Pay TV phoenix Premiere rises from Kirch’s ashes

Revs up, co. now seeking buyer

BERLIN — It may have been partly responsible for the billion-dollar collapse of Leo Kirch’s media empire, but the future looks bright for German pay TV web Premiere.

The multi-channel digital platform has come out from under the rubble stripped of debt and has been quick to doll itself up for new suitors.

Media analysts have nothing but praise for chief exec Georg Kofler, who has radically restructured the web, cutting costs, laying off 1,000 employees and renegotiating expensive output deals with Hollywood studios DreamWorks, Fox and Universal.

Premiere has even managed to increase revenues in the first half of the year to 372.8 million euros ($365 million) and reduce operating losses by 37% to $259 million.

Germany’s only pay TV web has now invited about 20 potential buyers for a closer inspection of its goods.

The list is said to include the Hollywood studios that are some of the biggest creditors of fallen TV and rights conglom Kirch.

Others are Kirch shareholder and creditor Rupert Murdoch, Germany’s Tele Munchen Group and U.S. investor Hicks, Muse Tate & Furst.

Creditor banks Bayern and HypoVereinsbank are also expected to take a stake in Premiere in lieu of $735 million in past loans to the web.

A combination of high Hollywood film prices and a failure to attract subscribers turned Premiere into a financial disaster for Kirch, which collapsed after borrowing billions to keep it afloat. Last year alone Premiere recorded losses of some $1 billion.

Since the insolvency of its parent Kirch Pay TV in May, Premiere has struggled to shake off its Kirch ties as it seeks new investors.

Its most pressing need has been renegotiating lower prices for movies.

Last month it inked a new multi-year licensing agreement with Universal, described by Kofler as “a breakthrough for Premiere.”

The multi-channel pay web is close to similar deals with other studios, according to Kofler. “There is a strong probability that we will close contracts with one or two other Hollywood majors by Christmas,” with Paramount reportedly at the top of that list.

In July DreamWorks and Fox agreed to a new licensing fee based on Premiere’s actual subscriber count of 2.4 million.

Company is looking to raise that number to 2.5 million by year’s end. Kofler has said he’s looking for savings in film rights of “significantly over 50%” as part of plans to turn around the operation by 2004.

While the studios will pocket considerably less from Premiere than they have in the past, the fact that the web has managed to remain a viable outlet still surprises some local observers.

The latest deal has also ended a years-long conflict between Premiere and U over Kirch’s unpaid bills.

Kirch Media, the group’s core free TV and rights division, had in the past handled all acquisitions for Premiere.

In 1999 it filed a lawsuit against U arguing that its output deal with the studio failed to deliver quality films for Premiere and instead had flooded Kirch Media with low-quality TV fare.

An L.A. court threw out the lawsuit. U’s counter suit against Kirch remains in litigation.

Premiere will begin airing its new acquisitions in October, including “Gladiator,” “Hannibal,” “The Mummy Returns,” “Billy Elliot” and “Erin Brockovich.”

As part of its deal with the studio, U’s Studio Universal and 13th Street channels will continue to be carried by Premiere. Following the insolvency of Kirch Pay TV, it was not clear which channels would remain on the platform.

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