NEWS Monday 4th March- Monday 11th March 2002

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WEEKEND NEWS Friday 8th to Monday 11th March

Hollywood rescue for Kirch?
Tivo loss down, subs up
Yes HK breakeven in sight
FCC suspends DTH merger review

Hollywood rescue for Kirch?

The latest bid by German media group Kirch to cut its E6.5 billion debt is, according to Sueddeutsche Zeitung newspaper, a move to target Hollywood Studios including Walt Disney Co and Sony Corp as white knights to invest in its loss making Premiere world pay TV unit.

The plan is that studios would waive some of their claims on long-term film contracts signed with Kirch in return for stakes in Premiere.

Kirch spokesman Harald Schulz has called the report speculative, adding, "Kirch Group is looking for a stable solution for its ownership structure and the financing of its pay TV platform."
Without new funds, Kirch faces bankruptcy because of
Estimated losses of E1 billion a year at Premiere and the current advertising slump threaten the group with bankruptcy, and the break-up of Leo Kirch's media empire which also encompasses the Bild newspaper plus F1 motoring and soccer world cup TV rights.

A senior Fifa official subsequently warned that there could be delays in payment of E203 million still due for the 2002 World Cup broadcasting rights as a result of Kirch's problems.

The funds - nearly a quarter of the overall amount due - have been placed in an escrow account, by agreement with Kirch, which is responsible for selling rights to the tournament on Fifa's behalf.

"If Kirch goes bankrupt, the money will remain in the account until the claim is settled, and that would be a serious liquidity problem for us," a Fifa official told the press.

If there was no such problem, the money would be released to Fifa once the final game had been delivered to rights holders.

Fifa says the funds in the account are protected against any claim from Kirch creditors should the German group go bankrupt.

Fifa is committed to giving each of its 204-member associations $1 million over the four years between each World Cup, hence needs the flow of funds.
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Tivo breakeven expected

Tivo Inc, the US PVR (personal video recorder) pioneer, posted a less-than-expected loss (7/3/02) for Q4 while revenue for its fiscal fourth quarter doubled over the same period a year ago. TiVo reported a net loss of E44 milion ($38.5 million) or 85 cents per share, on revenue of $6.8 million (E7.8 million) for its fiscal fourth quarter, which ended January 31. In the same quarter a year ago, the company reported a loss of $81.5 million (E93 million), or $2 per share, on revenue of $2.2 million (E2.5 million). The company also reported a net loss of $157.7 million (E180 million), or $3.67 per share, on revenue of $19.4 million (E22 million) for fiscal year 2002.

"We believe we are on track to achieve our goal of reaching cash-flow breakeven by the end of this fiscal year," TiVo Chief Executive Mike Ramsay said in a statement.

The company predicts revenue to more than double to $50 million (E57 million) to $60 million (E68 million) for the year and expects to be cash-flow breakeven sometime this year.

Last year, TiVo created a new business unit to concentrate on technology licensing deals which are set to become a bigger contributor to the company's revenues. "This year we anticipate licensing to contribute about 20 to 30 percent to revenues," said Ramsay.

Shares in TiVo closed on 7/3/02 at $6.76, up 76 cents, or 12.7 percent.

TiVo provides hard-drive video recording of TV television viewing by automatically recording shows according to user requests and patterns of viewing - as well as enabling pausing of live TV (by recording and 'catching up' by playing at slightly increased speed).

TiVo expects to add 30,000 to 35,000 new subscribers in the current quarter, bringing its total subscriber base to between 410,000 and 415,000 for the quarter.

Some 250,000 to 300,000 new subscribers are forecast to be added for the full fiscal year 2003, bringing its total subscriber base to between 630,000 and 680,000 - from 380,000 at January 31.
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Friday 8th March

15 bidders for Russian TV
Fox uses online for promotion
Ecclestone/carmakers in F1 offer
Messier calms Vivendi loss fears
TDF 'undersold' to promote DTT
Thai broadband satellite planned
Direct/Echostar hurdle raised
CNN Web video to charge
BBC needs outside regulation

15 bidders for Russian TV

Some fifteen companies met Wednesday's (6/3/02) deadline to apply for the former TV6's broadcast rights to deliver a national channel - with the winner to be awarded by a special commission on March 27. Media Minister Mikhail Lesin was reported by AP as saying that the 15 applications were far more than he had expected and that the high number would encourage healthy competition.

Bidders included a team of former TV6 journalists (see news archive, 6/3/02) led by Yevgeny Kiselyov and about a dozen major businessmen proposing to launch Channel Six.

Other bidders include Media-Socium, a nonprofit organisation created by the Russian Chamber of Commerce and the Russian Union of Industrialists and Entrepreneurs, reportedly 'supported' by the Kremlin.

Media-Socium reportedly attempted to lure the Kiselyov's team from its group of investors with the compromise result that Channel Six was to join Media-Socium - a plan which collapsed prior to the 6.0 pm 6/3/02 deadline.

Another applicant is TNT, a second-tier network that is majority owned by the state-connected natural gas monopoly Gazprom. Last year, Gazprom took over NTV, which was then Russia's leading independent station. TNT said it hoped to create a sports and entertainment station on Channel 6.

The Gorbachev Foundation, headed by former Soviet President Mikhail Gorbachev, is also a bidder.
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Fox uses online for promotion

A unit of Fox Entertainment Group Inc is to promote its films via Yahoo! Inc following sigining of an online promotional and market research deal, Fox's largest Internet media advertising contract. Traditional companies are reported to have been testing online advertising, seeking metrics which prove the value of their investments.

Terms of the deal between Fox Filmed Entertainment and Yahoo, which involves the studio's domestic US movies and home entertainment initiatives, were not disclosed.

Yahoo signed a similar promotional deal with Sony Pictures Digital Entertainment last year.

Twentieth Century Fox and Yahoo will also monitor the effectiveness of the online marketing on Fox's theatrical ticket sales and home entertainment purchases.
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Ecclestone/carmakers in F1 offer

Former Formula One owner Bernie Ecclestone aims to buy back German media group Kirch's majority equity stake in a joint bid with the main F1 carmakers.

These include Paolo Cantarella, the Fiat Chairman, Wolfgang Reitzle, Head of Ford's Jaguar-owning Premier Automotive Group, and Jurgen Hubbert, Head of DaimlerChrysler's Mercedes-Benz divisions.

The joint approach is reported by the FT to follow behind-the-scenes talks at the Geneva motor show between Ecclestone, the former owner, and senior car company executives.

Kirch's current 75 per cent stake in F1 is expected to fetch substantially less than the near-$2 billion (E2.28 billion) paid for Kirch's 58.3 per cent stake held in its own name, and the further 16 per cent stake held by media group EMTV, whose acquisition was financed by Kirch.

The deeply-indebted Kirch is being forced to sell its stake by creditors hence is not in a strong negotiating position.

F1 sponsors, whose contracts with teams reach to hundreds of millions of dollars, have stepped up pressure for a settlement. Kirch could sell the entire stake or it may be allowed to continue some involvement in F1 via a minority holding as a face-saving exercise.
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Messier calms Vivendi loss fears

Vivendi Universal registered a E13.6 billion ($11.9 billion) loss this week (6/3/02) after it took a E15.7 billion charge, mostly linked to its E38.4 billion acquisition of Seagram and E12.5 billion purchase of Canal Plus. The group's frantic deal making also pushed its stock 21 per cent lower over the year.

Jean-Marie Messier, Chief Executive of Vivendi Universal, strove to ease investor concerns, saying, "Sometimes there is a confusion between write-offs and the creation and destruction of value. Given that the acquisitions were virtually [all] paid in shares, not cash, this non-cash charge does not represent any value destruction."

However, the comment has been criticised by investors and analysts, who disagreed with his contention that acquisitions bought with shares at the peak of the stock market bubble avoided destroying value.

Grace Fan, a media analyst at Bank of America, was reported in the FT as saying, "That's completely wrong, of course. We're a long way from seeing Vivendi Universal earn its cost of capital. I expect them to earn a return on capital of around 3.5 per cent this year, rising to only 7.5 per cent by 2005."

It was also noted that even overvalued shares had an important opportunity cost to existing shareholders, as a company could choose to exploit any valuation bubble by issuing equity for cash rather than by buying other overvalued assets, which would fall in value.

Canal Plus has yet to prove a success, hence the decision to write off E6 billion - roughly half the total acquisition cost - from its book value. Canal Plus lost E374 million at the operating profit level last year.

The Seagram acquisition was described as "very accretive to Vivendi shareholders" while the Canal acquisition was seen as "dilutive," making Canal Plus the company's highest internal priority."

Guillaume Hannezo, Vivendi's Finance Director, said that the company had been right to capitalise on was effectively admitted to have been the inflated value of its own equity to fund acquisitions.

Messier also said, "I want to restate very clearly that we are not contemplating or scrutinizing any significant, or non-significant, acquisitions for 2002. We have no need." He also said the company had no plans to raise new equity and hinted that he may sell down the Group's utility interests and deconsolidate its utilities arm Vivendi Environnement - but this would be gradual.
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TDF 'undersold' to promote DTT

France Telecom is negotiating the sale of a majority stake in its wholly-owned TeleDiffusion de France (TDF) unit according to a report in Le Figaro which says the basis of the deal is E2.1 billion, a valuation seen as a substantial discount on the true value of some E3.5 billion to 3.8 billion.

The discount is reportedly being provided so that TDF can help finance the launch of digital TV in France.

France Telecom plans to sell the TDF stake to Caisse des Depots et Consignations (CDC) and UK investment fund Charterhouse Development Capital, as part of its efforts to sell non-core holdings to reduce its debt load.
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Thai broadband satellite planned

Shin Satellite, a Thai satellite operator controlled by Prime Minister Thaksin Shinawatra's family, is preparing to launch what it says is the first satellite built especially to provide broadband services.

The company was due to finalise a loan from a United States bank to complete the financing of the $350 million (E400 million) satellite, known as iPSTAR, this week.

The company said that the satellite would be able to provide high-speed Internet services across a variety of different platforms in a footprint ranging from India to Australia. No launch date has been set for the satellite, although Shin added that it would announce the information when it unveils its marketing plan for the bird.
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Direct/Echostar hurdle raised

The US Senate Antitrust Subcommittee met this week (6/3/02) with the CEOs of the top two US satellite operators, EchoStar and DirecTV, to scrutinize their planned E29.5 billion merger and its possible effects on rural TV viewers.

The CEO's were given a rough ride according to Sky Report which quoted Senator Mike DeWine, ranking Republican on the subcommittee as commenting, "You are saying, in order to increase competition, we need to decrease competition. Maybe this is true and maybe this is not."

Utah Senator Orrin Hatch pointed out that the combined satellite TV entity would control all full-CONUS DBS slots. "This sort of merger, combining both remaining competitors in a market and leaving no avenue of entry into that market, raises a lot of vexing competition policy questions," the Republican said.

"I am concerned for the success of the DBS business as a competitive force for the benefit of television viewers, broadband Internet subscribers and creative content developers who need distribution choices to deliver the goods and services to consumers," he added.

The counter argument made by the CEOs emphasised how the merger will bring true competition to cable, with the expansion of local TV channels into all TV markets in the United States, satellite broadband access and a national pricing plan, in which rural customers pay the same as city TV viewers.

Charlie Ergen, Chairman and CEO of EchoStar responded to fears of a monopoly saying, "In rural America today, there's what I like to call a 'no-opoly.' Nobody, not the cable companies, not the phone companies, is providing broadband service."

DirecTV Chairman and CEO Eddy Hartenstein, emphasised that cable "is clearly the dominant provider," and is serving most of the pay-TV market.

The merger requires regulatory approval from both the FCC and US Department of Justice.

* Outside the court Ergen said that his company will pursue a Supreme Court challenge to must-carry rules which require satellite TV companies to carry all stations in the markets they serve, for more than a year - despite telling the hearing that Echostar would carry all the stations in its markets.
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CNN Web video to charge

Free video news feeds are to be removed from the CNN web site within a month and put in a subscription channel available only through RealNetworks' RealOne SuperPass.

AOL Time Warner's CNN made the announcement at the launch of the new RealNetworks audio and video player software. Mitch Gelman, Senior Vice President and Executive Producer of CNN.com, said advertising revenue is not sufficient. He was reported in the WSJ as saying, "To continue to offer the quality and quantity of video that we expect our users will want, we need to be able to support that as part of our business model."

RealNetworks' new audio and video player features faster delivery of programming for the subscription service, eliminating the buffering delay common with Web multimedia. The President of Real, Larry Jacobson, also said the software will be included with new Compaq PCs.
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BBC needs outside regulation

Lord Dubs, Chairman of the UK Broadcasting Standards Commission, called for the BBC, to move from internal regulation of its public service obligations to come fully under the jurisdiction of Ofcom, the proposed super-regulator for the communications industry.

"I do not think governors can have responsibility for running the BBC and the responsibility for protecting the consumer interest," he said. "It is just not a very logical stance."

The UK's five existing communications regulators are to be replaced by Ofcom, drawing some 1,200 staff from the Broadcasting Standards Commission, the Independent Television Commission, Oftel, the Radio Communications Agency and the Radio Authority - potentially with Dubs as Chairman - competing for the post with Howard Davies, head of the Financial Services Authority, and former culture secretary Chris Smith.

A draft communications bill including further details on the establishment of Ofcom is expected to be published jointly by the UK Department for Trade and Industry and the Department for Culture, Media and Sport at the end of April.

There is much speculation about wether the UK will follow the US in relaxing cross-media ownership rules - particularly 1996 UK laws designed to limit the influence of media mogul Rupert Murdoch.
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Thursday 7th March

DTT pioneer to close
NTL behind Pace share crash
Local DTT tenders delayed
Vivendi records E13.6 m loss
Liberate expands Two Way Relationship
Russian TV launch planned
EchoStar, SES Global SA in broadband initiatives
Aussie Broadcaster in US DTH

DTT pioneer to close


Sweden's K-World, which claimed at its launch late in 1999 to be "the world's first digital e-learning channel" is about to close down. The station is running out of funds, and several attempts to sell the operation have all failed, so on March 31 K-World will go off the air. K-World was one of the first operators to be given a national DTT licence, and launched in late October of 1999. The service has been taken by leading cable and DTH operators, like Telia's Com.hem, UPC Sweden and Canal Digital.

K-World was founded in 1998 by two entrepreneurial ladies, Annie Wegelius (the first Director of Programmes of pan-Scandinavian TV3 and then founder of Wegelius Television, one of Scandinavia's most successful independent production companies, sold to Bonnier media group in 1995) and Maria Borelius, a respected TV journalist and programme host. Initially financed by a Swedish investment fund, Bure, Wegelius and Borelius soon managed to attract the attention of some of Sweden's richest and most influential families. These include the Wallenberg (who control dozens of leading Swedish/ international industrial groups (such as Ericsson, Electrolux, ABB, SAAB-Scania) and Rausing, the family behind TetraPak. But despite several new share issues financing has been a never-ending problem for K-World.

Gradually moving from education and learning to a more general documentary fare, focused on culture and life-style, K-World last summer merged with Swiss rival Viviance. The then newly recruited MD Patrick Staahle (who took over from Annie Wegelius in early 2000), soon started making public hints that the television part of K-World might be put up for sale. It is a well-known secret that all three major commercial Swedish operators (TV4, TV3 and Kanal5) have been in clandestine discussions with the board of K-World about a possible take-over, but utimately all such discussions failed.

The closing of K-World as a TV station will mean making the staff of 14 redundant. But the 'e-learning' part of K-World will live on.
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NTL behind Pace share crash

Shares at UK set top company Pace plunged 67 per cent to 100p when it issued its third warning in seven months, saying sales for the year to 31 May would be £150 million (E244 million) short of expectations - largely due to cancellation of 300,000 digital set-top box shipments to UK cableco NTL because Pace had not been able to secure credit insurance for the contracts.

Malcolm Miller, Pace's Chief Executive, said, "We have stopped shipments [to NTL] because we can't get credit insurance. We are talking to NTL and the credit insurers about how to go forward."

NTL is reported by the FT as describing the remarks as "confusing and inaccurate." A spokeswoman said, "We have a contract with Pace and that contract is fully insured. We have sufficient boxes in our warehouse to service our customer needs."

This was disputed by Pace, which said the contract had previously been insured but that cover was no longer available. "Pace does not have credit insurance for NTL so we stopped manufacturing yesterday," the company said. NTL accounts for around 30 per cent of Pace's sales.

NTL has debts of £11.8 billion (E19 billion) and has appointed advisers to organise a refinancing. Pace does not receive payment until it ships the units to customers such as NTL and obtains credit insurance to guarantee the sums owed. But Pace's credit insurers, NCM, has been cutting back its exposure to the cash-strapped UK cable market. "They are being cautious so we have to be cautious," Miller said. He added that it was the insurer's decision as to whether it decided to have exposure to a particular company or not.

Pace Micro had begun making the boxes but will not shipped them unless NTL pays cash. NTL still owes £25 million (E40 million) from an order sent in November.

On 31 December 2001 Pace had £130 million (E211 million) of unit sales insured from various customers.

Pace's revenue for the year to 31 May will now be £350 million (E568 million) rather than the £500 million (E812 million) previously forecast. Analysts have halved their pre-tax profit forecast to £23.5 million (E38 million). The company is now valued at £226 million (E367 million), compared to a March 2000 peak of £2.7 billion (E4.383 billion).

Now the company is looking at its orders with similarly indebted UK cableco Telewest whose shares fell 1.75p to a new low of 11.25p, and where there has been a 25 per cent drop in orders, cutting a further £10 million (E16 million) off group sales.

Miller confirmed that US sales would also be down, saying, "We were hoping to ship half a million boxes, we are only going to ship a quarter of a million now."
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Local DTT tenders delayed

The French daily Le Monde revealed that a call for tenders to bid for DTT local association TV licenses is to be delayed.

The call for tenders had been expected to be launched on 30/3/02. The reason for the delay is that the decree concerning advertising, production and film quotas on local channels is still awaited. The CSA, the French broadcasting regulator, has written to the Ministry of Culture asking when exactly the relevant decree will be published.

The French DTT scheme plans for three local TV channels (which could in fact be more stations, sharing capacity) out of the total of 33 DTT channels that may be received by the viewers. The total number of DTT frequencies available round the country for local channels is 330.

Local channels are generally quite wary of DTT, which will involve them in much higher transmission costs than cable. There are currently about 100 such local channels, employing a total of about 500 people with a budget of some E20 million. Subsidies from local councils account for about 55 per cent of their budget. Advertising brings in another four per cent. The remainder comes from the cable operators. The forthcoming decree should enable local channels to carry advertising for a wider range of sectors than is currently allowed.

The call for tenders for commercial DTT has already been issued at the end of January, with a closing date on March 22.
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Vivendi records E13.6 m loss

French media group Vivendi Universal reported a E13.6 billion ($11.8 billion) loss on Tuesday (5/3/02) following two years of boom-time deal-making.

The loss was primarily attributed to a E15.7 billion non-cash charge, mostly linked to Vivendi's E38.78 billion acquisition of Seagram and E12.5 billion purchase of Canal Plus.

Vivendi's chief executive, Jean-Marie Messier commented, "Given that the acquisitions were virtually all paid in shares not cash, this non-cash charge does not represent any value destruction." Charges noted by the FT include write-offs of E6 billion at Canal Plus, E3.1 billion at Universal Music, E1.3 billion at Universal Studios, E1.3 billion in international telecoms, E300 million in Vivendi's internet division and E600 million at Vivendi Environnement. A further E2.6 billion charge will be required in Q1 to meet US accounting standards for asset impairment. The write-offs leave Vivendi's shareholders' equity at E47 billion under French accounting standards and E65 billion under US accounting.

By shifting from French accounting procedures to accepted US accounting principles, Vivendi hopes it will be easier to build its empire in the United States and to raise its profile among American investors. Vivendi has sought to raise its profile in the United States to that of AOL Time Warner Inc. and Viacom Inc.

Vivendi said Ebitda in its core media and communications activities had risen 34 per cent to E5.04 billion in line with forecasts. It said it would boost that to close to E6 billion in 2002 on underlying revenue growth of 10 per cent.

Vivendi Universal's internet arm lost E290 million and Canal Plus, its pay-television unit, E374 million. Some 70 per cent of Canal's losses were in the Italian market said Messier, adding rival pay-TV provider, Stream, had no future if Italian regulators blocked a planned merger with its Vivendi-owned rival Telepiu.

For 2002, Messier said the company planned to deliver the highest growth in terms of revenue and operating profit in the industry.
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Liberate expands Two Way Relationship

Liberate Technologies has licensed core intellectual property and knowledge for enhanced broadcast from Two Way TV, a provider of iTV games and technology.

Liberate says this addition to the existing relationship allows it to offer network operators, developers and other partners greater ability to create interactive TV content tightly synchronised with the video.
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Russian TV launch planned

A team of journalists that ran Russia's last independent national television station (TV6) want to set up an independent broadcasting company - the Channel Six television company - free of government and media mogul control.

The team is headed by Yevgeny Kiselyov, who ran journalistic teams at NTV and TV6. Kiselyov's plan is to attract some 30 investors so that no individual can use the station for political purposes. A dozen or so investors have signed up, including some powerful personalities - all of whom will hold equal shares.

"This is commercial television. This is not state television. This is not television run by a private individual," Kiselyov said.

Russian TV has tended to be used as a political tool, and the country's only two independent national stations quickly declined over the past year as a result of political pressure - with the government seen as playing a large part in silencing opposition voices.

The total annual advertising spend in the country is estimated at about E1.37 billion over all media. Achieving a profit has proved difficult, hence many moguls saw their media holdings primarily as a political vehicle rather than a business venture, analysts say. Journalists often found themselves caught up in these political manouevres.

"Russians are very cynical about journalists on both sides of the state-private divide," Gillian McCormack, who monitors the media industry in the former Soviet Union for the European Union-funded European Institute for the Media in Germany was reported by AP as saying, adding, "Russians like the phrase 'Whoever pays the piper calls the tune.' Unfortunately, that is to a certain extent true."

The new Channel Six company will be among those bidding March 27 for the television frequency formerly held by TV6, which was forced off the air in January after it lost a legal fight with a minority shareholder in a move many saw as a blow to press freedom.

Russian President Vladimir Putin rejected claims that politics drove the case, blaming it purely on economic disputes. But many saw the closure as an attack on the pluralism of the media.
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EchoStar, SES Global SA in broadband initiatives

US satellite provider EchoStar and SES Global SA are in talks to develop a joint venture delivering high-speed Internet service via satellite, also carrying real time video to consumers in the United States.

Terms under discussion between the two companies reportedly don't involve equity stakes. The value of the venture, which will be announced soon, is not anticipated to exceed E342 million.

"EchoStar believes it is important to develop satellite-delivered high-speed Internet access in order to provide more effective competition to cable and to bridge the digital divide for all Americans," Marc Lumpkin, spokesperson for EchoStar was reported as saying in Star Report. "Unfortunately, the large number of well-funded companies that have abandoned or suspended their investments in these services highlighted a difficulty in establishing a viable alternative.

"EchoStar has had discussions with a variety of vendors and potential partners who might help us bridge the digital divide and revive satellite-delivered broadband. However, all of those discussions recognise that the tremendous technical and economic risk associated with these investments makes the ultimate viability of those projects contingent on successful approval of the pending Hughes merger, which is a crucial component of all those discussions," said Lumpkin.

EchoStar and SES reportedly propose to build and launch a single satellite that could complement EchoStar's existing broadband initiatives.
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Aussie Broadcaster in US DTH

A new satellite TV platform is to be launched in the US following PanAmSat's signing of a 10-year, multi-transponder sales agreement with Television and Radio Broadcasting Services (TARBS), an Australian multicultural broadcaster.

With GlobeCast and EchoStar's ethnic and niche offering on DISH Network, TARBS will broadcast more than 50 channels of multicultural programming direct to consumers in the United States over the Galaxy XR North American satellite.

TARBS has been a PanAmSat customer since 1999, when it launched an ethnic programming DTH platform in Australia over the PAS-8 satellite. The company, headquartered in Sydney, broadcasts 52 channels of subscription television and radio programming, sourced from government and private broadcasters in 28 non-English speaking countries. TARBS currently distributes that programming throughout Europe, Asia, Africa, the Middle East and Oceania.
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Wednesday 6th March

ITV Digital must honour sport deal
Broadband focus at FT Media show
Telewest shares at record low
US TV stations not digital ready
Pace shares fall
Foxtel share channels with Optus
Nordic broadband spread
Changes in Swedish TV
Canal Digital offers more services

ITV Digital must honour sport deal

David Burns, Chief Executive of the UK's Football League, has written to his 72 members' club chairmen saying that UK ITV companies Carlton and Granada are legally obliged to fulfil the three year E514 million TV Sport deal signed by their wholly owned digital terrestrial service ITV Digital - despite their contention that they are not liable.

"We have a legally binding contract with ITV Digital which is backed by its parents, namely Carlton and Granada," Burns said.

The ITV Digital platform has cost E1,307 million so far, and co-owners Granada and Carlton want to renegotiate the Nationwide League deal to reduce costs.

The league is still expecting two payments of E145 million at the beginning of each of the next two seasons.

Renegotiation of the deal is seen as necessary to aid the network's cash crisis, but the money is also vital to the survival of lower league soccer as some clubs are thought to have already spent two years' worth of television money.

Granada and Carlton executives believe they are not liable for the contract if ITV Sport - and even ITV Digital - is shut down, because there is no recourse to them as ITV Digital's shareholders.

"ITV is confident that there are no parent guarantees," one ITV executive told the Financial Times.

Although ITV Sport has over 200,000 subscribers, it needs to attract a lot more to have a hope of breaking even. The collapse of negotiations for ITV Sport to appear on the Sky platform have compounded the channel and ITV Digital's problems.

Industry insiders said ITV Digital might offer the league 10 per cent of the E290 million owed under the contract. Taking into account the E222 million paid until the start of the next season in September, this would, in effect, mean the league receiving less than half the E514 million originally agreed.
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Broadband focus at FT Media show

Broadband was the focus at the FT New media conference in London yesterday (See show report for details) Tuesday (5/3/02). Sir Christopher Bland, Chairman of UK dominant telco BT was targeting five million broadband subs by 2006 follwing a 40 per cent drop in wholesale pricing of ADSL.

Adam Singer, CEO of UK cableco Telewest announced plans for a 1MB service this year, at the same price as its 512Kbps service which is being switched off.

Stephen Carter, Managing Director and Chief Operating Officer at NTL said his cableco would be launching its 1Mbps Internet service March 11 starting at £49.99 pcm when part of a bundled service.

Andrew Sukawaty, President and Chief Operating Officer at Callahan Associates International rounded off the cable triple play - while the satellite triumvirate of Romain Bausch (President and Chief Executive Officer SES Global); Giuliano Berretta (Chairman of the Management Board and CEO of Eutelsat SA) and Conny Kullman (Cief Executive Officer of Intelsat) described how broadband is a key component of satellite growth.
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Telewest shares hit record low

Last Friday the FTSE shares market saw a positive movement, even UK terrestrial Carlton Communications rose from16p to 232p, but Telewest, the debt laden UK cable company finished 3p, or 18.75 per cent, weaker at 13p - an all time low - after Schroder Salomon Smith Barney said the shares were worth no more than 10p on account of the increased risk of a debt for equity swap.

Previously, the US investment bank, which is now telling clients to sell the shares, put their worth at 75p.

Telewest is confident that it has enough cash to reach break-even, counting on a E1.63 billion overdraft facility, which is conditional on the company meeting pre-set performance criteria Ì which CEO Adam Singer told the FT New Media Conference in London on Tuesday that it had met and exceeded.

"There is a chance that the operational leverage is less than we forecast and as a result Telewest might breach its banking covenants," Salomon said.

Telewest's Finance Director Charles Burdick said last week after the company released strong preliminary figures for 2001, "We know it's a high-wire act. We have to hit our numbers because the capital markets are effectively closed to us."

With Telewest owing about E8.19 billion to its lenders, a debt for equity swap would render its shares almost worthless.
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US TV stations not ready for digital rollout

More than 30 per cent of US commercial TV stations believe that they will miss May 1st deadline set by the Federal Communications Commission to begin digital broadcasts. At least 412 of the 1,288 commercial stations - mostly in small to midsize markets - said they need the time to solve technical, legal or financial problems and they wanted a six-month waiver.

The analogue-to-digital-TV transition began in 1997 in the US. The federal government's goal is to have switched by 2006 to then reclaim and sell the airwaves used for analogue TV, but with so many delays the prospects are dubious.

Government and industry officials believed that millions of consumers would buy TV sets equipped with digital receivers once stations began to offer DTV programming.

TV stations can keep the spectrum until 85 per cent of the homes in their market can receive digital programming. Broadcasters say stations have little incentive to push digital as long as most new TV sets can't receive the signals and most cable operators refuse to provide a channel for the digital version of the stations' transmissions.

But cable officials say the broadcasters aren't offering enough digital shows and, in any case, few consumers have digital receivers.

"There's not enough compelling content to justify our raising prices for new equipment so one per cent of the customer base can receive the digital signals," says Marc Smith, spokesman for the National Cable & Telecommunications Association.
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Pace shares fall

Pace Micro Technologies, one of Europe's largest manufacturer of set-top boxes, warned on Tuesday (5/3/02) that full-year sales and profits would be substantially below expectations after the slow growth, reduction in capital expenditure and falling prices in the cable and satellite television industry.

Pace lowered its sales targets twice in the last seven months and it is expecting total revenue of about E573 million for the year ending May 31, a 33 per cent fall from the previous year. "This represents a significant shortfall on the board's previous expectations," Pace said in an official statement.

"The difficult trading environment has been exacerbated by a reluctance on the part of Pace's trade credit insurers to increase their exposure at this time. In the US, deployment has been slower than expected."

Pace has pinned its hopes on overseas markets which it believes would help to it to achieve significant contract wins and return to turnover growth in the next financial year.
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Foxtel share channels with Optus

Australia's pay TV sector has signalled major structural changes after two operators announced a channel and satellite capacity sharing agreement yesterday.

Market leader Foxtel said it will share channels with third-ranked Optus and take "substantial" transponder space on Optus' C1 satellite.

In addition Foxtel will takeover the cost of Optus' movie channels, although all of the changes will require regulatory approval and agreement from content rights holders.

Each of Australia's pay TV platforms are losing money and Optus has been in talks with second-ranked Austar since last November about collaboration.

During last month's Australian Subscription Television and Radio Association conference the three CEOs warned that the industry needed to be "kickstarted" in 2002 - and attacked "unsustainable" programme acquisition costs set in long term contracts with US studios.

Under the agreement Optus will have access to Foxtel's two homemade sports channels, and late last month the companies announced that Optus will take Foxtel's newly-launched channel dedicated to Australian Rules Football League coverage. Foxtel will also begin carrying some of Optus' channels. Optus estimates that sharing Hollywood-supplied content costs will save the company E17.2 million a year.

The announcement also included the news that Telstra, the dominant Australian telecommunications provider that owns 50 per cent of Foxtel, will package pay TV services with its phone and Internet services - a facility already provided by Optus.
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Nordic broadband spread

Bonnier Entertainment Broadband and Musicbrigade have signed an agreement to jointly offer services in Nordic broadband networks. Bonnier Entertainment Broadband, under the trademark SF Entertainment, offers movies to broadband customers on demand. They have top American video titles, top Swedish movies and Astrid Lindgren's classics for kids. In addition to these movie and TV services, Musicbrigade will now offer music videos for Nordic broadband customers through the same service as SF Entertainment.

Bonnier Entertainment Broadband recently signed an agreement with Bredbandsbolaget to jointly develop IP-based TV services.

Musicbrigade offers various music video channels within different musical genres and many advanced jukebox functions. The repertoire today includes over 2000 music videos from all over the world with the number growing weekly. The videos are not downloaded but streamed from a server within the broadband operators' network.

"It is very exciting to cooperate with Bonnier Entertainment and offer all music-oriented broadband customers Europe's biggest digitised music video archive. We are aiming at being present with all the major broadband operators in the Nordic countries. Never before has there been a TV service where all fans interested in music could choose themselves which videos to view. Up until now all music video broadcasting has been pre-programmed by different TV stations. Now everybody can make their own channel," says Anders Hjelmtorp, Managing Director of Musicbrigade.
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Changes in Swedish TV
By Goran Sellgren

Sweden's two leading commercial channels are undergoing major executive changes. TV4, the country's most watched station and MTG-controlled TV3 announced major changes in their respective top executive line-ups on Monday (4/3/02).

Svante Stockselius, head of the public service broadcaster Sveriges Television's SVT, Entertainment & Variety department for the last four years, has been appointed by TV4 as the station's new head of Acquisitions, with a seat at the channel's executive management table.

TV3 Sweden has 'promoted' its director of programming, Staffan Erfors, 'upwards to the east'. Erfors will now serve MTG as its Senior Adviser for programming and publicity covering MTG's Hungarian and Russian operations.

Stockselius' resignation from SVT took the media industry by total surprise. He has been absent from his regular office for almost a year, helping Estonian television organise the country's first ever Eurovision Song Contest (still a most important event in this part of the world) to be held in May. The idea was also to breathe new life into SVT's Swedish qualification rounds, which have recently proved a major success.

Stockselius and Erfors used to work at Expressen, formerly Sweden's biggest national newspaper which, like TV4, is controlled by the Bonnier media group. Stockselius was then recruited by TV3 as Director of Programming, a position which Erfors inherited when Stockselius was given the job at SVT in 1998.

Obviously Stockselius' departure from SVT was not a happy one. On Monday his former employer, Expressen, gave Stockselius several pages to voice his criticism of the new MD of SVT, Christina Jutterstroem (who also worked as editor-in-chief of Expressen), accusing her of being "negative to and uninterested in entertainment", and being of "marginal importance" etc.

In his new role Stockselius will be head of programme acquisitions at TV4, a position he will take up in June. He succeeds Tony Mendes, who resigned last summer to become "head of content" at one of Sweden's new 3G operators, HI3G, where Hong-Kong-based Hutchinson Whampoa and Sweden's most influential industrial operator and investor, Investor, part of the powerful Wallenberg family, are the two major investors.

At TV3 Erfors wil be temporarily replaced by Calle Jansson, currently MD of MTG's youth channel ZTV.
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Canal Digital offers more services

As of March 4 Canal Digital, one of the two leading Nordic DTG operators, launched four new services, to its Family Package subscribers: Travel Channel, Viacom's VH1 Classic and Manchester United TV, MUTV Ì all at no extra cost. In addition Eurosport News will be upgraded from its present 'bonus' tier status.

Canal Digital, launched in 1997 as a joint venture between Norwegian telecom operator Telenor and French Canal+, has been 100 per cent controlled by Telenor since last summer. No exact official figures have been released, but Canal Digital claims to have 'in excess of' 1.2 million subscribers in the four Nordic territories, more than half of which are being converted to digital services.
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Tuesday 5th March

Mixed message for new media
BSkyB pay less to transmit channels
Canal Plus/Stream will merger
Philippines cable TV
Viewers to Challenge Experts
US Interactive Games Developer
European satelllite met in Brussels

Mixed message for new media
By Tony Morbin

At Yesterday's Financial Times New Media and Broadcasting Conference (London, 4/3/02), delegates received a mixed message on the prospects for new media. Peter Chernin, President and Chief Operating Officer at News Corporation kicked off the critics saying that there was no viable commercial model for the Internet, Dieter Hahn, attending the event in his capacity as Deputy Chairman of TarusHolding GmbH, saw the Internet simply as a promotional vehicle for existing paid- for brands and not a revenue enhancing service, while SBS's Chief Finance Officer Juergen von Schwerin revealed that the company had dropped Internet services this year.

But both the UK and US public broadcasters, in the shape of BBCi's Director of New Media and Technology, Ashley Highfield and PBS's Senior Vice President, Interactive & Digital Content Planning, Cindy Johanson, noted how cummulative web traffic for programmes was overtaking the broadcast audience and that the web was an integral part of their multi-platform offerings - but then they were not relying on the market for their finance.

A priority for Chernin was copyright protection in an age of video file sharing, with News Corp expected to up activity in this area. He described how the industry needed to be simultaneously more Highfield was particularly looking at community service provision, up to and including using the TV remote to contact emergency services direct on screen.

Hahn, in his capacity as a Kirch Group board member, was questioned how his proposals for interactive services could be considered, when the company was failing to make Pay-TV pay in Germany. When questioned after his presentation on the Kirch Group's plans, he commented that the company's debts were E6.5 billion, and it would not be selling Pro Sieben, but would consider selling TV channel Premiere, and would consider selling it F1 motoring racing rights - though would prefer to keep them. However, it would prefer partners to invest in the company - and would even concede control if necessary, saying it was, "Open for discussion." He would not comment on the latest moves by creditor banks, but it is thought that a bank 'salvation' is most likely.

Notable by their absence were representatives from ITV Digital parents Carlton and Granada - though Carlton issued a statement that following termination of merger talks, and the appointment of Deloitte and Touch to implement a restructuring plan for ITV Digital, Gerry Murphy had been advised that it would be inappropriate to address the conference.

Instead an analyst from JP Morgan described how ITV Digital , "Has no happy ending," and went on to explain how all alternative scenarios - from closure (cost E326 million), to white knight investor (most unlikely - who would want to? Sky and BT have both said no) or massive restructure and cost cutting (again unlikely to be sufficient even if soccer rights fees were renegotiated), were all just variations on how slow the death should be. And maintaining the status quo was ruled out too, with Barb figures quoted as putting deployment at 40 per cent less the claimed 1.263 million subs, underlying churn put at 33 per cent rather than the 25 per cent claimed, with the resulting three year customer life seen as two to three years short of break even given the high costs of customer acquisition.

The current dire state of the advertising market was catalogued - with expectations (or hopes?) of an upturn in Q3 this year, Tivo flaunted its high customer 'desireability' - despite relatively low uptake (300,000 plus units deployed world-wide to be announced this month), and the consumer lobby questioned the relaxing of ownership regulations - and general paucity of interactive TV regulation in respect of viewer data privacy.

There was no mistaking - this was a gathering that, while still, somehow, maintaining belief in the future success of interactive convergent digital TV - some five to ten year's hence - was expecting to keep the hatches battened down for at least the next three months.
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BSkyB pay less to transmit channels

UK satellite broadcaster, BSkyB has reached an agreement with Flextech and UKTV that for the next five years BSkyB will broadcast 13 of their television channels - including UK Gold, UK Style, Bravo and Living, paying at least 10 per cent less for the right to broadcast them. UKTV is a joint venture between Flextech and BBC Worldwide and Flextech is part of Telewest, the cable company. In 2001, carriage and advertising revenue from the channels contributed most of the E314 million turnover in the content division of Telewest.

BSkyB had a total of 5.7 million subscribers as of last month and has an ambitious target of seven million subscribers by 2003.

These 13 channels account for 20 per cent of all viewing of basic pay channels - which excludes channels such as sports and movie services that charge customers premium rates. However, their share has fallen three per cent since 2000.

The gross of revenue for pay television channels is made up from carriage fees - paid on a per subscriber per month basis - from satellite, cable or terrestrial television distributors. But this year, MTV, the veteran music television programmer, suffered deep cuts in cable carriage fees paid by Telewest. Discovery Networks, the owner of documentary and factual channels, had a similar fate at the hands of NTL, the UK's biggest cable company.

Over time, Flextech and UKTV are expected to make up lost revenues, as BSkyB attracts additional customers. On an other front BSkyB has denied a newspaper report claiming its Chief Executive Tony Ball and Chairman Rupert Murdoch are at odds over the future of Premiere, the pay-TV platform of debt-ridden German media group KirchGruppe. The company said that Murdoch, the single largest shareholder of BSkyB, had no intention of acquiring Premiere in the first place.

BSkyB partly owns KirchPayTV which, in turn, owns the loss-making Premiere. It has been reported before that Murdoch has made it public that he is not interested in any of Kirch's assets, notably Germany's biggest TV stations and its 40 per cent stake in Axel Springer AG.
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Canal Plus/Stream will merger

The Italian antitrust commission ordered the suspension of the merger of Stream, from Telecom Italia SpA, and Telepiu, Canal Plus' pay-TV unit, saying it will investigate details of the deals made between Canal Plus, Telecom Italia and News Corp. The investigation should close within 45 days, but this does not mean that the merger is being put off.

Canal Plus said in a statement that " The suspension referred to in the (Italian regulatory) Commission's document only concerns certain contractual clauses regarding working meetings that are intended to develop the technical questions involved in the eventual acquisition."

"However, the Commission has decided, well ahead of schedule, to begin its investigation regarding the companies involved in the acquisition of Stream," the company said.

"The Commission has taken this decision well ahead of expectations, signalling its intention to proceed very rapidly and calmly to a final decision, which has not yet been taken."

On Friday, the Italian regulator warned that the merger of Stream and Telepiu would lead to a strengthening of Telepiu's dominant position in the pay-TV market, to such a point that it would "result in lasting and significant restrictions to competition" which would be very difficult to reverse.

Vivendi Universal owns 49% of Canal Plus. Stream is owned 50-50 by Telecom Italia and News Corp.
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Philippines cable TV
By Owen Hughes

STAR Group appears to have resolved its differences with the dominant cable TV companies in the Philippines after pulling off its channels last October over what it claimed was a non-payment of fees and disputes over subscriber numbers.

News Corp-owned STAR said it was owed E4.03 million in arrears for supplying channels to Beyond Cable, owned by the Philippines largest operators, Sky Cable and Home Cable when it took its channels off air last October. Another contentious issue included a perennial problem in the Filipino market - underreporting of subscriber numbers and the resultant confusion about channel fees.

There has been no formal announcement that the sides have reached an accord, although indications from Manila are that STAR's channels will return to the three systems incorporated under Beyond - Sky, Home and Sun - this month.

STAR's hardline stance reflected its extreme frustration with the Philippines cable TV industry, since Beyond Cable incorporates 70 per cent of the country's 700,000 susbcribers. However it has not been all one-way traffic since Filipino operators have pulled several channels off their systems including ESPN and Discovery as a protest at what they regarded as excessive fees.
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European satelllite met in Brussels

The key executives of nine European satellite operators met in Brussels on 1 March to sign the Articles of Association that form the European Satellite Operators Association. ESOA, a non-profit organisation to be based in Brussels, will represent the interests of European satellite operators before key European organisations including the European Commission, Parliament, Council and the European Space Agency as well as any other relevant international organisations.

Founding members of ESOA are: Europe*Star, Eutelsat S.A., Hispasat, Inmarsat Ventures PLC, New Skies Satellites NV, Nordic Satellite AB, SES GLOBAL, Telenor Broadband Services AS and Telespazio.

The General Meeting appointed the Board of Directors, comprising the Chief Executive Officers or Chairmen of the Board of each of the operators. The Board is led by Romain Bausch, President and CEO of SES GLOBAL, who has been elected Chairman of the Board of ESOA and Jacinto Garcia Palacios, CEO of HISPASAT and Salvatore Pinto, CEO of Telespazio, as Vice Chairmen of the Board, each of whom have been appointed for a one year term.

An Executive Committee to support the Board will meet regularly comprised of representatives of each satellite operator, and is led by Barry Saunders, Eutelsat S.A., Chairman, Andrew D'Uva, New Skies Satellites N.V., Vice Chairman and Christine Leurquin, SES GLOBAL, Treasurer.

ESOA will pursue five priorities in 2002:

Provide input into the development of a European space policy at the levels of both the European Commission and European Space Agency.

Represent the views of European satellite operators in Europe and around the world to help remove trade, regulatory and market access barriers facing them.

Actively support satellite service providers by stimulating the increase of research and development funding for ground equipment (satellite applications and low-cost interactive terminals).

Promote the role of satellites in the European Commission's e-Europe broadband programme. e-Europe was launched in 1999 to bring Europe on-line and satellites, with their total coverage of Europe and multi-casting capabilities, are an excellent method of delivering rich content.

Appoint the Association Secretary General.
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Monday 4th March

RTL eyes Channel 5
Springer plays alone
BBC4 digital culture
NTL/BskyB deal dropped

RTL eyes Channel 5

It appears that Channel 5 will be the preferred route for expansion in the UK television market by RTL, the pan-European broadcaster controlled by Germany's Bertelsmann. RTL Chief Executive, Didier Bellens, is presenting RTL's full year results today (Monday 4/3/02). He also plans to talk to investors and it is thought that the Luxembourg-based company will commit to further investment in Channel 5 - which launched five years ago- with the aim of increasing audience share from about six per cent to ten per cent. The channel also has about six per cent of the national television advertising market. Advertising revenues fell 7.5 per cent last year.

United Business Media, which owns 35 per cent of Channel 5, is said to be prepared to invest further despite previously clashing with RTL over funding, according to a report in today's FT.

There is speculation about Bertelsmann's plans to launch a bid for one of the two biggest ITV companies in the UK, especially following the termination of merger talks between Granada and Carlton Communications last week. But it might not happen just yet.

It is known that Thomas Middelhoff, Bertelsmann Chief Executive, and Michael Green, Carlton Chairman, have had serious discussions about a deal. But they are not thought to have talked since the autumn.

Following a profit warning in December, RTL is expected to report 2001 operating cashflow of E265 million to E274 million ($229 million to $237 million) (E555 million in 2000) after exceptional items on turnover of E3.92bn, against E4bn last time. The fall in profits is partially accounted for by the advertising downturn. Analysts also expect RTL to take a E40 million charge for restructuring at its TV production arm in the US and E28 million of start-up costs for RTL Shop!, a German shopping channel.

In the first six months of the year, RTL recorded the biggest ever interim loss by a European media company after writing off E2.2 billion in goodwill associated with the acquisition of Pearson TV. In December, Pearson, which owns the Financial Times, sold its 22 per cent stake in RTL back to the European group. Bertelsmann is preparing an offer to minority shareholders in the coming weeks to take RTL private.
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Springer plays alone

Equity investors offered Axel Springer the opportunity to participate in buying back the 40 per cent stake in the German publisher held by Kirch Gruppe. But the publisher and Friede Springer, its majority shareholder, are understood to have rebuffed the move. They support a competing E1.1 billion bid by HypoVereinsbank and Dresdner Bank, reports the FT.


What Axel Springer would like is for HypoVereinsbank and Dresdner Bank to sell back about a quarter of the stake to Mrs Springer. The rest would be floated or sold to a long-term financial investor. The success of the bid, however, depends upon an agreement between the eight largest lenders to Kirch Gruppe.

Three insolvency experts are studing Kirch's internal accounts to determine whether a refinancing of Kirch's loans would guarantee the group's survival in the near future.
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BBC4 digital culture

Over the weekend a new £35 million arts and current affairs channel, BBC four, was launched in the UK. Although 50 per cent of British viewers have access to the channel, Saturday night's debut line-up was watched by just five per cent of the total viewing audience. Viewing figures were boosted by the channel's simultaneous broadcast on BBC Two. A £20 million marketing budget was used to promote its digital services.

The first night showcased Surrealissimo!, a re-enactment of the trial of Salvador Dal» by fellow Surrealists, and Goya - Crazy Like a Genius, a documentary on the Spanish artist.

The modest viewing figures were released as Tessa Jowell, the government's Culture, Media and Sport Secretary, said that the new channel should not be used to dump arts programmes from BBC One and Two in the battle for ratings.

Jowell told GMTVÈs Sunday Programme, "I think that the BBC have to take very seriously the public concern, which is regularly raised, about the loss from schedules of programmes dealing with the arts. In approving new digital services for the BBC, this is not the go-ahead to dump onto digital channels programming from the mainstream analogue channels.

"Viewers paying their licence fee should expect to see the whole range of genres on BBC One and Two, and there is a public enthusiasm for that, IÈm absolutely sure of it."

She said that while the BBC had a duty to respond to the public hunger for "high-quality programming," it should not use the new service as an excuse to diminish the quality of programmes on the terrestrial channels.

A BBC spokesman said, "We are a specialist arts and current affairs channel offering new innovative programming, we are not competing with Sky Sports and Sky One. More people will discover BBC Four in the weeks ahead."

The whole of BBC4's first night was broadcast simultaneously on BBC2 and in future much of BBC4's output will be shown later on BBC2.

George Alagiah a veteran foreign correspondent, will present BBC4 News which is designed to concentrate on the global picture, a sort of World Service with pictures.

BBC4 is free to anyone who already has a satellite dish, digital cable or an ITV digital set top box.

BBC Four continues tonight with a documentary placing Henry Kissinger on trial for war crimes, while Peter Brook's Hamlet will be screened on Wednesday.

Viewers will also see repeats of Saturday night's programmes in the days ahead, with 30 per cent of the channelÈs output composed of 'second chance' screenings.
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NTL/BskyB deal dropped

UK cable providers, BskyB and NTL, who have been waiting for a decision from the Office of Fair Trading (OFT) to their proposed deal since Septemeber 2000, have abandoned the deal due to delays by the OFT.

The deal would have given NTL discounts on Sky's sports, news and entertainment channels in return for making the stations available to more of its cable TV subscribers.

The OFT said that it decided not to take a decision on the case and is closing its file because there was a lack of interest from the companies in pursuing the agreement. Both NTL and Sky hit out at the OFT saying this was only because the regulator had taken so long.

NTL's Managing Director, Stephen Carter said, "It has taken the OFT 16 months to come to the decision that it is not going to make a decision. The world has moved on since October 2000, and the agreement that was made then is no longer commercially viable for either party." Sky said, "It is disappointing that, through regulatory inertia, commercial progress is being impeded.
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