BERLIN — With his $1.5 billion investment in Leo Kirch’s operations, Rupert Murdoch will move centerstage on the Euro media continent — and give a huge boost to the struggling pay TV business in Germany.
KirchPayTV officially announced Monday that British Sky Broadcasting is taking a 24% stake in the company’s pay TV operations for DM 2.9 billion ($1.5 billion) (Daily Variety, Dec. 6).
Under the agreement, BSkyB will pay $513 million in cash and give KirchPayTV 78 million new BSkyB shares, worth about $1 billion.
Deal leaves Kirch with a 4.3% stake in the British-based satcaster.
KirchPayTV has some 2 million cable and satellite subscribers, about 6% of the German TV market. Kirch is aiming for 2.9 million by the end of 2000 and about 4 million by the end of 2002. Company is expected to make a profit in 2002; sometime in 2003, 20% of KirchPayTV will be going on the stock market.
As part of the bargain, BSkyB will get a majority stake in the company after 2001 if it fails to meet targets specified in the agreement. Murdoch also managed to get a veto over some decisions at KirchPayTV.
Kirch has already pumped billions of marks into the money-losing multichannel digital pay TV service Premiere World.
Although Germany’s 33 million homes make it Europe’s largest TV market, more than 30 free TV broadcasters have dampened demand for pay channels — something Kirch had hoped to combat by investing in marketing as well as programming.
Officials at BSkyB say there is strong potential for the growth of German pay TV despite these obstacles.
Murdoch’s News Corp. already controls two German free TV weblets, TM3 and Vox.
While the European Commission has been notified of the Kirch/BSkyB deal, it was not clear whether it would be reviewed by European or German antitrust authorities.
“I cannot tell whether it will fall under our jurisdiction,” said European Commission spokesman Michael Tscherny.
In 1998 the EC torpedoed a planned alliance among Kirch, Bertelsmann and Deutsche Telekom, fearing the creation of a powerful monopoly in Germany.
Peter Voss, chairman of German pubcaster ARD, warned Monday that Kirch and Murdoch would together dominate the sport- and film-rights market.
“Compared to the concentrated purchasing power of Murdoch and Kirch, all other film-rights buyers are just second league,” said Voss, who added that the pubcaster’s role as a counterweight to the new threat is more important than ever.
Meanwhile, in Italy, Silvio Berlusconi’s Mediaset TV company reached a record high on the Milan stock exchange Monday. Mediaset stock rose by 7% to 14 euros (about $14) Monday on expectations that in the wake of the Murdoch-Kirch deal the global mogul will now ally himself directly with Mediaset.
Mediaset and Kirch are long-time allies and have recently launched a Euro joint venture called Eureka spanning production, broadcasting and advertising.
Kirch’s Premiere World was launched in October and is Germany’s only subscription TV service. KirchPayTV also controls Swiss pay TV channel Teleclub.
(Andy Stern in Brussels contributed to this report.)