CAMPAIGN REPORT ON GERMANY: New rules shake up broadcasting arena

By NICOLE DICKENSON, campaignlive.co.uk, Friday, 18 April 1997 12:00AM

No holds are barred in the battle to dominate German digital TV, since a federal treaty eased monopoly restrictions in January. Nicole Dickenson reports.

No holds are barred in the battle to dominate German digital TV,

since a federal treaty eased monopoly restrictions in January. Nicole

Dickenson reports.



Last year was meant to be the clincher. The fight for broadcasting

supremacy between the media giant, Bertelsmann, and Leo Kirch, Germany’s

answer to Rupert Murdoch, would be decided on digital technology. Or so

the media had us believe, until viewers gave a lukewarm reception to the

Kirch digital offering of 25 television channels, DF1, and Bertelsmann

decided not to launch its RTL Club digital bouquet.



Now the battle lines over the free market have been redrawn as a result

of the new federal broadcasting treaty that came into effect on 1

January. It allows media companies to control any number of TV stations,

as long as their combined audience share does not exceed 30 per cent of

total viewing. Previously, shareholder stakes in TV networks were

limited to 49.9 per cent.



The treaty is a victory for Bertelsmann and the Kirch Group, which can

tighten their grip on the world’s third-largest TV market.



Bertelsmann’s TV and radio subsidiary, UFA, has merged with Compagnie

Luxembourgoise de Telediffusion to form a new company, CLT-UFA, which

owns 89 per cent of Germany’s top TV station, RTL TV.



RTL TV, RTL2, Super RTL, Vox and the pay-TV channel, Premier, have a

combined audience of around 26 per cent.



The TV stations popularly linked to Leo Kirch - Sat 1, DSF and his son

Thomas’s channels, Pro 7 and Kabel 1 - have almost 27 per cent.



Little change in programming at RTL TV is expected, but one possible

outcome of CLT-UFA’s increased shareholding is a search for greater

synergies among the RTL channels. CLT-UFA wants to set up a holding

company which could pool marketing, production and other resources for

the RTL stations.



But David Linn, broadcast director at HMS/Carat, believes it could face

strong resistance. ’A company such as Disney, which has a large share in

Super RTL, may not be happy having a tiny shareholding in the holding

company,’ he explains.



CLT-UFA’s position as Europe’s largest broadcaster has important

implications.



Nikolaus Formanek, its head of corporate communications, explains: ’We

can compete with the big American media companies on the international

field. If a company wants to market programming in Europe, at some stage

it will have to deal with us.’



CLT-UFA has a stake in the UK’s Channel 5, a TV station in Poland and is

about to move into Hungary.



Little change is expected at Pro 7, which could lose its franchise when

it comes up for renewal in November. The treaty allows Pro 7, and its

sales house, MGM, to issue ordinary voting and non-voting shares when

they go for a stock market flotation later this year. One broadcast

director of a media buyer says: ’The voting shares will be owned largely

by Thomas Kirch. Leo Kirch dominated Pro 7. That’s not going to

change.’



Sat 1, the second-largest private channel, is seeing the biggest effects

of the treaty. Rival shareholders the Springer Publishing Group and

Kirch are trying to boost their stakes. Kirch, which owns 43 per cent of

Sat 1, is sure it can acquire a further 16 per cent from Holtzbrinck

subsidiary AV Euromedia and Ravensburger Film and TV to give it majority

control.



Springer, which had first refusal on the shares, hopes to increase its

shareholding.



What is at stake is control of the Sat 1 supervisory board and the final

say in policy. Whatever the outcome of the battle, which Kirch is tipped

to win, it should result in clearer decision-making after the run-ins

and wheeler-dealing of recent years. Clashes over the running of Sat 1

and shaky programming have further eroded its audience share from 14.8

per cent in 1994 to 13.2 per cent last year. Its slice of the ad cake

has fallen to 24 per cent, compared with RTL TV’s 29.9 per cent. If

Kirch takes control, it could mean a change in programming policy.



Sharper management of German TV is badly needed. Ad spend has slowed and

limits on minutage (commercial satellite stations are allowed only

12,000 minutes a week of commercial airtime) make it hard to profit.



In a bid to prevent a flood of US imports, the treaty stipulates that

channels with more than 10 per cent audience share must give some of

their airtime, including prime time, to local independent production

companies.



Broadcasters are up in arms.



But Kirch and CLT-UFA have little to grumble about. They can consolidate

their dominant position and make it even harder for non-German media

owners to enter the market.



This article was first published on campaignlive.co.uk

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