U frets over fallout from German TV pact

BERLIN — Universal is mulling whether to lodge a complaint with EU cartel authorities over the planned pay-TV alliance of German media giants Bertelsmann and Kirch.

The hitherto fiercely competitive Kirch and Bertelsmann groups have signed a truce to launch digital platforms in Germany. During the race to get their platforms launched, Kirch forked over huge amounts of money for rights to Hollywood movies and TV shows.

U concern

Universal, which cut its pay-TV output deal with Kirch 18 months ago, is concerned that the obligations entered into by the Kirch Group — in particular, that its digital platform would carry two Universal-backed program channels at guaranteed subscriber rates — will now be ignored by the merged partners.

Sources in Germany and in Hollywood suggested the complaint could be the first salvo in a new tussle between the Hollywood studios and foreign satellite players.

“These pay-TV hopefuls around the world sometimes sign one thing when they’re in competitive mode and then rethink — or cannot meet — their obligations when they merge with their rivals. It’s not just Germany: it could happen in Australia and Spain, too,” said one source.

Law firm petition

A Berlin law firm is preparing a petition on behalf of Universal that may be sent to EU competition commissioner Karel van Miert, German daily Suddeutsche Zeitung reported Wednesday. A Universal spokesman confirmed that the law firm was looking into the situation on behalf of Universal.

Universal fears that Kirch and Bertelsmann execs, who inked the contracts confirming the merger of their pay-TV activities last week, could attempt to lock out some non-German channels in their jointly owned digital pay TV platform.

Universal pay-TV president Blair Westlake, who is in Paris for the launch of the company’s action channel 13th Street on French digital platform Canal Satellite, told Daily Variety Thursday: “We are monitoring the progress of the European Union Commissioner’s review of the Kirch merger with Bertelsmann and expect that all of the obligations Kirch has committed to with Universal will be honored regardless of the confirmation or rejection of the merger.”

Universal’s output deal with Bavarian media magnate Leo Kirch gives him German pay-TV rights to the studio’s recent film releases and guarantees carriage of two Universal channels at set subscription rates.

When signed, Kirch and Bertelsmann were locked in a struggle for control of Premiere, Germany’s only analog pay TV web, and Kirch was eager to acquire programming for his freshly launched digital pay TV venture.

But last summer, Kirch and Bertelsmann unit CLT-UFA agreed to work together in developing digital pay TV in Germany by investing in Premiere.

DF1’s currently existing specialty channels are due to become a part of the newly created Premiere digital platform early next year.

After sealing the pact with former pay TV rival Bertelsmann, DF1 managing director Gottfried Zmeck reportedly informed Universal in July 1997 that Kirch was no longer in a position to allow the studio to add its channels to the soon-to-be-obsolete DF1 platform.

A Kirch Group representative told Daily Variety that DF1 canceled its agreement with Universal due to the “uncertain situation” arising from the Premiere merger.

Bertelsmann and Kirch still need to clear their digital plans with EU and federal anti-trust and media authorities, but the partners are, said the rep, “open to discussing future projects.”

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