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.
