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Revenues


In terms of revenues, the Italian television market in recent years has
been aligning itself with longstanding trends throughout Europe, combining
public funding and advertising revenues with revenues from fee-based
services.

In this landscape, the licence fee, in part because of the hold on increases
imposed for 2005 and 2006, has gradually declined in comparison with
total revenues for the system. Already, the inflows generated by the
various forms of pay TV have exceeded funding from the licence fee.

Historically, the parameter used to adapt public funding has been the
programmed inflation rate, and not the actual rate of inflation, meaning
that not only does it not allow the company to recover the entire effect of
inflation within the Italian economy, it also does not consider the significant
pressure on production created by the level of competition within the
marketplace that has been growing for several years now.
The Italian licence fee remains the lowest in western Europe.

It should also be noted that in Italy, despite the steps Rai has taken to limit
these effects, reliable estimates point to a rate of evasion approaching 25%, far and away the highest in Europe, where the average rate of evasion is 8%, with a low of 5% in the U.K.
In that regard, we would like to see the introduction of legislative measures
that would increase the efficacy of actions to combat evasion, measures
that Rai has requested on numerous occasions from the competent public
bodies.

In the near future, the Italian marketplace will, nonetheless, continue to be funded primarily through advertising revenues.
However, growth is estimated to come not so much from the leading terrestrial broadcasters, for which room for further growth is highly contingent upon the limits of market saturation, as from the satellite monopoly and other new broadcasters destined to enter the Italian television market.

Nonetheless, advertising revenues, too, will be declining in importance in the
context of broadcasting funding, in part because of the increase in pay-TV
revenues, but also due to a shift in investment to other emerging media.

The gradual decline in TV advertising revenues can also be seen over the last
two years in relation to public services.

In a comparison of the leading European players, we have seen a general decline in such revenues, although to varying extents from one country to another, while viewing audience has remained fairly stable and, in Rai’s case, has actually increased.

RAI: Rai Radio Televisione Italiana