Making German Pay TV Pay

Georg Kofler turned Premiere from a flop into a sizzling IPO-to-be

It was during a late-night brainstorming session that someone came up with the idea of calling the new German program guide TV Kofler. That's Kofler as in Georg Kofler, chief executive of pay-TV broadcaster Premiere, which publishes the guide. At first, everybody laughed at naming the magazine after the boss. Then they thought, "Why the heck not?" recalls Kofler, leaning back and laughing in his office in the Munich suburb of Unterföhring.

In fact, the decision makes some business sense -- and says a lot about the brash 46-year-old, who is arguably Germany's most successful TV entrepreneur. The decision to name the magazine after himself -- a temporary solution while Premiere fights in court for the name it actually wants -- generated buzz in a country where corporate ego-flexing is regarded as slightly scandalous. And with Kofler at the controls, Premiere now looks set to make money for the first time in its 14-year history, setting the stage for an initial public offering next year. Last year, Premiere cut its operating loss to $13 million on sales of $1.2 billion, vs. a loss of $424 million in 2002. "He has the shop very well under control," says Wolfgang Bock, vice-president at the Munich office of Mercer Management Consulting Inc., which advised London private equity house Permira when it bought a majority stake in Premiere last year.

RADICAL CHANGES. It's not much of an exaggeration to say that TV in Germany is, to a large extent, Kofler TV. While still a young executive at Munich-based Kirch Group, he built a bankrupt local broadcaster into the family of stations now known as ProSiebenSat.1, which divides the German commercial-TV market with Bertelsmann's RTL Group. Nor is the turnaround at Premiere a small achievement, given its unhappy past. Premiere was founded in 1990 as a joint venture of Bertelsmann, Kirch, and France's Canal+. But the partners argued, and Kirch took control in 1997. Premiere then racked up such enormous losses that it helped drag Kirch Group into insolvency in 2002.

Kofler took over during Kirch's final days. He cut staff 40%, introduced a cheaper set-top box, offered base subscriptions of 5 euros a month to lure new customers, and persuaded Hollywood studios to accept 50% price cuts in the fees Premiere paid them. Most important, Kofler revamped programming. Together with programming chief Hans Seger, he has emphasized content not yet available on free TV, especially recent films such as the James Bond movie Die Another Day and spy spoof Johnny English. He upgraded sports offerings to include second-league soccer games and to allow pre-game telephone betting. Kofler "has an outstanding feeling for programming, and at the same time he's a good businessman. That's a rare combination," says Gerd Bacher, former chief of Austria public broadcaster ORF.

Premiere's IPO will make it Germany's second big TV stock after ProSieben -- whose IPO in 1997 Kofler also squired. If Premiere boosts subscribers from 2.9 million to 3.2 million, as it now plans, the company could be valued at about $2 billion, according to one knowledgeable estimate. That would make a wealthy man of Kofler, who owns a 20% stake.

Already there is speculation that Kofler will use the equity capital for another grand project -- perhaps a merger with ProSieben, whose offices are directly across the street. Such a move would effectively reunite the Kirch Group. Kofler discourages such speculation, arguing that Premiere is better off as a stand-alone business. But he allows that he likes new challenges. "I need something to push -- to bite into," he says. The German media world is wondering what he'll bite into next.

By Jack Ewing in Unterföhring

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