Kirch Group

» see kirchmedia.de as it lived, on the wayback machine

~ the obituary ~

Leo Kirch was born in Würzburg on 21 October 1926 and went into business by borrowing. In 1956 he took $54,000 he did not have, most accounts say from his wife's family, and bought the German rights to Federico Fellini's La Strada. German television was about to need more material than it could possibly make, and Kirch had worked out before almost anyone that the rights to old films were an asset you could rent over and over to people who had no alternative.

He kept doing it for the next forty-six years. By 2002 the library held more than 15,000 films and 50,000 hours of television programming, including a thousand RKO titles and twelve hundred from Hal Roach, and the group sat on top of German broadcasting without ever quite being visible in it. TaurusHolding was the structure that held everything. Under it, KirchMedia held 52 percent of ProSiebenSat.1 along with all of the sports channel DSF and the rights trader BetaFilm, KirchPayTV owned Premiere outright, and KirchBeteiligung carried 40 percent of Axel Springer and the stake that controlled Formula One.

None of it was publicly traded the way an American media empire is. Kirch ran a private structure of partnerships, and the circle of people who knew what was actually inside it was famously small.

~ the case file ~

~ fifteen thousand films ~

Pay television was the part that cost him. Premiere launched in 1991 as a venture between Kirch and Bertelsmann with Canal Plus alongside them, taking over Teleclub's hundred thousand subscribers. In 1996 Kirch launched DF1, Germany's first digital broadcaster, and sold it through a set-top box called the d-box whose encryption turned out to be easy enough to decode that a lot of German living rooms watched without paying. On 1 October 1999 the two services merged into Premiere World.

Germans did not take to subscription television the way Britons had taken to Sky, and the subsidy on every decoder was real money going out against subscriber numbers that never arrived. Then in February 2001 KirchBeteiligung rescued EM.TV, picked up 49 percent of it and control of Speed Investments, and Kirch borrowed 1.6 billion euros to push his share of the Formula One holding company to 75 percent. One billion of that came from Bayerische Landesbank.

Turkey was running the same experiment in those years. Cine 5 started scrambling its signal in 1993 and Digiturk arrived in 1999, and in both countries the subsidized decoder in the cabinet was a thing a certain kind of neighbor knew how to get around. The difference was the scale of the borrowing underneath it.

~ the sentence on bloomberg ~

In early February 2002, on the sidelines of the World Economic Forum in New York, Deutsche Bank's Rolf Breuer gave an interview to Bloomberg television in which he was asked about Kirch and said that the financial sector was not prepared to provide further debt or equity on an unchanged basis. Breuer ran a bank that was itself one of Kirch's lenders.

Whatever the intention, the effect is not seriously disputed in Germany. The other lenders read the sentence as the verdict of the bank that knew most, and began calling in what they were owed. KirchMedia filed for insolvency on 8 April 2002. KirchPayTV followed on 8 May, and KirchBeteiligung and the TaurusHolding parent on 12 June. The liabilities ran past 6.5 billion euros and the German press called it the country's largest corporate collapse since the Second World War.

~ what the pieces went for ~

The breakup took about two years. Haim Saban bought the ProSiebenSat.1 stake in 2003. Jan Mojto, who had run the rights business, took BetaFilm and Unitel in 2004. Premiere narrowly avoided an insolvency of its own and went to the private equity house Permira in 2003. It floated in 2005 at 1.2 billion euros and was renamed Sky Deutschland on 4 July 2009. The Formula One stake stayed with Bayerische Landesbank and the other lenders through Speed Investments.

The administration itself ran until 2018. About 1,500 claims worth roughly 5 billion euros were filed, the first distribution in February 2007 paid 8 percent, and thirteen payouts later the creditors had about 2 billion back, something near 40 percent of the unsecured money. Around ten thousand jobs survived the process inside the companies that were sold on.

~ the case he did not live to win ~

Kirch sued Breuer and Deutsche Bank and did not stop. The Federal Court of Justice ruled on 24 January 2006 that he was entitled in principle to damages. The Munich regional court threw the claim out on 22 February 2011. Leo Kirch died in Munich on 14 July 2011, aged 84, with that dismissal standing as the last word on the subject.

It was not the last word. On 14 December 2012 the Munich higher regional court found Deutsche Bank liable, with the amount to be set by expert opinion and estimates circulating between 120 million and 1.5 billion euros. On 20 February 2014 the bank settled with the heirs for 775 million euros plus interest, a number Manager Magazin put nearer 925 million once everything was counted. Set against the debts of April 2002, the settlement came to roughly an eighth of what the group went down owing.

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