Feature: Media Tycoon Kirch Admits Defeat

An era in German media has ended after self-made television tycoon Leo Kirch sought creditor protection for KirchMedia, the jewel in the crown of the group he began almost half a century ago.

Kirch, 75, who has been almost blind from diabetes for the last 25 years, pulled out all the stops to save KirchMedia.

But he now appears to have given in and accepted the inevitable - to cede control of his core business which has rights for Hollywood movies, World Cup soccer and a majority stake in Germany's largest commercial broadcaster.

A seemingly almighty media powerbroker whom politicians feared or admired for his ability to make or break a national election, brought himself down with a mixture of mismanagement, greed for power and stolid ignorance of a changed political and economic environment.

"It's like handing a dying man his last drink," a banker involved in the rescue attempts for Kirch said last week when the patriarch hesitated to make the final step.

But it's not as if Kirch hasn't been there before.

Throughout the 1990s, Kirch faced financial meltdown several times - but managed to cajole Bavarian politicians, private and public banks and investors including rival media tycoons Rupert Murdoch and Silvio Berlusconi and cash-and-carry-billionaire Otto Beisheim, into bailing him out.

"Kirch has come out alive after news of his death so often that people in Germany seemed to be immunised against the possibility of his failure," said an industry source who has dealt with Kirch.

But signs that the endgame was close were reinforced in March when Kirch, a devout catholic, turned philosophical about giving up control in a rare interview with magazine Der Spiegel.

"The Lord giveth, the Lord taketh away," he said when asked about his feelings towards a possible takeover by Murdoch.

What the Lord Gave

From humble beginnings as the son of a vintner, Kirch rose to become one of Germany's richest men, without allowing himself the public profile or media glamour enjoyed by Berlusconi, Murdoch or Ted Turner.

Kirch started his company in 1956 when he bought the rights for Federico Fellini's "La Strada" -- with 25,000 German marks borrowed from his wife.

Decades of a virtual monopoly as an intermediary between Hollywood and German public TV secured Kirch fat margins and allowed him to grow a tangled web of mostly private companies and shareholdings, including a 40 percent stake in Germany's largest newspaper publisher Axel Springer Verlag.

But his disastrous, cash-bleeding venture into pay-TV, insane bidding wars with rival rights traders mimicking his early success story, and an economic downturn meant he was not able to rescue the situation on this occasion.

"In hindsight, the one big strategic mistake was how he handled pay-TV," said Bernhard Tubeileh, a media analyst at Merrill Lynch.

On the assumption he had to create a monopoly to make pay-TV a success story, Kirch overspent on exclusive movie and sports rights and on a proprietary and faulty technological platform after he took over the only alternative pay TV station from rival Bertelsmann in 1996.

"Kirch was overoptimistic about the success of pay-TV in Germany at first," another media analyst at a German investment bank said. "And then he didn't change his expectations when it became apparent that they were unrealistic."

Even when outsiders began talking of the pay-TV risk, Kirch continued to expand and bought a majority stake in the Formula One racing car business last year for 1 billion pounds.

"I don't understand why he went into that risk in an already tense situation," said Merrill Lynch's Tubeileh.

Changed Perceptions

When Kirch's bankers started to negotiate a rescue takeover with Kirch's minority investors and conservative opinion leaders Rupert Murdoch and Silvio Berlusconi, media sector observers warned about the political implications if Kirch lost control.

However, an observer who spent the last five years on Mars may wonder why the German liberal camp is so scared of Murdoch when Kirch has been promoting a right-wing agenda for years.

Kirch - who intervened personally when an editorial comment lauded a more liberal German abortion law in Springer's flagship daily - appeared as the classic right-wing TV czar to the left after he gave his buddy, conservative ex-chancellor Kohl, prime coverage during the 1994 and 1998 general elections.

For business circles and the Bavarian government, however, he was the showcase self-made man, determined in his entrepreneurial drive, a shrewd manager impossible to fail.

"For way too long, Germany didn't realise the severity of Kirch's problems," the industry source said.