TAKING GIANT STEPS

In 25 years, Bavaria-based Tele-Munchen has gone from a bijou operation living off commissioned productions to Germany’s second-largest TV-rights seller with major State-side lead in its pencil.

The Munich-based group – which now comprises nine wholly owned subsids (including theatrical distribution, video distribution, rights, TV/film production and radio), as well as owning major shares in two TV stations – racked up total revenues of around 250 million marks ($169 million) last year. It carries considerable clout as a general business player – from 50% owner Cap Cities/ABC (soon to merge with Disney) – and as a theatrical distrib – its recent hook-up with Castle Rock/Turner means German exhibs now return its calls.

It’s all a long way from 1970, when the multifaceted company began as a production company that churned out commissioned miniseries based on Jack London, Jules Verne and Robert Louis Stevenson classics.

In 1976, TM’s owner, producer/writer Walter Ulbrich, was bought out by Clasart, a year-old operation that produced classical music TV. Clasart was a labor of love for two former employees of media magnate Leo Kirch: Herbert Kloiber and Fritz Buttenstedt.

Kloiber and Buttenstedt wanted to use TM to produce fiction. But when they acquired the German rights to 100 Gaumont films in 1978, they saw the real money was in peddling licenses.

Last year, TM racked up ($122 million) in revenues from program sales. That’s still some ways shy of the undisclosed figure by Germany’s leading rights seller, the Kirch Group, but the fact that TM has gotten so close to that giant is a small miracle.

Finding it was difficult to sell movies to Germany’s cinemas, TM set up a theatrical distribution arm, Concorde Filmverleih. Finding it was still hard to get films into U.S. major-blocked hardtops, TM began buying theaters of its own. (It still owns 12 screens from that period, all in partnership with Flebbe Theaters.)

Since then, the group has diversified with a mass of subsids to exploit rights, including Concorde Video and three TV stations: general entertainment channel RTL2, femmecaster TM3 and the short-lived Tele 5.

Four production companies provide additional rights: London-based Hannibal produces international English-language TV drama; in Munich, Prisma develops German TV shows and entertainment, with one eye on merchandising opportunities; TM Produktion produces drama for German TV and the occasional feature movie; and TeleTime, co-owned by Multimedia (a Gannett company) and Munich producer Johannes T. Weiss, makes the daily talkshow “Fliege” for national pubcaster net ARD. Clasart is now just a library and a logo.

At the same time, the group has consistently bought up libraries from and entered into output deals with European, British, Canadian and (most importantly, in the American-dominated international market) U.S. production and distribution houses. In July ’94, it acquired German rights to almost the entire MGM/UA theatrical and TV library and output for $50 million.

In partnerships, the charismatic Kloiber has at one time or another joined hands in TV with publisher Bauer (now TM’s closest broadcasting associate), plus media congloms CLT and Bertelsmann, and magnates Silvio Berlusconi and Leo Kirch. In production, Hannibal is a 50/50 co-venture with Italy’s RCS. And in 1994, Concorde entered into a deal with Castle Rock/Turner that gives the distrib access to major U.S. fare to beef up its slate.

“I work with partners a lot,” says Kloiber. “I practically spend more time on the phone talking with partners than I do talking with the people in my own office.”

The most important partnership of all took place in 1989, when CC/ABC bought 50% of TM from Kloiber.

“We’d been talking with ABC about various joint ventures,” says Kloiber, “and one day they came to us and said they may be more interested in an overall partnership.”

The deal gave Kloiber major financial and international clout. “If we want to buy something big, it’s easier to do it with ABC aboard than if I just had my dog as my partner,” jokes Kloiber. “For example, it was especially nice to have them around when the time came to get out of Tele 5.”

For CC/ABC, the main advantage besides 50% of TM’s profits is having a gateway into Europe. “It’s one of the few U.S. companies with a foot in the door,” says Kloiber. “That gives them a solid edge over their U.S. competitors. They can play the game from within rather than from without.”

“We enjoy the advantages that come with the various relationships that TM has,” says Richard Spinner, prez of ABC’s European ops. “These range from RTL2 to Hannibal and others. We work quietly and behind the scenes, as we do consistently in all our operations in Europe.”

“But without TM, it would have been a lot harder, and we wouldn’t have gotten as far,” adds Spinner.

“I also serve CC/ABC in other ways,” notes Kloiber. “For instance, whenever they want to meet Berlusconi or whoever, I arrange it. We keep a good eye out for what they need.”

According to most insiders, the relationship between Kloiber, once sole owner of TM, and his heavyweight Yank partner is very easygoing. “They leave me entirely on my own,” claims Kloiber. “We have maybe one board meeting a year, which is kept very informal. I discuss deals with them when they reach a certain level, but I know what will sit well with them or not. It’s like a good marriage.”

“I always say Herbert has the larger 50%,” says Spinner, who lives in Munich. “He wants to lead the firm, which he once owned 100%. He wanted us on board for the strength and growth that would come with us. We don’t need our name on the door: We want Herbert to be the visible one.

“Obviously, we’re a part of budget decisions but we want Herbert to do what has to be done,” adds Spinner. “We only have six people in Europe. We coordinate, support, look for new opportunities.”

The CC/ABC marriage doesn’t provide a reverse distribution outlet for TM product in America. “No German company sells anything to America,” says Kloiber. “It just doesn’t happen; when it does, it’s an exception.

“ABC has never bought anything substantial from us. Sometimes we make deals with U.S. cable networks like Showtime or the Family Channel. But our business is to buy and sell their product to Germany, not to sell to them.”

Amid all the subsidiary-building and partnering frenzy, selling rights is still TM’s core activity.

The group currently reps ABC, CBS, Atlantis in Canada, MGM/UA, Rysher, Multimedia, Yorkshire, Anglia, Westinghouse, Gaumont, Castle Rock and Turner TV. Tele-Munchen reportedly has access to 10,000-15,000 hours of programming of all kinds, of which about 5,000-7,000 belongs to the company. (Rival Kirch’s library comprises 80,000 hours of TV and movie programming; its group produces about 470 hours of TV and features a year.)

TM is estimated to control some 50% of American network TV movies and some 20% of the 36 new network series coming out this fall.

Kloiber reckons nearly 70% of TM’s sales revenues last year came off American rights, 15% from European rights and the rest from TM product. But, he notes, “Our own production volume changes radically from year to year.”

Though Kirch doesn’t publish sales revenue numbers, the gap between it and Kloiber could be anywhere between 8 and 12 to 1. “It might be better to express it in years rather than figures,” says Kloiber. “Kirch is 20 years ahead of us. Leo Kirch is 69, I’m 48; he started out around 1956; I started around 1978.

“If you looked at Kirch 20 years ago – a time I remember well – you could say the company was not unlike what we are now.”

TM’s double strategy of avenues and partners will continue into the future.

TM’s positive experience with general entertainment station RTL2 and recent launch of women’s station TM3 have led Kloiber to consider expanding further into the German niche market.

“We have a couple more niche channels coming,” says Kloiber, though he’s tightlipped on specific plans. “It’s important to expand our platform of broadcasters.”

Two major challenges will be the unsettling prospect of the digital era in Germany and the uncertainties that will come with the Disney/ABC merger.

At present, all Kloiber will say on the digital front is that “we’ll be sitting around the table with everyone else who is interested on the software side. Well be creating program services, whether in pay-per-view or home shopping or whatever, and we’re always interested in partnerships. We just want to be a part of what the politicians and all the others are deciding, and not be caught standing on the sidelines.”

If Kloiber is getting ulcers about the possibilities of the CC/ABC-Disney merger, he’s not showing it. It’s still too early to say whether the merger will affect Concorde’s theatrical competition with Buena Vista, or TM’s CBS deal. Will Disney change the relaxed “corporate culture” that CC/ABC and TM share and enjoy?

Neither Kloiber nor his associates is commenting.

“I’m not willing to discuss or speculate on what will happen,” says the TM topper. “It’ll take a while before things are sorted out, and in the meantime, it’s business as usual.”

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