MTV Loses German Payment, Widens Reach

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Frankfurt, Germany -- MTV/VH1 International confirmed last
week that monolith German MSO Deutsche Telekom would no longer pay it a fee for carriage.

But the company simultaneously announced a new deal with
Telekom that will allow MTV to expand its reach in Germany from 18 million homes to 29.4
million.

MTV and Telekom mutually agreed to cancel MTV's carriage
contract -- a landmark deal, signed in 1995, in which MTV became the first channel paid
for carriage in Germany, rather than doling out cash to operators for access to their
customers.

The primary reason why Telekom had agreed to the MTV
payments in the past was because the network scrambled its signal, effectively shutting
out the 11.4 million German households that receive TV through SMATV
(satellite-master-antenna TV) or C-band transmissions.

Being that Telekom is no longer interested in that payment
arrangement, MTV is turning its German feed into a free-to-air signal, swelling its German
household universe to nearly 30 million.

As part of the new deal, MTV is greatly expanding the
percentage of German-language programming on the feed targeted toward Germany and the
German-speaking countries of Austria and Switzerland. Until now, about 60 percent of the
feed used for that market was in German, but the unscrambled service will be almost
entirely in German.

MTV Germany's general manager, Christiane zu Salm, said the
moves were made to widen MTV's German reach and to strengthen its competitive position
against German music channels Viva and Viva 2, which are owned by a consortium of
recording-company and studio interests.

MTV's other feeds in Europe will remain scrambled. The
music service didn't anticipate any conflicts with other European operators about MTV's
new German service being in the clear because most of the programming will be in German.

"Nobody complained against us going on satellite
because we are not competing with MTV in other countries," zu Salm said. "In
Germany, you can't compete with an English-language program anymore."

MTV and Telekom also agreed that a bouquet of new music
channels -- most likely services from "The Suite" -- will be added to Telekom's
new digital service. However, they declined to identify which services will be added or
when.

"We want to launch the services as soon as
possible," zu Salm said. She noted that the new services will cover a range of new
music styles and interactive elements.

MTV hopes to make an announcement this week with more
details on future expansion in Germany.

While MTV is gaining new distribution in Germany through
the deal, it is losing about $6 million in annual carriage-fee payments from Telekom.

However, zu Salm denied rumors of a rift between MTV
corporate parent Viacom International and Telekom. "We both want to continue to work
together," she said.

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