Tele Munchen Group Sale Marks End of a German Film and TV Dealmaking Era

HERBERT KLOIBER - Getty - H 2019
Kurt Krieger/Corbis via Getty Images

German viewers — following the trend seen across Europe and the world — have increasingly turned away from American fare in favor of home-grown TV.

The sale on Feb. 22 of German mini-major Tele Munchen Group (TMG) to private equity giant KKR had the feel of an ending. Not just for the era started by TMG boss Herbert G. Kloiber, who built up his Munich-based company over the last 40 years, turning the small-scale local TV production house into one of Europe's largest independent media firms. But for the period, going back at least to the 1990s, when Germany was a guarantee of big bucks for Hollywood.

TMG was, and is, one of Europe's largest licenser traders — companies that make money by acting as middle men, buying the rights to U.S. films and television series and selling them on to local TV channels.

For a long time, U.S. feature films — particularly studio blockbusters — and U.S. network series were a ratings guarantee on German television networks. TMG, and competing licensing companies like Telepool, as well as local networks such as ProSiebenSat.1 and RTL, helped bid up rights packages from the studios. The result was a steady flow of cash from Berlin to Beverly Hills.

It was the era of the “output deal” — when Paramount, Warner Bros. or Disney could count on a German buyer willing to fork over hundreds of millions for rights to everything a studio produced (every film and every series) over a certain time period, usually 3-5 years.

It was always a lousy deal for German buyers — who paid big for the movie hits they wanted and were saddled with hundreds of hours of second-rate sitcoms and soaps. But as German viewers — following the trend seen across Europe and the world — have increasingly turned away from American fare in favor of home-grown TV, the numbers no longer add up. U.S. films, which could once be counted on, even in repeats, to deliver a double-digit market share and millions of viewers, now struggle. The recent broadcast of YA vampire hit Twilight on RTL 2 (a German network part-owned by TMG), pulled just half a million viewers, a 1.8 percent share.

“Films now run on smaller networks and generate smaller shares,” Kloiber tells The Hollywood Reporter. “The big movie night on the big free-to-air channels is long over in every country in the western world and finally even here (in Germany). You used to have big Sunday movie night on (public broadcaster) ZDF, but now that slot is primarily serial fiction.”

Indeed, the ratings champs in Germany these days are all home-grown: series like female-led crime drama Kommissarin Heller (which drew 7 million viewers on its new season start on ZDF) or period epic Babylon Berlin on fellow public channel ARD (which debuted to 7.8 million viewers last year).

“I consider that we are at the turning point of the business as we have known it for, say, the last 10-15 years,” says Kloiber, explaining why he decided now was the best time tell sell TMG.

The deal with KKR follows Telepool's auction last year — to an investment consortium lead by Will Smith and World War Z director Marc Forster, who have repurposed the company as a vehicle to finance low-budget productions. German broadcasting giant ProSiebenSat.1, after seeing profit and revenue slump last year, is scrambling to renegotiate its licensing deals with the Hollywood studios and shift its focus away from U.S. shows towards more home-grown production.

“ProSieben now have hundreds of millions (of dollars worth) of excess baggage in their film library that nobody is ever going to put on air,” Kloiber notes, “And that's the classic moment where the write-down comes in.”

TMG is in a much stronger position, having invested heavily in its own high-end productions, including reboots of Moby Dick (starring William Hurt and Ethan Hawke) and The Name of the Rose, with John Turturro and Rupert Everett.  

KKR, which took TMG for an undisclosed amount, has said it plans to continue focusing on “premium content from Germany” and is acquiring other firms (starting with distributor Universum Film on Feb.?25) to grow TMG to become the country’s "leading independent audiovisual content platform."

But for Hollywood, its time to say auf Wiedersehen to those big German checks.  

This story first appeared in the Feb. 27 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.