CAMPAIGN INTERNATIONAL: MEDIA GIANTS (IN ASSOCIATION WITH MOTHER TONGUE WRITERS) - Good connections help astute Kirch cope with controversy. Several scandals are unlikely to damage the Kirch Group’s plans for expansion, Alasdair Reid says

Controversy and Leo Kirch are never far apart. Since August, Kirch has been embroiled in an international tax evasion probe, an ongoing wrangle with the German monopolies commission and a boardroom row brewing at Axel Springer. It’s business as usual, some might say.

Controversy and Leo Kirch are never far apart. Since August, Kirch

has been embroiled in an international tax evasion probe, an ongoing

wrangle with the German monopolies commission and a boardroom row

brewing at Axel Springer. It’s business as usual, some might say.



The source of the Kirch Group’s power is programming. Kirch owns one of

the world’s largest film libraries, is Europe’s biggest film distributor

and owns Germany’s biggest film and TV production operation. Before the

liberalisation of TV in Germany, Kirch made a fortune selling

programming to the state channels, ARD and ZDF. After liberalisation, he

placed himself at the forefront of the private TV sector. He has a

controlling interest in Sat-1 and his son, Thomas, runs Pro Sieben.



So, while he continues to sell programming to the state channels, he can

also now sell to his own. That’s where the tax investigation comes in -

the authorities believe he has been indulging in creative accounting by

selling to Sat-1 and Pro Sieben through an intermediary in tax-friendly

Switzerland. German prosecutors have estimated that Kirch could owe as

much as pounds 138 million. But if true - and the paper trail will take

a long time to unravel - the scandal will be unlikely to damage the

politically astute and well-connected Kirch.



His connections have come in handy in dealings with the monopolies

commission too. The issue at stake here is the development of digital TV

in Germany.



Last year, the digital race was shaping up to be a messy battle between

Kirch and CLT/Ufa, a division of the giant Bertelsmann group and the

other major power in German TV.



Earlier this year, they buried their differences, pooled their technical

expertise and, to guarantee cable distribution, invited Deutsche Telekom

to be a partner. Other broadcasters protested, arguing that the alliance

controlled access and distribution of the new medium. In recent weeks,

following the monopolies enquiry, a compromise may have been reached

with Kirch and CLT/Ufa guaranteeing the system will be open to all other

broadcasters on equal terms. Deutsche Telekom has already begun

introducing the new digital ’platform’ on cable networks.



But as with Rupert Murdoch in the UK, many in Germany are concerned

about the extent of Kirch’s power. The potential Springer row - over the

sacking of one of Kirch’s allies from a top editorial post at one of the

Springer papers - illustrates the extent of his influence in German

media. In the 80s, Kirch took advantage of shareholder discord at

Springer, Germany’s biggest newspaper group, to build a 40 per cent

stake. Monopolies restrictions only just prevented him from taking full

control but he continues to cast a long shadow.



There are signs Kirch wants to focus more clearly on the domestic market

- earlier this year he sold off stakes in Silvio Berlusconi’s Mediaset

and, in another Italian operation, the Telepiu pay-TV company. But

Germany is a big enough prize and, if digital takes off, he will have

guaranteed Kirch Group’s position at the forefront of German media well

into the next century.



KIRCH GROUP



PRODUCTION Beta Film,Taurus Film



TELEVISION



Sat-1 Negotiating to buy out minor shareholders in an attempt to raise

his stake to 5 per cent.



Sat-1’s other major shareholder is Axel Springer



DFS Wholly owned sports channel



DF1 Digital pay-TV television package launched last year



Premiere 50:50 joint venture between Kirch group and CLT/Ufa. A pay-TV

package originally developed for analogue distribution it is now being

upgraded for digital and will be merged into DF1



Teleclub Swiss pay-TV operation.



TeleCinco Minority stake in Spanish TV network



FILM AND TV FACILITIES



Beta Technik, Beta Digital



PUBLISHING



A 40 per cent stake in Axel Springer, Germany’s largest newspaper

publisher.Titles include Die Welt and Bild.



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