The Fall of the Kirch Kingdom

Until its collapse earlier this year, Leo Kirch's empire dominated much of the TV landscape in Germany. How is the non-fiction sector coping with the gaping hole left in the industry? CAROL NAHRA reports
November 1, 2002

For a long time, Leo Kirch was a big fish in the big pond of German TV. His core business, KirchMedia, held a majority stake in broadcaster ProSiebenSat.1, which has five free-to-air stations that represent 47% of the German television market. KirchMedia produced or co-financed around 1,000 hours of content a year and owned one of the world’s largest film libraries, which it began building in 1960 after buying the rights to Buster Keaton’s films.

In the 1990s, however, the company’s aggressive expansion into pay TV, coupled with the inflated prices it paid for sports broadcasting rights (such as Formula One car races and World Cup soccer), lead to its downfall. In April 2002, KirchMedia filed for bankruptcy with debts of roughly 6.5 billion euros (US$6.4 billion), representing the costliest business failure in German history.

While KirchMedia’s investment in factual programming was modest relative to its other ventures, the company was more than a bit player in the industry. Its collapse has affected few non-fiction entities directly, but many indirectly, exacerbating a general lack of confidence within German broadcast media. As a result, doc-makers are turning to Germany’s pubcasters and the international market for opportunities.

Deep pockets

KirchMedia’s most high-profile investment in docs was a joint venture in 1996 between Discovery Germany and a Kirch subsidiary, pay-TV channel MultiChannel GmbH. Like many of the Kirch subsidiaries, MultiChannel is still operating, but the insolvency of KirchMedia has led to a gap in program provision for Discovery. Past Kirch-distributed documentaries that ran on Discovery Germany include Ephesus – Metropolis of the Ancient World, by Vienna’s Interspot Films, and the four-part series Lost Ships, by Bibo TV Hamburg.

Kirch wasn’t known as a documentary producer, but the company invested in a few pet projects, notably The Great Dance, which won three Panda Awards at the U.K.’s Wildscreen Festival 2000. Notes Patrick Hoerl, managing director of Discovery Germany, ‘It is very unfortunate to see that one player in the market who used to have the muscle to produce particularly big documentaries is now no longer there. The spectrum is more limited now.’

Ellen Windemuth, producer of The Great Dance (along with copro partners Liquid Pictures and Earthrise Films, both in Cape Town, South Africa, and Johannesburg-based Aardvark) and managing director of Amsterdam, Netherlands-based distributor Off the Fence, found herself in the wake of the Kirch collapse when her company’s partnership with Munich-based RTV Family Entertainment, a heavy Kirch investor, came to an end just weeks after the KirchMedia insolvency (see RealScreen July/August 2002).

But, Windemuth thinks the impact of Kirch’s collapse on the doc industry is psychological. ‘The name Leo Kirch was associated with limitless growth and power. That such a media empire proved to be vulnerable has shifted the perception of the industry among Germans and internationally,’ she says. ‘Because this perception has so radically changed, we are bringing a more depressed situation upon us, in non-fiction, than we have to.’

In discussions about the Kirch collapse, the words ‘tip’ and ‘iceberg’ come up a lot, as the company’s demise was one of many to hit the industry in the past 18 months. Part of the problem was the over-valuation of media companies on the Neuer Markt, the German equivalent of the NASDAQ stock exchange.

‘Germany was extremely high on the dot-com boom,’ says Windemuth. ‘The belief that media companies would be the next growth sector in Germany became a natural extension of thought. There was unprecedented hype in Germany about what these companies should be able to achieve, coupled with everyone going for the same thing at the same time.’

Buyer beware

The dismal performance of many media companies had a profound impact on the doc industry. Observes Walter Kohler, a commissioning editor for Austrian pubcaster ORF, ‘For the small independents in Germany, I don’t think the Kirch collapse changed anything – the situation was bad before, and it’s been bad after the crash.’

It’s clear, though, that the Kirch crisis has aggravated the already shaky financial climate for indies. ‘What is surprising is the way the financial side has panicked since Kirch collapsed,’ says Sophokles Tasioulis, head of docs for Berlin-based prodco Greenlight Media. ‘Even for productions that are 100% financed – through contracts with broadcasters – the bank will not give money, which for a majority of the factual market is a catastrophe.’

For Germany’s public broadcasters, however, Kirch’s difficulties may have inadvertently proved helpful. Says Christian Bauer of Munich-based prodco Tangram, which regularly supplies docs to pubcasters ZDF and ARD, ‘[The pubcasters] are in a situation where they see themselves as the winners of this competition. The psychological situation has changed. They are the big players, whereas before they more or less felt like underdogs in the television landscape in Germany.’

Fred Burcksen, VP of distribution and investments at Mainz, Germany-based ZDF Enterprises, the commercial arm of ZDF, disagrees with Bauer’s assertion and adds, ‘All of us were surprised by the Kirch collapse. None of us were anticipating it when it actually came… It fell upon us.’ But, Burcksen notes that in recent years there has been a profound power shift between broadcasters and suppliers, putting ZDF Enterprises in a much better position to negotiate. ‘It’s definitely a buyer’s market,’ he says. ‘Five years ago it was impossible both in fiction and in non-fiction to discuss one single title – you were always forced into deals that you didn’t want. And, the suppliers always mentioned that if we weren’t the ones to take the project, there was definitely going to be someone else.’

Many of Germany’s independent producers have noticed with alarm that pubcasters are developing their own production houses. ZDF has set up three in the past three years, including Hamburg-based Doc.Station. Notes Discovery’s Hoerl, ‘You see the public broadcasters using the weakness of other players in the market to buy up formerly independent companies to link them with their own programming needs.’

Burksen counters that ZDF has followed KirchMedia’s route in acquiring its own production houses to allow for more involvement in the production process. ‘It was a matter of being more independent and flexible when it comes to the realization of ZDF’s ideas and productions.’

Matthias Pfeffer, CEO of Munich-based Focus TV, says he sees a danger with this trend, in terms of program innovation: ‘The public channels are repeating what Kirch did before – it was one of [Leo] Kirch’s faults that he did business [primarily] with his own companies. If you only deliver to your own mother, it might be a problem when you want to be an adult.’

Reaching out

Not surprisingly, as Germany’s indie producers and broadcasters struggle through the realities of shrinking budgets, they are paying more attention to international coproduction opportunities. However, Olaf Grunert, commissioning editor for ZDF/ARETE, warns that securing funds from sources based outside of Germany may prove a challenge for local producers: ‘The German production houses, at least the more old-fashioned ones, are not accustomed to raising money. The Dutch and the Danes [for example] are much more clever at that than German producers, because they are used to it.’

Tasioulis of Greenlight notes it can be a challenge for German prodcos to find partners. ‘Germany has to fight against the prejudice that German documentaries are black and white and boring. It’s very easy for us to go to Discovery with a U.K. production house that’s making a film for Discovery U.S., whereas if we say it’s a German company it’s much harder.’

The European climate for international copros has also been hit hard by the financial difficulties of the last year. Notes Hoerl, ‘In continental Europe it is difficult to come up with enough money from European territories to do international documentary coproductions.’ He says Europeans are increasingly dependent on copros from the U.S. or the U.K. market. ‘There was hope amongst the continental European production companies that we Europeans would be strong enough to do big things on our own. I see that hope fading a bit.’

Carsten Oblaunder, head of Story House Productions, which has offices in Munich and Washington, D.C., says producers who want international partners need a physical presence outside of Germany: ‘You can’t sit in Munich or Cologne and offer shows to somebody in Bethesda, U.S., or the U.K. This is tough, for obvious reasons.’

The next challenge for his prodco, notes Oblaunder, will be to coproduce across the U.S. and German markets. A successful coproduction, he says, will accept from the start the need for different elements, including characters, pacing and interviews. ‘The synergy is that you deal with the same topic and that you might have the same message in the end. But that’s it.’

The coming year will be a shaky one for German media, as the realities of the roller-coaster ride of the past two years sink in. ‘There’s a last-man-standing situation at the moment,’ says Greenlight Media’s Tasioulis. ‘The market is changing drastically. On the one hand, it might be healthy, because some of the rotten production companies will fall down. But, some good ones will also go, and the ones that will survive will be stronger, but in a more hostile environment.’

Industry Voices

The Future for German Factual Producers

‘There will be a highly fragmented market with a lot of cheaper shows generated within broadcasting stations, shows that don’t have much of a relationship with the international market. Completely unrelated [to this], there will be a number of very expensive shows that the players in the free market can schedule in primetime.

– Patrick Hoerl, Discovery Germany

‘We will have a few midsize documentary companies [of] about 20 people or so, companies that are producing documentaries for the German as well as the international market. On the other hand, we’ll have very small companies that can do everything on their own, such as cheap programs with fast turnaround.’

– Carsten Oblaunder, Story House Productions

‘In two years the situation will be more balanced. There will be a lot of fallout among smaller production companies. At the same time, the situation within the Kirch group will have stabilized and there will be another player. I hope that it will be a very healthy situation which is dominated once again by the market.’

– Fred Burksen, ZDF Enterprises

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