Media Giants On Prowl For Digital Pay TV Partners

Bertelsmann AG, Leo Kirch and Deutsche Telekom are searching for new partners in a second attempt to launch a service-provider venture for digital television.

The powerful investment trio, which binds the world’s second-largest media concern, Europe’s most important film rights dealer and Germany’s virtual telephone monopolist, is back on the drawing board after Euro regulators nixed the attempt to launch a joint venture known as Media Services GmbH (MSG) late last year.

Now the push is on to find a new partnership that would be more acceptable in Brussels. European Union regulators objected that the proposed company, which would have managed the administrative and technical infrastructure of digital pay TV, also would have quickly and unfairly dominated the market.

The strategy behind new talks is to widen the field of participants, preempting antitrust criticism. Spokesmen for all three MSG parties confirmed a Reuters report out of Bonn that talks continue, but downplayed them as wide and vague preliminary discussions.

Variety has learned, however, that those discussions include pubcasters ARD and ZDF as well as leading commercial web RTL and France’s Canal Plus. The Gallic pay TV giant is a partner with Bertelsmann and the Kirch Group in Germany’s only pay TV service, Premiere.

Any new constellation of investors will need to overcome political opponents of the plan, who fear that small programmers will be squeezed out of the digital market by the big players controlling the key service provider.

Sources also tell Variety that big German publishing groups like Burda and Holtzbrinck are being approached to round out the mix. Those publishers already are participating in half a dozen pilot projects in digital broadcasting taking place across Germany.

If the trio cannot strike a satisfactory balance in the partnership and achieve a common technical standard, few analysts consider a second MSG viable. But it is still conceivable that Deutsche Telekom, which begins phased privatization with an initial public offering next year, could launch the service alone. In fact, Brussels negotiators said MSG would have been more likely to cleared regulatory hurdles if it were a 100% subsidiary of the phone giant.