Murdoch Watch – German Edition

Michael Hedges April 7, 2008

News Corp raised its stake Friday (April 4) in German pay TV channel Premiere to 22.7% triggering speculation that Mr. Murdoch is up to something.

There seems to be little doubt that Mr. Murdoch wants a seat on the Premiere board. That would give News Corp a dominant voice in the broadcasters strategy. This might be significant as Premiere enters into negotiations for German Bundesliga football rights, Premiere’s main cash source. Mr. Murdoch would be in a position to control those negotiations.

Marketing rights to the Bundesliga are held by Leo Kirch with whom Mr. Murdoch has a long history. Mr. Kirch will auction rights to the highest bidders and, through an arrangement with the German Football League, provide the all the content. Premiere – and presumably Mr. Murdoch – objects to this and has complained to the German anti-cartel authority, which has delayed bidding pending an inquiry. A ruling against Mr. Kirch would effectively kill his business, not unlike his last dealing with Mr. Murdoch.

That Mr. Murdoch wants to control Premiere is a given. But he does not want to increase News Corps share to 30% or beyond because then he’d be required to bid for all of Premiere or walk away. Spending €45 million for an additional 2% of Premiere is one thing, getting into a bidding battle that would certainly approach €1 billion is another thing. 

The game was now includes RTL and, perhaps, ProSiebenSat.1. Over the weekend RTL Germany head Anke Schaeferkordt told Der Spiegel that RTL would not be bidding for Bundesliga rights. “I don't need to ask my owners first to know that we can't pay the kind of money that public service broadcasters can offer, thanks to the license revenues they get from taxpayers,” she said.

Then Premiere’s Chief Executive Michael Boernicke said, reported in Handelsblatt (April 6), he’d be interested in bidding for free-to-air Sat1, the weakest of ProSiebenSat’s German channels. The two very big private equity firms that control ProSiebenSat.1 paid a huge amount to buy then merge ProSiebenSat with SBS Broadcasting. There’s been some speculation that they are ready to talk about spin-offs. ProSiebenSat CEO Guillaume de Posch mentioned as much in March, saying he’d consider shedding non-core assets, specifically pointing to the Scandinavian pay channel C More. 

But selling off all or part of ProSiebenSat requires a buyer and considering the hesitant financial markets they are few and far between. ProSiebenSat is very little pressure to sell off anything. A spokesperson, quoted by Reuters (April 6), called discussions about selling Sat1 “absurd.”

RTL and its parent Bertelsmann are sitting on piles of cash with little interest in throwing it to the wind. Not bidding on Bundesliga rights saves a lot of money and leaves the bidding game to Premiere and public broadcaster ARD. And RTL might relish the notion of leaving Premiere and ARD financially bloodied.

But having Mr. Murdoch on the Premiere board – the quintessential elephant in the room – would make things happen. Henry Kravis – senior partner in Kohlberg Kravis Roberts, one of the private equity owners of ProSiebenSat – would certainly take his phone call… and listen very carefully. That could brew a storm in German television that RTL and ARD would like to avoid.

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