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Will Kirch unplug Premiere?

Axing paybox may save embattled conglom

BERLIN — Will embattled German media mogul Leo Kirch shutter his money-losing paybox Premiere World? That’s the latest question making the Teuton rounds as the once all-powerful conglom continues to come apart at the seams.

Kirch’s main goal now is to hold on to his core business: Kirch Media, which houses TV station ProSiebenSat 1 and its sports rights and film production divisions. At this point, everything else appears to have become non-essential.

Putting Premiere out of its misery may in fact be the simplest way to lead Kirch out of its dire financial straits: The paybox has been largely responsible for Kirch’s ?6.5 billion ($5.7 billion) debt.

Premiere’s prospects for survival are increasingly slim.

The broadcaster is losing an estimated $2 million a day; there’s little sense in keeping the lifeline open to the critically wounded web — unless an unexpected savior appears with a huge wad of cash to plug up the hemorrhaging business.

The only candidate to fit that bill is Rupert Murdoch.

Local analysts do not rule out a takeover of Premiere by him. After all, 2.5 million subscribers are a difficult asset to ignore, and the global mogul has long had his eye on the world’s second biggest TV market.

But Murdoch’s U.K. satcaster BSkyB, which wants a refund on its 22% stake in Premiere, has repeatedly assured its shareholders it would not invest any more money in the web.

Stefan Weiss, a media analyst with WestLB Panmure in Dusseldorf, says a solution for Premiere cannot be had without Murdoch, or without the Hollywood studios that inked high-priced output deals with Kirch back when business was booming.

Kirch is bracing itself for a $1.4 billion put option from BSkyB in October. If the company is still standing by then, the refund will in all likelihood wipe Kirch out.

The German group’s relationships with Hollywood partners also have suffered since it reneged on two content deals, leading to legal battles with Paramount and Universal.

Media experts are sure of at least one thing: Without compromises from all sides, Kirch will go down, and Hollywood will lose a major client.

“There will be no winners in this,” Weiss predicts. “Everyone — Murdoch, the studios, the banks — will have to give up something. If the majors stand by their demands, they will lose Kirch as a major customer for the German market.”

Weiss stresses that “a solution for Kirch without a solution for Premiere is impossible.”

While killing Premiere off remains a last resort, Kirch is hard at work disentangling the paybox’s complex ties from the rest of the group.

Kirch Media passed on the cost of expensive Hollywood contracts, meaning it also could be dragged down if Premiere were to go under.

In addition, many of Premiere’s bank loans and credit lines were done through other subsidiaries or handled directly by the parent group — all additional liabilities hampering the group’s financial restructuring.

Kirch hired three corporate troubleshooters last month to help with a rescue plan. The experts presented the findings of their initial study last week.

Other assets that appear ready to go include money-losing local stations in Berlin, Hamburg and Munich.

While Kirch may have to sell his stake in Formula One motor racing, he has said repeatedly that ProSiebenSat 1, the group’s main engine, will not go on the block.

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