CAMPAIGN REPORT ON GERMANY: The media barons - The size and scale of the media in Germany means that its leaders are powerful men. Ken Gofton profiles three of the industry’s biggest hitters

ROLF SCHMIDT-HOLTZ

ROLF SCHMIDT-HOLTZ



Chairman and joint CEO of international TV station CLT-Ufa



When Bertelsmann announced it was plucking Rolf Schmidt-Holtz from his

role as the chief executive of its broadcasting arm CLT-Ufa and

appointing him as the group’s first chief creative officer, there were

many in the industry who took a sharp intake of breath. ’I can only say,

Jesus, what a challenge,’ noted the head of one media independent who

assumed Schmidt-Holtz would be laying down creative strategies across

the Bertelsmann empire.



It was the scale of the task rather than Schmidt-Holtz’s talent that was

the issue. For, if anyone is up to the task, it is this outspoken former

editor who has risen through the ranks of the German media giant and

gained enormous respect in the process.



It is rare for a journalist to reach such heights in any media

group.



However, Schmidt-Holtz’s networking ability, his motivational skills as

an admired former editor-in-chief of Gruner & Jahr’s Stern magazine and

his acknowledged editorial judgment will be key attributes in his new

role.



Everything, of course, depends on the job description. Some press

reports suggested he would be primarily concerned with running the

group’s internet strategy. Schmidt-Holtz himself sees it differently.

’The internet is important, and a big part of the future, but it is only

one channel,’ he says. A key part of his remit, he argues, will be

building bridges between the disparate parts of the company.



’We have a decentralised, entrepreneurial structure at Bertelsmann,’ he

explains. ’On the one hand, that is excellent. It creates initiative and

independence. It is one secret of the group’s success. On the other

hand, it is a disadvantage because there is little synergy. The editors

in the publishing houses are not interested in co-operating with the

magazines or TV stations. No-one knows anyone. We have to bring people

together.’



Another side to the job, he says, will be to collect ideas from the

outside world. Big publishing houses are anonymous organisations, but he

will be the face of Bertelsmann, the point of contact. Already, he

claims, he has received more than 100 letters from people suggesting

projects.



Schmidt-Holtz’s career progress has largely been shaped by the media

revolution where two factors are paramount: the interdependence of the

various channels and the demand for content. Material developed for

books, magazines or newspapers can be adapted for the internet. Digital

technology and the emergence of interactive TV are both creating a huge

appetite for moving images and fresh opportunities for recycling. And

Bertelsmann, as a major international media player, is well placed to

exploit this market.



While at Stern, Schmidt-Holtz succeeded in halting an eroding

circulation and re-established the magazine’s reputation for

investigative journalism and setting the political agenda. After six

years, however, he resigned - allegedly over a disagreement about G&J’s

plans for a new magazine which he felt would damage Stern - and

relocated to Bertelsmann’s music group.



When Bertelsmann merged its TV subsidiary Ufa with the Luxembourg-based

CLT to form Europe’s biggest commercial broadcasting network,

Schmidt-Holtz became joint chief executive, responsible for content.

Under his guidance the company, now making record profits, produces 90

per cent of its own primetime programming.



Schmidt-Holtz’s keen editorial eye and belief in high standards should

stand him in good stead as Bertelsmann’s creative supremo. ’Quality is

key,’ he says. ’But that doesn’t mean an intellectual, elite thing, it

means appropriate quality for your readers and viewers. The simple

philosophy is that you have to love working for people and you have to

love your target groups. Only if you internalise these beliefs will you

fulfil this target of quality.’



Schmidt-Holtz remains very much his own man, one who has had his rows

with the Bertelsmann group in the past and may well do so again in the

future. ’Maybe my reputation for being outspoken is right, and maybe the

reason is that I do not fear the consequences,’ he says. ’As a

journalist I had to decide very difficult, even dangerous issues and I

concluded that the only thing to do was to take the best decision you

could at the time and stick with it.’





THE SCHMIDT-HOLTZ FILE



Age 51



1997-date Chairman and joint CEO of international broadcaster CLT-Ufa,

responsible for the German speaking regions and the station’s

content



New appointment: First chief creative officer, Bertelsmann group



1994-1997 President of the executive board of Bertelsmann’s

entertainment division



1988-1994 Appointed to board of Gruner & Jahr, initially as publisher,

then editor-in-chief, Stern



1986-1988 Editor-in-chief for TV, WDR



1985-1986 Head of executive office of information and journalism,

Bertelsmann



1980-1985 Journalist with public broadcasting corporation WDR



1977-1980 Federal press office







BERND KUNDRUN



Chairman Designate, Gruner & Jahr



In October, Bernd Kundrun will succeed the legendary Gerd Schulte-Hillen

as chairman of the pounds 1.7 billion publishing house Gruner & Jahr.

For now, though, he has his mind on other things. February saw the

launch of FT Deutschland, a joint venture between Pearson and G&J, and

he’s in charge.



This is a major challenge. It’s the first national daily newspaper to be

launched in Germany for decades. On the positive side, the timing could

hardly be better. There has been a huge, if belated, rise in interest in

everything to do with the stock market in Germany. Needless to say,

however, others have also seen the opportunity. Business coverage is

increasing in all media and there have been a number of magazine

launches, headed by the successful Borse Online from G&J itself, which

already has a paid circulation of more than 216,000.



’This is a very, very tough project,’ a well-placed observer notes. ’One

thing is clear. If Kundrun fails, it will not be favourable for his

career at G&J because to lose will be expensive.’



The engine that provided the resources to enable G&J’s parent,

Bertelsmann, to expand in the post-war years was its book club division,

which is where Kundrun first made his mark in the 80s, rising from

management assistant to marketing director and, finally, chairman.



Kundrun was instrumental in driving the adoption of direct marketing

techniques to replace door-to-door representatives just before the

Berlin Wall came down. The result was a surge in subscribers which

rejuvenated an ailing and traditional business. His reward was the

tricky job of chief executive of the Hamburg-based pay-TV company

Premiere. There he successfully doubled the subscription base to 1.5

million by focusing on new films and top sporting events.



What was tough about the assignment was the ownership of the

company.



Under recently abolished rules, individuals could not own the majority

of shares in more than one TV station, a situation that led to

competitors taking minority stakes in the same operation. In Premiere’s

case, ownership was split between the Kirch Group (approximately 25 per

cent), Bertelsmann and Canal Plus.



With 30 free channels available in Germany, Kundrun believed that one

pay-TV channel from Premiere was enough and that it had to concentrate

on programmes consumers would be happy to pay for. The Kirch Group

disagreed, arguing for a package of channels in the style of BSkyB. ’I

said, ’where is the pay value if we offer viewers another 30

channels?’,’ he now recalls. ’But I understood the Kirch logic because

it has a lot of film rights and distribution contracts and it wanted

broader distribution for them. A clash was inevitable.’



And so it proved. In the end, the Kirch Group increased its stake in

Premiere while Bertelsmann reduced its holding to just 5 per cent. For

Kundrun, the outcome was a move, in August 1997, to G&J as head of the

newspaper division where fresh challenges awaited - including the launch

of the German-language Financial Times.



Kundrun says critics put all kinds of hurdles in his path to the launch

of the business daily. He, however, in typical style has brushed

doubters aside. People claimed the target publication date - first

quarter of 2000 - could not be met. They doubted it would be possible to

recruit 100 journalists, weld them into a team and persuade them to

agree to write for both the printed paper and the online version. Nor

would it be possible to find enough printing sites or achieve national

distribution when going to press as late as 10.30pm.



’One of our main competitors went so far as to say that if we succeeded

in closing so late while still reaching all our sales points, the

distribution managers of all the big newspapers should resign,’ Kundrun

says. ’I am still waiting for that to happen.’



Kundrun won’t spend too much time waiting as he has bigger fish to

fry.



Within the next six months the company’s chairmanship will be his and he

can look forward to another set of challenges to tackle and - no doubt -

critics to silence.





THE KUNDRUN FILE



Age 42



1997-date Head of G&J’s newspaper division



New appointment: Chairman designate, G&J



1994-1997 Chief executive, Premiere TV



1993 Chairman, Bertelsmann Club



1989-1993 Marketing manager, Bertelsmann Club, responsible for

recruitment, direct marketing and the catalogue division



1987-1989 Sales director, Bertelsmann Club retail chain



1984-1987 Executive assistant, Bertelsmann Club, the book club division

of Bertelsmann





THOMAS KIRCH



Member of KirchMedia GmbH



The legendary Kirch Group founder Leo Kirch is now in his 70s and

nearing the end of his career. His son, and assumed heir, Thomas has

made his own fortune in the media world and is now starting to emerge

from his father’s shadow.



But one could be talking about two black cats on a moonless night. The

most-quoted fact about Leo Kirch is that he shuns publicity, a trait

that appears to be in the genes.



Of the three rising stars profiled for this article, only Thomas Kirch

declined to be interviewed. Neither the Kirch Group head office nor the

TV station Pro Sieben, with which he is closely associated, could

provide a current photograph of him. And a request for an official

biography was met with a curt 40-word statement, revealing that he is a

member of the supervisory board of KirchMedia GmbH and holds 7.31 per

cent of the shares.



He also holds 33 per cent of the shopping channel HOT, 40 per cent of TV

Munchen and 100 per cent of Radio Hundert.6 in Berlin.



All of which would sound very entrepreneurial if Thomas Kirch’s media

shareholdings had not already been a matter for controversy in Germany.

As the head of one media independent puts it, the law that prevented

companies or individuals from owning the majority of shares in more than

one broadcasting station ’led to some amusing alliances between bitter

rivals’. ’It was quite ridiculous,’ he says. ’You can’t keep the media

tycoons from the TV table like that. They will always find a way.’



It was against this background that Thomas Kirch, then aged 37, set up

his own media company in 1995. Initially its holdings included a near-50

per cent stake in the Pro-Sieben TV station but within months this was

reduced to less than a quarter in the face of what the Wall Street

Journal termed ’German media officials’ anti-trust suspicions’.



The Kirch family maintained that the business interests of father and

son were quite separate. Since then, the law regarding shareholdings has

been relaxed. ’Surprise. The shares have now been sold to the Kirch

Group. And what is the son doing now? I have no idea,’ a media agency

observer says.



The same restrictions on shareholding resulted in the situation at the

pay-TV station Premiere where the interests of the Kirch Group

conflicted with those of the other shareholders, Bertelsmann and Canal

Plus. Kirch wanted Premiere to launch more channels, thus providing

outlets for films and programmes for which it had distribution rights.

The other two companies backed the station chief Bernd Kundrun (see

separate profile) who believed that, in a country with a multitude of

free stations, it was better to concentrate on a tightly defined

offering that people would be prepared to pay for.



Despite spending time in negotiations with Kirch junior, even Kundrun

cannot shed much light on the make-up of the man. ’I saw Thomas Kirch at

some of the meetings I had with Leo Kirch, but he was very quiet in his

father’s presence,’ Kundrun says. ’The management around Kirch were

fairly aggressive people and very professional. I understood their

strategy and why they held a completely different view to mine and that

of the other shareholding companies. At the end, I believe both sides

had a high respect for each other.’



The secrecy surrounding Leo and Thomas Kirch appears both old-fashioned

and eccentric in an industry such as media, devoted as it is to the

distribution of information and the maintenance of press freedom. They

are not unique, however - the UK’s Barclay brothers take a similar

position.



The first sign of a softening in the group’s attitude came three years

ago when, for the first time, the managing directors of the Kirch

Group’s seven divisions held two press evenings that ran on long into

the night.



This development was so unexpected that it made headlines at the time

and hinted at a more open approach when chairman Leo finally stands

down. Pointedly, however, father and son did not attend.





THE KIRCH FILE



Age 41



Member of the supervisory board of KirchMedia GmbH, and a minority

shareholder (7.31 per cent)



1995 Established holding company Thomas Kirch Communication for his

media interests, of which the most controversial was a 47.5 per cent

stake in Pro Sieben TV. He subsequently reduced this stake, and then

sold the remaining shares to Kirch Group.



Retains holdings in shopping channel HOT, TV Munchen and Radio

Hundert.6.



Topics