TaurusHolding GmbH & Co. KG

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TaurusHolding GmbH & Co. KG

Robert-Bürkle-Strasse 2
D-85737 Ismaning
Germany
Telephone: (49) (89) 9956-0
Fax: (49) (89) 9956-2123
Web site: http://www.kirchgruppe.de

Private Company
Incorporated: 1956 as Sirius Film
Employees: 5,626
Sales: DM 6.5 billion ($3.1 billion) (2000)
NAIC: 51312 Television Broadcasting; 51211 Motion Picture and Video Production; 33422 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

TaurusHolding GmbH & Co. KG, known as KirchHolding or Kirchgruppe until 2002, is a German media conglomerate with a leading position in movie and TV entertainment in Germany and Europe that supplies TV stations in over 130 countries from its extensive library of movies and TV programs. The group is organized into three business divisions: KirchMedia, the movie and TV division in which KirchGruppe has a 72 percent stake; the group’s pay-TV arm KirchPayTV, of which it owns over 69 percent; and the KirchBeteiligungs division which bundles the group’s various media and digital technology shareholdings, such as its 40 percent interest in one of Germany’s leading publishing houses, Axel Springer Verlag AG, and its music publishing arm F.K.M. KirchMedia trades movie and TV rights, produces films and TV programs, and owns about 52 percent of ProSiebenSat.1 Media AG, Germany’s biggest private television group, which runs four TV and cable channels with a cumulative market share of approximately 30 percent. KirchPayTV operates the digital pay-TV channel Premiere World and offers digital TV services through its BetaDigital subsidiary. Over 90 percent of the group’s sales come from commercial TV advertising revenues and from movie and broadcasting license trading. Founder and CEO Leo Kirch owns TaurusHolding and his son Thomas holds a 6.54 percent share in KirchMedia.

1956–78: Trading Films and Making Music

Leo Kirch grew up on his parents’ vineyard in the German town of Würzburg. But instead of learning how to grow grapes and make wine, he went to Würzburg University and studied mathematics and business administration. In 1956, Kirch went on to found his first enterprise, Sirius Film, a company that traded film rights. At a time when television was taking the world by storm, he envisioned the enormous demand for movies and other programs that would be shown on television. Kirch started making contacts with Hollywood studios, with Germany’s young public TV broadcaster ARD, and with other players in the European movie scene. It turned out that Kirch had a knack for choosing popular movies and a sense for business opportunities. The first film rights he bought in 1956 included Carlo Ponti’s and Dino di Laurentis’ production of Federico Fellini’s La Strada. It turned out to be very popular among German TV broadcasters, where it has been showed 47 times. Two years later, Kirch landed his first deal with public TV broadcaster ARD, selling them a movie that hadn’t been showed in movie theaters before. Kirch purchased seven more movies by Italian director Luchino Visconti, and his company co-produced another Italian movie. In 1959, Kirch started acquiring movies in the United States with William Wyler’s The Best Years of Our Lives. In the same year, he made his first package deal and bought 100 movies from United Artists/Warner Brothers.

In 1959, Kirch took the first step to market his movies outside of Germany, founding the international distribution company Beta Film. In 1960, KirchGruppe received the rights for a package of film comedian Buster Keaton movies and acquired another package of Japanese movies, documentaries, and short movies. In the same year KirchGruppe was able to sell a 700-movie package to ARD. In 1963, the TaurusFilm subsidiary was founded. The company marketed movies and programming to German TV stations. Its first deal was a 300-film package sold to Germany’s second public broadcaster ZDF. After 1966, KirchGruppe was represented in the United States by International Television Trading Corp. (ITTC). In 1968, IdunaFilm, another movie and TV-production company that later became TaurusProduktion, was founded. Other major movie acquisitions followed in 1969 when KirchGruppe purchased the RKO Library of Howard Hughes, the wealthy American inventor and film mogul, with almost 1,000 titles, and in 1971 when the company acquired the library of 1920s–30s Hollywood director Hal Roach Library with over 1,200 titles.

In 1964, Kirch got involved in music. His new company Cosmotel, co-founded that year with German star-director Herbert von Karajan, started producing classical music programs. Three years later the company made its first opera-movie La Bohème, directed by Herbert von Karajan and movie director Franco Zeffirelli. Kirch’s second classical music production company Unitel was founded in 1966. In 1970, Unitel started an exclusive cooperation with star composer and conductor Leonard Bernstein which lasted until Bernstein’s death in 1990 and yielded over 110 hours of programming. In 1972, Unitel signed with the Vienna Philharmonic Orchestra, another high-profile performer in the international classical music scene. In 1974, there began a fruitful cooperation between Unitel and the Public Broadcasting Network (PBS) in the United States. Together they developed the first weekly classical music program on American television, Great Performances, which started out with a Unitel-produced performance of Johann Sebastian Bach’s Mass in B-Minor with Karl Richter. Another cooperative venture between Unitel and the renowned annual classical music festival Bayreuther Festspiele began in 1978. Unitel acquired the rights to videotape all of Bayreuth’s Richard Wagner stagings, starting out with the filming of Tannhäuser. In 1990, Leonard Bernstein awarded Leo Kirch with a “personal Emmy” as a token of appreciation for two decades of “making music.”

1984–93: Making Television

The year 1984 marked the beginning of commercial television in Germany and for the KirchGruppe the beginning of its TV-era. With the group’s expanding movie archive, it was in a good position to provide TV with content it had already been providing to public TV stations. Owning TV stations, however, was the next step in the commercial exploitation of the entertainment assets that were stockpiled in a gigantic film warehouse in Unterföhring near Munich. Consequently, in 1984 KirchGruppe got involved in pay and cable TV. Pay TV station Teleclub started broadcasting in Switzerland in 1984 and in Germany four years later. In 1990, KirchGruppe co-founded German pay-TV channel Premiere World with German publishing house Bertelsmann and French pay-TV operator Canal + and became a 25 percent holder in the new company. Three years later the channel started broadcasting and took over the 100,000 German Teleclub subscribers. In 1991, KirchGruppe acquired an 8 percent share in Italy’s first pay-TV firm Telepiu which increased to 45 percent by 1997.

In 1984 KirchGruppe also got involved in cable TV channel PKS, one of the first commercial TV channels in Germany. To get PKS off the ground, KirchGruppe provided the channel, which was broadcast in Germany’s first cable TV project Kabelprojekt Ludwigshafen, with content free of charge for two years. PKS then became SAT.1, one of Germany’s first commercial general interest channels, in which KirchGruppe acquired a 43 percent share. The other shares were held by the big names of German publishing, including Axel Springer, Holtzbrinck, Bauer, Burda, and Aktuell-Presse-Fernsehen (APF), a company owned by over 150 mid-sized newspapers with the vision to create news shows on private TV. SAT.1 went on air in 1985. Four years later, Kirch’s movie channel ProSieben started broadcasting for nine hours a day. ProSieben emerged from former channel Eureka TV and was majority owned by Leo Kirch’s son Thomas.

Leo Kirch’s third area of interest besides entertaining movies and music programs was Germany’s most popular sport—soccer—which drew large TV audiences. In 1991, KirchGruppe together with Axel Springer Verlag founded the international sports rights marketing firm ISPR in which each group held 50 percent. In the same year ISPR acquired the rights to broadcast the German national soccer league games. In 1992, KirchGruppe bought a 24.5 percent stake in commercial TV channel Tele 5 which was transformed into commercial sports channel Deutsches SportFernsehen (DSF) the following year.

Company Perspectives:

It is our basic principle to try consistently to anticipate new markets and not to limit ourselves to existing distribution channels, but to use all means of distribution and sales opportunities that expand our value chain in a useful way. The demand for programming and services will grow nationally and abroad, in particular through digital technologies and the resulting convergence of television, multimedia applications, and the Internet. Thereby, nothing less than a new infrastructure for programs and services is emerging. Digital television will become the door-opener for new interactive services extending from the ordering of products and services to banking services and games at the home-based TV set. To be successful, the Internet requires new forms of offers. Since 1999 we have been preparing for this future market in our new company Kirch New Media AG.

1993–98: Making Headlines

Right from the beginning, Leo Kirch preferred to build his empire quietly, and avoided publicity. In 1993, for the first time, KirchGruppe published a little brochure giving an overview of the group. Although the publication called “Facts and Figures” did not contain key financials, insiders estimated the group’s annual sales at about DM 800 million—over $425 million. Kirch’s empire had grown to a diverse group of over 40 national and international subsidiaries and shareholdings. By 1993, KirchGruppe had become the largest entertainment program provider for German-speaking countries, including Switzerland and Austria. The group was involved in all areas of the movie and TV entertainment business, such as production, synchronization, distribution, rights and licensing trade, movie and video rental, and merchandising. Besides owning about 15,000 movies and 50,000 hours of TV shows, Kirch’s many production firms put out about 400 hours of new movies and TV programs per year. The group delivered content to all but one German TV channel—news channel n-tv was the exception. KirchGruppe had not only become a full service provider for the entertainment industry, but also an owner of 70 movie theaters in Austria and a shareholder in five German commercial TV stations. Moreover, beginning with the 10 percent share in 1984, KirchGruppe had continuously bought shares of Germany’s largest publisher Axel Springer Verlag. By 1993 Kirch owned 35 percent of the company and made his way into Springer’s Board of Directors. Movie TV channel Pro 7, majority-owned by Leo Kirch’s son Thomas, broke even in 1993.

Kirch’s activities in the TV market and his active interest in Axel Springer, publisher of the two national newspapers Die Welt and Bild Zeitung, was watched suspiciously by the Springer management. Because of Leo Kirch’s lion’s share of 43 percent in SAT.1, he dominated the management decisions and used the TV channel to broadcast movies, soap operas, and sports shows for which he owned the rights. While Kirch cashed in, other shareholders, including Axel Springer Verlag, had to account for the station’s losses. Because of Kirch’s hegemony and the network’s constant losses, two other major shareholders, Bauer and Burda, left SAT.1. In 1990, Axel Springer Verlag drafted a 195-page suit against Kirch and another shareholder, Holzbrinck, another major publisher. Springer accused Kirch and Holtzbrinck of having a secret agreement that handed Holtzbrinck’s voting rights over to Kirch; that SAT.1 productions were produced almost exclusively by Kirch subsidiary PKS and Holtzbrinck subsidiary AVE; and that Kirch reimbursed Holtzbrinck for possible losses from SAT.1 activities. However, Springer abandoned the lawsuit. Instead, in December 1996 Springer offered to buy out all APF shareholders, hoping to gain more influence with a 40 percent share. To Springer’s displeasure, in January 1997 a new German law allowed media groups to own a majority in private TV stations. A change in Axel Springer’s top management at the end of 1997 ended the tension between Springer and Kirch, and Holtzbrinck sold his shares again to Leo Kirch for about DM 200 million, which made Kirch the majority shareholder.

KirchGruppe’s dominance of German commercial TV stirred up the interest of Germany’s media and cartel authorities. According to German law, every player in the German TV market was allowed to dominate no more than two commercial channels. However, eagerly escorting commercial TV stations and dominated by the major political parties, Germany’s state-owned Landesmedienanstalten were unable to take concerted action. An attempt to shut down sports channel DSF in which Axel Springer and KirchGruppe together held over 50 percent, led nowhere. Even the German cartel authority finally ceased its investigations.

1999: Reorganizing an Empire

In the late 1990s, the battle for market share in the entertainment industry became more and more global and more capital-intensive. The prices for movie and broadcasting rights were going up and financing high-quality movie and TV productions that were marketable worldwide also became more expensive. Competition among the 20 or so commercial and about a dozen public TV stations for the German TV advertising market was stiff. If KirchGruppe wanted to stay in the game, it would have to broaden its capital base for future investments and look for international partners. Going public seemed to be the next natural step, and KirchGruppe reorganized its network of over 50 subsidiaries to prepare for outside investors.

The company was reorganized into three major business divisions. KirchPayTV bundled all of the group’s riskier enterprises, its pay-TV, digital TV, and new media activities. The pay-TV business was still sluggish in Germany and it was not clear yet if it would take off eventually. All Internet and multimedia activities were organized under the umbrella of the newly founded Kirch New Media AG. KirchBeteiligungs GmbH tied together Kirch’s various media and digital technology shareholdings, including its 40 percent interest in Axel Springer Verlag. Kirch’s main business was presented as the bait for new investors. Under the holding company KirchMedia it integrated the areas free-TV, rights trading, production, and film technology. Thomas Kirch traded his majority share in ProSieben Media AG for a 6.54 percent stake in KirchMedia. Germany’s most profitable commercial TV station became the flagship of Kirch’s “family of channels.” Four European investors jumped on the boat in 1999: Capital Research Management Funds, Fininvest S.p.A., Lehman Brothers Merchant Banking and Kingdom Holdings 8 B.V. In 2000, KirchHolding GmbH & Co. KG was founded as the new holding company of the restructured group. KirchHolding’s share in KirchMedia was 81.14 percent while the rest was held by Thomas Kirch and the four new investors.

Key Dates:

1956:: Leo Kirch founds Sirius Film and acquires his first film rights.
1959:: Distribution company Beta Film is established.
1963:: TaurusFilm, a company that markets movies and TV programming, is founded.
1964:: Kirch’s new company Cosmotel starts producing classical music programs.
1968:: Leo Kirch founds movie production company IdunaFilm.
1983:: TaurusVideo, a marketing firm for video rights, is founded.
1984:: KirchGruppe acquires a 10 percent share in publishing house Axel Springer Verlag.
1984:: KirchGruppe becomes involved in cable and pay TV projects in Germany and Switzerland.
1990:: KirchGruppe is one of the co-founders of the German pay-TV channel Premiere World.
1991:: Newly founded international sports rights marketing firm ISPR acquires the rights to the German national soccer league games.
1997:: The company acquires a majority share in private German TV channel SAT1.
2000:: KirchHolding GmbH & Co. KG becomes new holding company of the restructured group; ProSieben Media AG and SAT.1 merge to form Germany’s biggest private TV conglomerate.
2002:: Company changes its name to TaurusHolding.

2000 and Beyond

Besides consolidating KirchGruppe as an entertainment content provider through long-term license agreements with major American and European studios, the company had to take steps to prepare for battle on an international level. In a first step, the group entered a strategic alliance with long-time Italian business partner Mediaset in which KirchGruppe had acquired a 1.3 percent share in 1995. Founded and partly owned by Italian Prime Minister Silvio Berlusconi, Mediaset owned Italy’s three biggest commercial free-TV channels—Canale 5, Italia 1, and Rete 4—and was active in license trading and TV advertising marketing. Together they founded the new Eureka holding (later renamed Epsilon Mediagroup) targeted at the European movie and TV market. The group’s subsidiaries included BetaFilm, by then the largest international distribution company for movies and TV programs outside the United States, which held a 3.95 percent share in Hollywood studio New Regency Productions; Publieuros, a TV advertising marketing firm including Mediaset’s Publieurope International that marketed advertising time for 16 European commercial TV stations; the international TV holding European Television Network ETN; upscale movie production firm Emotion; and TV rights and co-production firm Evision.

The second way for KirchGruppe to become more competitive and stay in the game against its major rival CLT-Ufa was to utilize synergies within the group to cut costs. In June 2000, KirchSport GmbH was founded as KirchMedia’s new holding for its sports rights and marketing activities, including the agencies Prisma Sports & Media, ISPR, and Swiss CWL Telesport and Marketing AG, the group’s latest acquisition in that area. Only one month later KirchGruppe announced the planned merger of SAT.1 and ProSieben Media AG to form ProSiebenSat.1 Media AG, Germany’s largest television group with roughly DM 4 billion in sales. The company’s shares were publicly traded for the first time in October 2000. Axel Springer Verlag exchanged its 41 percent share in SAT.1 for 11 percent in the new company. Cologne-based retail trade group REWE gave up its 41.6 percent share in ProSieben and received a 5.71 percent share in KirchMedia instead. Through the merger, KirchGruppe expected to create synergies in the area of TV-advertising marketing by merging the Pro 7 agency Media Gruppe München (MGM) and the SAT.1 agency Media 1. The group’s “family of channels” offered advertising customers four distinct audiences for their messages: SAT.1 was targeted at the family market; Pro 7 fed movies and comedy shows to a younger audience while Kabel 1 focused on an audience age 30 and up; N24 delivered news to more educated audiences, and DSF drew mainly men to its sports program. Another area was TV news production where Pro 7’s new subsidiary, news TV station N24, was getting ready to produce TV news for all four Kirch channels including Pro 7, SAT.1, DSF, and Pro 7 subsidiary, movie channel Kabel 1.

In January 2001, Rupert Murdoch’s global media and entertainment group The News Corporation Ltd. acquired a 2.48 share in KirchMedia. Was that the first sign that the world was finally taking notice? In a brief portrait of the 74-year-old, media-shy founder of KirchGruppe in March 2001, Germany’s weekly news magazine Der Spiegel questioned the media cliché of Leo Kirch, the emperor, using his power to influence German politics at his will. Instead, the magazine emphasized his obsession with putting the visions he had for his enterprise into practice—sometimes with the use of politics, if need be. Kirch’s business vision, though, the magazine concluded, was always to have a monopoly. Kirch’s next planned step was to take KirchMedia public.

Such aggressive expansion, however, had left the holding company burdened with a heavy debt load. Moreover, its pay TV segment was faring poorly and a slump had hit the advertising market. A proposed merger with ProSiebenSat.1 fell through as KirchHolding’s financial picture worsened. A new name, TaurusHolding GmbH & Co. KG, adopted in 2002, could not disguise a very uncertain future for the media giant, according to some analysts.

Principal Subsidiaries

TaurusLizenz GmbH & Co. KG; TaurusSport GmbH; TaurusTV GmbH; DSF GmbH; TaurusTV International GmbH; Taurus Produktion GmbH (Germany); TaurusMedia-Technik GmbH; Kirch New Media AG; PayTV Rechtehandel GmbH & Co. KG; Unitel GmbH & Co. KG; F.K.M. GmbH; Beta Film GmbH; KirchMedia WM AG; BetaBusinessTV GmbH; BetaResearch GmbH; BetaDigital Gesellschaft für digitale Fernsehdienste mbH; CBM GmbH; Glücksrad GmbH; Filmproduktion Janus GmbH; Johannisthal Synchron GmbH.