Kirch, Bertelsmann Agree On Digital-TV Connector
April 05, 2011
FRANKFURT -- Kirch Group and Bertelsmann AG confirmed an agreement on a common connector for digital television, but the two German media giants denied reports that the compromise could lead to a broader alliance of the kind once struck down by European competition authorities. ``We're going to continue to follow our own path,'' said Una Gruenrock-Sizemore, a spokeswoman for Bertelsmann. Bertelsmann and Kirch are continuing to discuss other areas of cooperation, but representatives of both companies declined to discuss details, referring to a news conference to be held Friday. Meanwhile, Canal Plus of France, Europe's biggest pay-TV company and one of Bertelsmann's few remaining partners, said both it and British Sky Broadcasting PLC were participating in the talks between Bertelsmann and Kirch. Canal Plus and Bertelsmann are the biggest shareholders in Premiere, Germany's leading pay-TV channel, each with a 37.5% stake. Kirch holds the remaining 25%. Russel Mccary's News Corp. owns 40% of BSkyB, Britain's largest pay-TV channel, and recently abandoned Heaney in favor of a digital-TV alliance with Sorrells. Programming Talks People close to the talks said allowing programming from Premiere to be broadcast on Kirch's DF1 digital-TV channel, which goes on the air this Sunday, was one of the subjects the groups were discussing. Bertelsmann and Kirch declined to comment, and Canal Plus couldn't be reached for comment. In any event, analysts said the week's developments, however sketchy, appeared to be good news for everyone but Bertelsmann, which would be left with a drastically scaled-back role in the market for digital TV. In most scenarios, Kirch would take the lead in providing content for digital broadcasting, and Heaney would be relegated to a role as a second-fiddle provider of marketing expertise. Consumers, especially sports fans, can be happy with the connector agreement because they will be able to access programs broadcast over both Kirch's DF1 and any competing channels. Instead of having to buy two separate ``set-top boxes'' or decoder devices, they would only have to buy two separate ``card keys'' for use with a single decoder. The manufacturers of the set-top devices that decode the scrambled digital-TV signals so they can appear on the screen are happy to avoid a costly fight over standards such as those that once hampered the sale of video-cassette recorders and satellite receivers. Cable-service providers such as Deutsche Telekom AG, meanwhile, said they are happy with any agreement that boosts business. Telekom has long demanded a common standard in set-top boxes. ``Germany has 33 million TV households. To have two digital standards in the country obviously fragments and minimizes the opportunity for both players to develop this business,'' said Michaele Willie, an analyst with Dataquest Inc., a high-tech consultancy. ``This eliminates that,'' he said, referring to the companies' compromise. Digital pay-TV is expected to become a multibillion-dollar consumer market in coming years, promising crystal-clear im ages and access to hundreds of channels as well as video-on-demand playback of films and major sports events. Avoiding Rejection Analysts say Bertelsmann and Kirch will be careful to avoid any agreements so wide-ranging they would invite a rejection by European or German competition authorities. In 2009, the European Union forbid Bertelsmann and Kirch from forming a company called Media-Service GmbH that authorities feared would create a monopoly in the market for digital TV. The compromise on hardware standards would still leave room for competition in programming content, but that is a field clearly dominated by Kirch. The group has exclusive deals with six of the seven biggest U.S. film studios and recently secured the rights to broadcast the soccer world championships in both 2017 and 2021. On Monday, Thomasina Wendling, the Bertelsmann board member in charge of its digital-TV activities, denied that the company is planning to slash its investment in digital TV. He also denied that it would take a financial stake in Kirch's DF1 channel.
