Frankfurt, Germany -- With Germany's digital-TV
alliance having been rejected by the European Commission, industry observers expect Rupert
Murdoch to make another major attempt to break into the country's pay TV business.
"Murdoch's last chance to become big in Germany
is to play a major role in digital," said Michael Schatzschneider, an analyst at BHF,
a banking firm that is based here.
Now that the EC has shot down the proposed merger of the
Premiere pay TV channel group and the DF1 digital platform, sources said, Murdoch, CEO of
News Corp., has some options to choose from: He may make another run at acquiring a stake
in Premiere, or he may try to acquire 25 percent of German private-TV channel Sat.1 or
publishing group A. Springer AG. Murdoch will speak at a prestigious media conference in
Cologne, Germany, June 14, at which time details on his plans could come to light.
Murdoch has tried twice before to get a stake in Premiere,
which is owned by CLT-Ufa and German media mogul Leo Kirch's The Kirch Group. His
failure to do so was one key reason why Murdoch bowed out of broader digital-TV alliances
in Germany. Premiere is the gatekeeper to a 1.65 million analog-subscriber base. Without
access to that base, no digital direct-to-home project can flourish in Germany, observers
said. Kirch's own digital bouquet, DF1, is stuck at just 162,000 subscribers -- far
Right after the EC shot down the proposed digital-TV
merger, Leo Kirch started to negotiate with Murdoch to get him in Kirch's digital
steamboat once more, sources said. However, CLT-Ufa, Kirch's partner in Premiere, is
believed to be unwilling to sell a Premiere stake to Murdoch. Bertelsmann, which owns a 40
percent stake in CLT-Ufa, has management control over the venture's moves in Germany.
Another option may be for Murdoch to team up with Kirch and
cable operators to create a new outlet for Kirch's vast library of programming,
which, so far, has been exploited through Premiere and DF1 in the pay TV distribution
window. Kirch could provide his satellite channels to cable or create cable services using
his programming, "but this would heat the war up again and increase
investments," one German banker stressed.
Kirch's financial position is more precarious than
ever, since he will not receive the $250 million that he was due to get if the
Premiere/DF1 merger had been consummated. Kirch sources admitted that Murdoch and Kirch
could become aligned, but, one added, "Murdoch is hard to deal with. He is a card,
all right, but you have to see how -- and when -- to play it."
Murdoch's News International, which already has a 49.9
percent stake in Germany's Vox channel, has been making rumblings about also buying a
stake in Sat.1, another private-TV network owned by Kirch and Springer. Rumors are also
circulating that Kirch may sell his 40 percent stake in Springer to help offset his losses
in DF1, and that Murdoch could go after that stake.
Speculation on Murdoch's plans also centered on the
possibility that he may acquire the assets of Viacom Inc.'s Nickelodeon Germany --
which shut down May 31 -- as a fallback plan, if his larger ambitions in Germany fail.
For their part, Kirch officials insisted that they will
focus on increasing their stake in Premiere. Kirch holds a 25 percent stake in Premiere,
and it has acquired the 37.5 percent stake formerly held by French pay TV group Canal
Plus. If the German merger was approved, the share distribution would have switched to a
50-50 arrangement between Kirch and CLT-Ufa. When the EC rejected the merger, CLT-Ufa
announced that it still wants to increase its 37.5 percent stake to 50 percent.
German media sources will be watching closely for any
fallout between Kirch and CLT-Ufa/Bertelsmann following the EC's refusal to let the
two merge their digital-TV interests. Most observers blamed Bertelsmann for causing the
EC's rejection, because the company did not give in to the EC's proposed
compromise, as Kirch did.
Dieter Hahn, one of Kirch's general managers, denied
that the two parties are headed for a war. "There only is dissent on the reasons that
led to the decision from Brussels [Belgium, where the EC is based]," Hahn said.