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THE TELEVISION BROADCASTING MARKET

2009 was the year of the switchover to DTT by a large part of the population. Analogue broadcasting was terminated in Western Piedmont, Val 'Aosta, Trentino Alto Adige, almost all of Lazio and in Campania, after accompanying us for over fifty years. It was replaced by the digital signal, which has made it possible to increase the number of television channels available and consequently the range of choice offered to viewers. At the end of the year, almost 30% of the population was reached exclusively by this type of signal.

The switchover to digital, which will completely replace analogue broadcasting by the end of 2012 is continuing in line with schedule and steps to make the whole of Northern Italy digital have already been laid out for 2010. This will mean that a total of 70% of Italians will be reached by the end of the year.

Further enhancement of the offering has resulted in excellent television viewing figures.In 2009 (Auditel reference period: 4/1/2009-2/1/2010) television audiences registered the absolute record for a whole day, touching on an average of 9 and a half million viewers, reaching an average prime time figure of 24.4 million viewers, the best result of the last four years.

At the end of 2009, about 65% of households had digital television (satellite and terrestrial broadcasting), with this figure rising to 70% on an individual basis due to the increased possession by larger families with children.

This growth hinges on DTT (digital terrestrial television) which, boosted by the aforementioned switch-off of important areas of Italy and by sales of televisions with built-in DTT tuners � the only appliances available on the market since last April � has overtaken satellite broadcasting and is the most widespread platform, having reached a user base of about 32 million people, 56% of the population, in December 2009.

In this sphere, Rai with its eight channels � which will become 13 in the areas where the switch-off has been completed - is the broadcaster with the most extensive and attractive free offering, not only in Italy, but also in Europe.

In the DTT pay segment, Mediaset's leadership with its semi-premium and premium packages reaches a subscriber base of about 2.9 million users (cards active in September 2009). The second operator is Airplus which activated its service in March 2009 with the Dahlia brand, replacing that of La7 Cartapiù, and which has a subscriber base estimated at around 400 thousand families.

Satellite has a total of 17.7 million potential viewers (31% of the total) and is still characterized by the undisputed leadership of the Pay segment, in which Sky, with 4.5 million subscriber households (virtually unchanged from 2008), reaches about 12.8 million people (22% of the population).

July 2009 witnessed the birth of TivùSat, Italy's first free satellite platform, set up

within the scope of Tivù, a company owned jointly by Rai, Mediaset and Telecom Italia Media.

Designed to reach every area of the country, including those which will not be covered by the DTT signal even when it is fully operational, thanks to a special tuner and relative smartcard, TivùSat makes it possible to receive the whole existing television offering (including all the programmes without foreign broadcasting rights), of all the new national television channels and of a series of other Italian and international channels (such as Euronews, France 24, BBC World News, TVE International, Canal 24 Horas, Arte, Deutsche Welle, ZDF ARD and others).

The market continues to be characterized by a greater articulation of the transmission and reception platforms and by increased competition at all levels: from the acquisition of production factors (rights, content and talents), to attention (viewing figures), to public expenditure (related mainly to pay TV) and income from advertising.

In terms of offering models, innovations continue with the specialization of the television channels on the one hand, with a focus by types of audience and/or themes, and with the development of non-linear offerings on the other, released from the typical logic of programming.

This latter category includes all the video on demand services (present especially in the offering by IpTv) operators) as well as the new digital video recorders (including My Sky offered by the main pay operator), which make recording and then watching television event (even while it is being recorded and consequently with time differences of just a few minutes in relation to its actual broadcasting) extremely simple.

Rai has contributed successfully to this major offering with its specialized digital channels, all of which are free, and with an almost entirely public service programming (Rai 4, Rai Storia, Rai Sport Più, RaiNews 24, Rai Gulp, Rai Scuola, RaiSat Cinema, RaiSat Premium, RaiSat Extra and RaiSat YoYo) proving its ability to combine the tradition of generalinterest TV with the innovation of specialized TV.

By strengthening its nature as a public service, Rai continues to be strongly committed also to other communication media, such as publishing, radio, film and web, diversifying and integrating the products it offers.

IPTV continues to occupy a marginal part of the Italian broadcasting market despite considerable efforts by telephone companies, particularly Telecom Italia and Fastweb, to build, articulate and promote an attractive service.

Albeit at a much slower rate than in the past, Internet continues to grow in terms of users, time spent on the Net and use of the various applications.

According to the latest estimates drawn up by Audiweb, in December 2009 about 23 million Italians logged onto the Internet at least once, either from home or at work.

In economic terms, this development is translating into rapid growth in revenues from direct expenditure by users (e.g., to purchase content), and particularly into a boom in advertising revenue. The Net is consolidating its role as a channel for the distribution of audiovisual contents via a broad range of services differentiated considerably in terms of offering and business models, characterized by a competitive arena full of traditional operators (e.g., broadcasters) and new points of reference for users (phone companies, portals, delivery platforms such as Google/You Tube, distributors like Apple, channel aggregators, and specialized web TV stations aimed at specific communities).

In this context of rapid change, by taking advantage of its position of central importance as a general-interest television network and of its capacity to attract widely diversified audiences, Rai progressively accompanies the hybridisation of Italian media consumption and continues to positively face market change thanks to its integration strategy and exploitation of the various platforms on which it always been present.

2009 was a year full of technological and industrial challenges which will be intensified in the years to come and will make the scenario increasingly complex and competitive. Rai has succeeded in moving with agility in the past and will know how to guide change in the future offering a complete response to the needs of increasingly differentiated audiences.