Atlas F1 News Service, a Reuters report

Leo Kirch Shakes Up Formula One

Thursday March 1st, 2001

By Marijn van der Pas

Reclusive German media baron Leo Kirch has sent shockwaves through the glamorous Formula One motor racing circuit with key players fearing the sport could disappear into a commercial black hole.

Kirch Group and partner EM.TV & Merchandising own 75 percent of SLEC, the company which holds the broadcast and merchandising rights to Formula One, after EM.TV exercised an option to raise its stake in SLEC on Wednesday.

Despite a pledge from the company that it does not intend to introduce dramatic changes to the way the sport is broadcast there are fears Kirch could restrict coverage to pay television, denting the popularity of the sport.

Newcomers to Formula One - just a year ago SLEC was fully owned by racing guru Bernie Ecclestone - German media groups Kirch and EM.TV have received less than a warm welcome from the world's most prominent and lucrative motor racing event.

Ecclestone, who now owns a quarter of SLEC, has threatened to launch an alternative contest while several Formula One car makers fear Leo Kirch's commercial instinct could drain the sport's appeal to racing fans.

Kirch, a devout Catholic who shuns public appearances and avoids the press, owns Germany's largest independent commercial TV company which includes free-TV stations ProSieben and SAT1. His business interests also comprise publishing, television, film and theatre production, video distribution and music.

Deals with Murdoch, Berlusconi

The son of a Bavarian vintner, Kirch studied business administration and mathematics before embarking on his media career, which began with the purchase of the German distribution rights to Federico Fellini's La Strada.

Now presiding over one of Europe's largest film distributors, Kirch has demonstrated his commercial ambitions through recent partnerships with Italian media magnate Silvio Berlusconi and Australian-born mogul Rupert Murdoch.

Murdoch's BSkyB group, which pioneered pay-per-view coverage of major sporting events in Britain, bought a 24 percent stake in Kirch's Premiere channel last year.

In Italy, Kirch formed a joint venture with Berlusconi's Mediaset at the end of 1999.

While Kirch's deputy Dieter Hahn has said the Munich-based group does not intend to alter a winning formula of motor racing, the fears might not be totally unfounded.

In a separate saga over soccer rights, German Chancellor Gerhard Schroeder on Wednesday wrote to Kirch urging him to ensure that the German media mogul's rights to 2002 and 2006 World Cup soccer matches do not end up exclusively on pay TV.

Many fear that the lucrative soccer rights, which Kirch acquired in a $2.2 billion deal, may not be shown on free television in countries such as Germany where talks between the German group and public networks have fallen through.

Several carmakers worry that Kirch will use Formula One races -- which attract one billion viewers worldwide -- to prop up its ailing pay-TV channel Premiere with German broadcast coverage being limited to pay-TV subscribers.

Some also fear that Grand Prix races could now become a pure media spectacle with the sport of secondary importance under 74-year-old Kirch. "Kirch's initial idea with the EM.TV deal was to get more content for its pay-TV platform because pay TV is not successful at all in Germany," said Sarah Schmidt, analyst at Commerzbank in London.

"But the prospect of Formula One being broadcast just on pay-TV has been heavily criticised and it would be difficult for Kirch to do that now."

Back Scratching

Kirch gained control over the Formula One holding company via a number of complex transactions involving his ex-employee Thomas Haffa, the controversial chief executive officer of EM.TV, a children's television licence dealer.

The media magnate rescued the debt-laden company earlier this month after a buying spree had brought EM.TV to the verge of collapse. Last year, EM.TV bought half of SLEC along with the Jim Henson company, owner of the Muppets.

Kirch, suffering from diabetes that has nearly blinded him, acquired 25.1 percent in EM.TV and almost half of the embattled company's SLEC stake at the beginning of February.

Ironically, Haffa, a former salesman of BMW cars who was hired by Kirch in 1979 before founding his own media venture in 1989, helped Kirch out when his group faced a cash shortage.

A decade ago, EM.TV bought half of Kirch's huge library of children's programmes which transformed the Munich-based start-up into Germany's biggest supplier of children's TV.

As part of the rescue deal, EM.TV obtained the other half of the children's television library, thus returning to its core business.

The additional 25 percent stake in SLEC which EM.TV acquired from Ecclestone on Wednesday was fully financed by Kirch.

However, the coup is not yet assured as the general assembly of the motor racing regulator, the International Automobile Federation (FIA), needs to approve Wednesday's acquisition of another 25 percent in SLEC by EM.TV.

And with protests from FIA head Max Mosley, Ecclestone and the car makers, there is some doubt whether the 157 motor sports organisations united in the assembly will approve the purchase.


Additional reporting by Merissa Marr



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