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Kirch faces crunch

Fight with News Corp. deepens

BERLIN — Rival execs at Germany’s struggling Kirch Group and Rupert Murdoch’s News Corp. slugged it out in a war of words over the debt-ridden Teutonic TV giant on Monday.

Kirch deputy CEO Dieter Hahn admitted it was ready to give up its pay TV web Premiere World, which is losing about $2 million a day, and its majority stake in Formula One motor racing to avoid collapsing under nearly $6 billion debt.

Rupert Murdoch-backed satcaster BSkyB, which holds 22% of Premiere, still is refusing to bail it out. News Corp. chief operating officer Peter Chernin repeated the company’s vow to take up an option to return the stake for a $1.4 billion refund in October.

“Our No. 1 goal is to get the cash, and we are working on the assumption that it will be difficult,” Chernin said. “We don’t want to get into Formula One; we want our money back.”

Earlier, Hahn said: “Sky has made its intentions clear, and our focus now is on finding an alternative long-term equity partner for Premiere. We have had substantial interest in the business already. We would be prepared to cede control if necessary.”

The exchange came in separate interviews in breaks during the FT New Media & Broadcasting conference in London, which both men are attending.

Leo Kirch, the 75-year-old German TV tycoon, is waging the battle of his life to save his crumbling TV empire from creditors.

Kirch is selling off non-core assets, including stakes in German newspaper publisher Axel Springer and its 25% share in Spanish web Telecinco. Company has said it would sell its stake in Formula One rights marketer SLEC as a last resort.

“We’d like to keep the Formula One stake, and our preferred route would be to find a partner, but it might have to be sold in the end,” Hahn told reporters.

And he ruled out the sale of Kirch’s 52% stake in ProSiebenSat 1, Germany’s largest commercial broadcaster — but that’s the only entity in which News Corp. is interested.

“ProSieben and Sat 1 are the most valuable assets, but they are not on offer,” Chernin said. “So far it has not been encouraging, and that is why we are taking an active role in discussions now, so that we have a voice when the group is carved up and we get a fair value.”

Hahn confirmed Kirch had spoken to various parties about Formula One — one of the world’s biggest TV sporting events — but declined to elaborate. Formula One founder Bernie Ecclestone and leading automakers both have been tipped as potential buyers.

Meanwhile, Telecinco is set to buy 10% of its own shares held by Kirch. The German group is said to be close to selling an additional 4% stake to Italian prime minister and media mogul Silvio Berlusconi’s Mediaset, which already controls 40% of the Spanish web.

Reaching Hollywood

Kirch’s troubles also are spilling over into Hollywood. Kirch signaled last week it wanted to “renegotiate downwards” its megabuck output deals with the Hollywood majors, which pump as much as $750 million annually into studio coffers.

Kirch has been the most important buyer of American movies and TV shows outside the U.S. for 30 years. It owns Europe’s biggest library of movies and TV shows, as well as the most popular youth-oriented TV station, Sat 1.

But it has not paid monthly installments to Universal for its pay TV output deal since October 2000, and it has not paid Viacom installments on a free-TV deal since last summer.

Next month, U will face Kirch in L.A. Superior Court to argue the German company owes it $100 million in damages for nonpayment and for not properly promoting the Universal channels on its pay platform.

Kirch contends U has failed to deliver the quality and quantity of films promised and that the channels are a dud.

The tiff with Viacom is similarly sticky and could mean a writeoff of several hundred million dollars.

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