Italy’s Entertainment Marketplace

In December 2016, Prime Minister Renzi stepped down after losing a referendum on constitutional reforms, plunging Italy into political uncertainty. This only adds to the country’s current financial troubles including sluggish growth, high youth and female unemployment, and economic disparities between the north and south. However, the nation’s fiscal problems are not as evident in the entertainment market. Italian films celebrated a record breaking theatrical box office in 2016, newly launched TV channels partnered with growth of the TV ad-spend are boosting the television sector, and the launch of international SVOD services is energizing digital revenues.

The 2016 box office totaled €661 million (US$706m), a 4% increase from the previous year. Italian films had a successful year, accounting for 29% of the market. The number one title, Quo Vado?, was the biggest Italian release ever, garnering €65.4 million (US$72.3m). At number two was another local film, Perfetti sconosciuti, with €17.4 million (US$19.2m). The major Hollywood studios rounded out the top five with Finding Dory, Fantastic Beasts and Where to Find Them, and The Revenant.

A new cinema law, which was approved in late 2016, aims to increase support for Italian filmmakers. The budget for production incentives will increase by 60% to €400 million (US$442m) in the hopes of luring more international co-productions. Tax refunds are now available to production, post-production and distribution companies. Support for the latter includes marketing costs, a great expense in this territory. Other measures will support new cinemas and reopen recently shuttered theaters. 

Exhibition in Italy is almost split into two separate markets between arthouse cinemas in the major cities, generally equipped with one to four screens, and large multiplexes, located on the outskirts of towns. Each cinema type attracts its own audience and, so far, attempts to bring arthouse films to the multiplexes have not been successful. Another unique feature of the theatrical market is the seasonal slump in ticket sales throughout the summer. Consequently, about 50% fewer titles are released from June to August and many small theaters close during this period. Traditionally, major U.S. studios will hold a release until admissions pick up in the fall; however, studios have been increasingly releasing day and date with the U.S. domestic debut for anti-piracy purposes.

Theatrical distribution is very fragmented and competitive in Italy with more than 45 companies releasing titles in 2016. Local distributors not only battle the U.S. major studios’ local subsidiaries but also the major Italian TV companies, RAI and Mediaset, whose film distribution arms together accounted for 24% of the year’s box office revenue. There are no laws requiring specific holdbacks or windowing. However, the traditional windows are strictly adhered to by industry practice.

The television sector began showing signs of recovery in 2016 after a number of years of declining revenues and stagnant sales. Traditional Pay TV players such as Viacom, Sony, and Discovery are moving into the terrestrial marketplace. Linear viewing is still very popular, with Italians watching the most live TV of any Western European nation. Public broadcaster RAI and private broadcasting group Mediaset dominate the television market.

Italy’s VOD market is still in development due to a lack of competition among local players and low revenues. Challenges hindering the growth of the digital marketplace include low broadband penetration, expensive dubbing costs, popularity of linear viewing, and holdbacks on VOD exploitation in Pay TV deals.

EST is the top segment of the digital market by revenue, followed by SVOD and TVOD. The highest earning TVOD and EST players are international services while the majority of SVOD revenue is garnered by Pay TV companies. Despite the strength of EST and SVOD, free services remain the most popular streaming platforms.