UPDATE: Sky Italia Boosts Movie Offer As Risks RAI Pullout

News Corp.'s (NWS) satellite TV unit Sky Italia Tuesday said it will boost its movie offer with a new channel and high-definition technology, in a move also aimed at offsetting a possible pullout by rival RAI of its free-to-air channels from Sky's platform.

Sky said it will launch a new movie channel July 31, which will be entirely dedicated to Italian cinema classics. It will also start broadcasting three existing channels in HD, targeting 30 by 2010.

News Corp. owns Dow Jones, publisher of this newswire.

"We would have boosted our movie and HD offer anyway," said Kathryn Fink, director of Sky programming.

"But this will help us to give our users a richer offer from August, also in case of RAI's withdrawal."

State-owned RAI has joined forces with Italy's largest commercial broadcaster, Mediaset SpA (MS.MI), and Telecom Italia SpA (TI) to launch a new free-to-air satellite platform, Tivu, that will broadcast digital television programs from end-July.

The move is officially aimed at driving the switch from analog to digital TV in Italy, due to be completed by 2012. But analysts see the creation of Tivu is an attempt by RAI and Mediaset, owned by Italian Prime Minister Silvio Berlusconi, to counter competition from Sky Italia.

Sky Italia has broken the domestic duopoly of privately owned Mediaset and state-controlled RAI, surpassing Mediaset in terms of overall revenue in 2008, Italy's telecoms regulator said this month.

Following the creation of Tivu, RAI is considering withdrawing its digital and free-to-air channels from Sky's platform. Negotiations on the renewal of an existing contract, which expires at end-July, are still underway.

Sky Italia has offered EUR425 million to RAI for its pay channels, including Rai Sat and Rai Cinema, for seven years, but RAI is also asking for a contribution for its traditional free-to-air channels.

-By Giada Zampano, Dow Jones Newswires; +39 06 69766925; giada.zampano@dowjones.com

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