a media company facing external austerity, advertising retreat and digital quandary. Off-loading assets – and people – only goes so far when debt burden is compounded by inertia. Restructuring is often the best strategy but only when it goes far enough.

It’s not a pretty sight at RCS Media Group, Europe’s 15th biggest media house and publisher of esteemed Italian daily Corriere della Sera. Debt-laden from digital transition, which some say has been ineffective, and the advertising slump effecting all Italian media, the company has gone to shareholders for a cash infusion. And, typical of media houses under stress, non-core assets are up for sale.

A three-year plan presented by new CEO Pietro Scott Jovane to an investor’s conference call (April 14) “will accelerate” digital revenues and profits, tripling digital subscribers in key markets – Italy, Spain and Latin America. Jovane joined RCS MediaGroup from Microsoft Italy in May 2012 partly to change the chemistry between the company and its investors and to fix the financial pain.

The non-core assets on the block included the company’s Milan headquarters building, ten magazine titles and, perhaps, sports daily Gazzetta dello Sport. The magazines were first shopped as a block then, when that didn’t work out, the exit plan developed some nuance. If not sold by the end of June the ten titles would close and about 100 employees would face the axe.

Monthly health magazine OK Salute, launched in 2005, and men’s magazine Max might continue as supplements to Corriere della Sera. Max has been on the scene since 1985 and last year was integrated with Gazzetta dello Sport. The others, including Yacht & Sail, are on the black list. The company is looking for “satisfactory” offers, reported affaritaliani.it (May 7), without some buyer’s rumored demands for continuing contributions to salaries.

This is all mere detail as the real business at hand is securing support – and cash – from the main shareholders, some of Italy’s best-known brand names. In mid-April RCS MediaGroup reported a €509 million loss for 2012 and asked major shareholders for a€600 million capital injection, €400 million by July 1st. Banks were also asked to reschedule €577 in credit lines.

Investment bank Mediobanca, retail bank Intesa Sanpaolo, automaker Fiat and tire maker Pirelli agreed to come to the aid of RCS. Other shareholders – insurance giant Generali, Benneton family members and luxury goods maker Tod’s owner Diego Della Valle – voted against. “It is entirely possible to vote in favor of the capital (increase),” said Intesa Sanpaolo CEO Enrico Cucchiani, quoted by Milano Finanza (May 2), “even for those who have decided not to participate.”  RCS MediaGroup is, he said, “a symbol for the country.”

Mr. Della Valle, who holds a 8.7% stake, raised “objections” based on the “dilutive effect… would result in harm to shareholders who did not (participate) in this increase.” Shareholders will discuss all of this at a scheduled meeting later in May.

The tempest at RCS Media Group gets no sympathy from Carlo De Benedetti, chairman of major media house Gruppo Editoriale L’Espresso. “RCS is like a timeshare where everyone wants to spend their August holidays,” he told reporters on the sidelines of the Festival of TV and New Media in Dogliani, quoted by LaPresse (May 5). Mr. De Benedetti was once chairman of automaker Fiat, currently a RCS Media Group shareholder, about 10%. Current Fiat chairman John Elkann agreed to participate in the recapitalization.

See also in ftm Knowledge

Media in Italy

The Italian media market is totally unique and very competitive. Italian consumers are quickly embracing new media and the advertising community is quickly changing. And hovering close is Italy's richest person - Silvio Berlusconi. 112 pages, includes Resources, PDF (October 2012)

Order here