Herbert G. Kloiber on Why He Sold Germany's Tele Munchen Group

Herbert Kloiber

The media mogul cashes out of the company he spent four decades years building, as KKR promises “further acquisitions” as it builds a “new platform” in Europe.

Herbert G. Kloiber has been a fixture on international television scene since Gerald Ford was the U.S. president and Andy Gibb was the big new thing in pop music.

In 1977, Kloiber acquired a small Munich-based production company called Tele Munchen Group (TMG) that specialized in German TV movies and recordings of classical music concerts. Over the following four decades, he built up TMG, transforming it into one of Europe's biggest, and most vertically integrated, media empires, with stakes in TV channels, production companies and a film distribution business, alongside one of the world's largest independently-held rights libraries. 

On Thursday, Herbert Kloiber sold that empire to private equity group KKR for an undisclosed sum. KKR says the company will form the base of a new “audio-visual content platform,” with further acquisitions to come.

For Kloiber, the sale comes at just the right time, both personally — he just turned 71 — and professionally, as the television industry, he says, is “at a turning point” with seismic shifts driven by the rise of the likes of Netflix and Amazon.

Shortly after the deal was announced, Kloiber spoke with The Hollywood Reporter's European bureau chief Scott Roxborough about why he decided to sell and what the future holds for him and the industry. The interview has been edited for space and clarity.

The news today came as a bit of a shock. How are you?

I'm feeling reasonably well. I just had a good lunch and a glass of wine to go with it. I am not in post-natal depression or anything like that. [My feeling is] you can't have the same characters sitting around all the time. It's like in The Muppet Show, occasionally one of the guys has to fall out of the box.

What led you to make this decision, to sell the company you built over 40-plus years to KKR?

I think it is a decision that matured over the past six to seven years. Once you pass the 7-0 mark, and you begin to relinquish the day-to-day things, once you slowly drift out of the markets and you don't go to Berlin or Cannes or the American Film Market anymore — leaving other people to report how bad the supply of movies is — you find yourself slowly letting go and disconnecting.

Which is something I very purposefully did, around my 70th birthday [in 2017]. And I cleaned house the year before by disposing of one asset, which was very difficult to get into profit, which was our Austrian TV station, ATV. Everything else was, and is, ticking along quite nicely. I – one or two or three people – I have been playing and toying and talking with for many years, and one or two of them seriously discussed coming on as an investor, but KKR emerged with a big plan that I thought was exciting.

Their plan, different than most other equity companies, was not to buy TMG and break it up and spit it out. They want to grow the media business — creating a production, licensing and distribution platform. They are planning a couple of other acquisitions soon and probably more later. And I think they came up with a nice idea of getting (veteran German TV executive) Fred Kogel to orchestrate it all. I don't want to remind Fred, but he was my employee 32 years ago. He literally started at our channel Tele 5 in '87. He was both a radio and TV host. And Philipp Freise, who headed up things for KKR, knows the German industry well, as a former board member at (German broadcaster) ProSiebenSat.1. Plus he likes classical music, as I do, which was convenient for spending an evening at the opera while discussing details of the deal.

The TV rights licensing business — selling rights to U.S. movies to German networks — was the original foundation of TMG, has changed radically in the past few years. Did that contribute to your decision to sell now?
 
When you are an old hack like me and you've been around what, 45, 46 years, you've seen the cycles come and go. When I got started, we had one TV channel in each country we could sell to. That was ORF in Austria, probably ZDF in Germany. I have seen this thing grow and come up and come down again. In this day and age, television stations don't mean much anymore to our business. They are maybe 15 percent of our revenue, but whether we sell a movie to a television station doesn't make the difference of whether we buy a film or not. I mean the Amazons, the Netflixes, the platforms, everything from home video on is more important than three runs over five years on free TV 30 months later.

The appetite for movies hasn't diminished overall, but it's come down to smaller numbers on smaller channels. RTL Nitro (a niche German cable channel), carries the Bond films and is getting a 3-percent audience share with them.

The volume of sales has not gone down but it is cut into smaller pieces. If you used to do one big film package with ZDF for €50 million, now its 10 packages with smaller stations for €5 million each.

But we haven't considered buying and selling feature films for television a big deal anymore for the last seven years or so. Our last big output deal with Warner Bros. — for the Harry Potter films and the Lord of the Rings and the Ocean Elevens — that goes back 10 years. And we never renewed it for the good reason that we didn't see that there would be the appetite and the pricing needed to support it.

If the business is doing well, why sell? Why not leave it to your son (TMG managing director Herbert L. Kloiber) to run it?

Well he is still running it (Herbert L. Kloiber will continue to serve as managing director of at TMG). He will continue to run it. The difference is between management and ownership. And with the ownership question — it was my call, having several children, and several responsibilities to those who will come after me, to make sure they all get the best share of what I have built over the last 45 years. Certainly my son will be a major part of it, but it will be entirely up to him whether to invest in this business or in the new platform or in another business or in something different altogether. It was my decision to take some of the chips off the table that I put on many years ago.

Why was now the best time to cash out?

We've grown and grown over the four decades in several layers, and I just found that around now, while we still have a very solid revenue line and profit line, before we start feeling a pinch here or a pinch there, before the advertising market goes to hell for two to three years running, would be the time to sell. We all know what the overall outlook for business is these days.

And it has nothing to do with TV sales. This is a global analysis in which advertising is a very early indicator of what is coming up. We have changed our business a little bit, shifting more to production from licensing, but the production business is also under terrible margin stress because of the enormous amount of production that is done. So you have actors and writers in huge demand and not exactly giving you a rebate. Nor are the stations in a position to allow you enormous luxuries, because they are under pressure. And I just found the entire economic picture meant we are at, or maybe just over, the peak of the cycle.

You are staying on as a member of the advisory board of TMG but will no longer be involved in the day-to-day running of the company. What do you plan to do with all your free time? 

I'm going to spend more time in Austria, where I'm from originally. I hope to spend more time on the ski slope or on the sailboat or on the music and orchestra circuit, more than on the TV and feature market circuit, which has been very time consuming.

How does it feel, after more than four decades, to finally be breaking ties with the company you built?

It feels like a very mature decision, which is not always what happens with a family-owned company like ours. I'm grateful that I've found what I think is the right home for the company, so it can continue to live and grow, which was very important to me. And I feel totally happy. I think I got a very fair deal and I'm looking forward to the time after. All I have to do is keep myself busy, do something intelligent.