CAMPAIGN REPORT ON GERMANY: TV's reality check - Germany's TV networks are undergoing a tough time as reality kicks in. Anja von Fraunberg lifts the lid on the Kirch crisis and other problems dogging the market

The stories unfurling in Germany's media could not be any more dramatic if they were screened on a primetime TV soap opera. The particular cliffhanger storyline in this case focuses on the Kirch Group, whose survival is under constant speculation.

The Kirch Group, Germany's biggest media company after Bertelsmann, has run up debts in excess of seven billion euros with banks in Germany and abroad and is undergoing the most serious crisis in its 50-year history.

The repercussions on the German TV market could be huge, especially considering that Kirch controls approximately one third of the German television market through ProSieben, SAT.1, Kabel 1 and N24. Kirch also owns Premiere, the only pay-TV service available in Germany to date.

And it is this pay-TV venture which has caused the biggest headache. Since its inception in 1990, the service has been making losses which have accumulated to a deficit in excess of four billion euros so far, rising by two million every day. And, to add insult to injury, Rupert Murdoch is breathing down Leo Kirch's neck. The media mogul has repeatedly threatened to call in the 1.7 billion euros he paid for his 22.3 per cent share in Premiere unless the station can secure four million subscribers by the autumn as initially agreed. To date, only some 2.4 million viewers have been willing to pay for live first division football coverage or Hollywood blockbusters.

So pay-TV has hardly been a rip-roaring success in Germany; viewers clearly prefer free-to-air TV which, following the introduction of commercial TV in the mid-80s, has become a lucrative market. Kirch's rival on German commercial TV is Bertelsmann's RTL Group which comprises RTL, RTL II, Super RTL, RTL Shop and VOX. On the sales side, IP Deutschland covers the RTL Group which, in 2001 contributed 41.2 per cent of the gross advertising market. Meanwhile the ProSieben stations, represented by SevenOneMedia, claimed 45.6 per cent.

The persistent economic crisis has also left its mark on German TV. Compared with 2000, television advertising turnover dropped by 5.2 per cent last year.

The picture is equally diverse looking at the smaller commercial stations, which are often referred to as "second-generation stations" because of their later entry to market in the 90s. Most of them also experienced a drop in advertising revenues, but VOX improved its turnover by 3.8 per cent. The service "continued its upwards trend in the audience market last year", Jan Isenbart, a spokesperson for the marketing company IP, says. "This is a signal to the advertising industry and is accordingly honoured."

Wolfgang Schuldlos, the managing director of the media agency More Media, attributes the better results of the commercial sector to its flexibility in marketing advertising time, rather than programme quality: "In times of crisis, the commercial channels are able to react faster concerning pricing strategies.

RTL even went so far as to reduce the ad rates charged for the quiz show Wer wird Millionar (Who wants to be a Millionaire?), one of the most popular programmes in Germany, by about 20 per cent.

But fast and flexible pricing alone will not be enough, as SAT.1 amply proves. The station "for all the family

suffered a 9.7 per cent fall in gross advertising turnover, despite aggressive marketing, making it the only major loser among the commercial TV channels of the first generation.

Klaus Scharpf, the head of research at MindShare, says: "SAT.1 clearly has some weaknesses regarding its programme scheduling. The early evening slot between 17.30 and 20.00 is a desert. Also, there are no highlights such as big shows that would generate a solid audience reach. It's ups and downs."

Schuldlos also highlights SAT.1's inconsistencies as its Achilles heel: "Especially in the difficult times that we're experiencing at the moment, it is all the more important to have planning security."

Meanwhile channels such as RTL and ProSieben have secured a clear-cut position in the market with consistent audience and market shares. The formula RTL adopted to this end includes successful series, quiz shows and sports coverage such as Formula One. ProSieben, on the other hand, opts for comedy formats and feature films.

Nevertheless, no-one is having a brilliant time at the moment. While Isenbart insists the stations marketed by IP Deutschland are "well booked", especially VOX and the market leader RTL, the first two months of 2002 rated poorly, "continuing the trend of the last few months". RTL Group does not expect any major upturn over the next few months.

Experts are equally reluctant to make a clear forecast on the developments.

"How 2002 will turn out is very difficult to predict,

Peter Christian, the head of SevenOneMedia, says. This is owing, among other things, to the fact that the agencies have now resorted to booking advertising time with less notice and are making more changes in their bookings.

Yet broadcasters are shunning the doom and gloom approach. "We do not intend to just sit back and watch advertising revenues going down any further but are about to launch new products in the market and to offer new solutions for communication,

Christian reveals. These moves are intended to generate new income. It is an open question, though, when this new revenue will materialise. While the industry toward the end of last year in a rare moment of unity believed that things would be on the up during the second half of 2002 at the latest, this hope has already been shelved until 2003.

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