MILAN (Reuters) - Italy's largest private broadcaster Mediaset (MI:MS) said on Friday it signed a content-sharing deal with Sky's (L:SKYB) Italian unit, paving the way for potential broader alliances between the two rival groups.
The deal comes as Mediaset's struggling pay-TV business is rethinking its business model, and broadcasters in general are tuning their strategies to fend off competition from online content providers such as Netflix (NASDAQ:NFLX).
Mediaset said in a statement the deal would allow it to broadcast its pay-TV Premium Cinema and TV series channels on Sky's satellite platform.
In turn, the agreement would allow Sky Italia to use Mediaset's Premium pay-TV digital platform for its own offering of services and channels.
On Thursday, Sky Italia signed a long-term deal with broadband company Open Fiber that will allow it to offer internet TV in Italy.
"The agreement reached today... ensures that both companies will enjoy a number of benefits... both operators will achieve optimisations that guarantee a new multi-platform scope and wider access for their respective clients to high-quality TV products," the statement said.
Mediaset's Premium business, with under 2 million subscribers, has struggled to make a return on its large investments for broadcasting rights to Champions League and Italian Serie A soccer matches, and over time it has lost market share to Sky, its major competitor.
The Milan-based TV group, controlled by the family of former prime minister Silvio Berlusconi, had agreed to sell Premium to France's Vivendi (PA:VIV) in 2016, but the deal collapsed, locking the two groups into a bitter legal battle.
The failed agreement prompted a change in Premium's strategy, shifting it towards on-demand offerings and moving to a strategy that relied less on expensive, premium sporting content.
"If you don't make alliances over pay TV to enrich the content offered to clients, other players, like Netflix, will come and eat you up," a source with knowledge of the matter told Reuters.
The statement added that the accord gave the Milan-based TV group the option to hand over to Sky Italia, between November and December of this year, full control of a newly created company, to which the technical, maintenance and operational assets of Premium would be transferred.
"The two groups are 'smelling' each other to see if they get along for future agreements," the source said.
The statement added that the potential sale of the share in the new company would not mean discontinuing Mediaset Premium's services, "which will continue to manage its offer and its client base."