Vox shocks a media colossus: The collapse of a German satellite TV station has dented some big egos, reports John Eisenhammer

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The Independent Online
BERTELSMANN, Germany's media colossus, has tried to package its humiliation as honourably as possible. But its treatment of Manfred Lahnstein has left no doubt as to the embarrassment caused by the collapse of Vox, the private satellite television station in which it had a 24.9 per cent stake and behind which it was the driving force.

A former minister of finance, Mr Lahnstein, 56, was a Bertelsmann high-flyer. Responsible for the electronic media, he was behind its investment in Vox.

But 15 months later Vox has lost an estimated DM600m ( pounds 241m), and Mr Lahnstein has been removed from Bertelsmann's management board. Another 300 jobs are also at risk at the Cologne- based infotainment channel, which was placed in liquidation on 1 April.

Vox is still transmitting, using programmes and rights already paid for. But things look bleak. The second-biggest media giant after Time Warner, Bertelsmann, can easily absorb its share of Vox's losses. But the damage to its image and confidence will be harder to repair. One of the pillars of corporate Germany, it has a reputation for being powerful, conservative and cautious, and, until Vox, was thought to have the Midas touch.

But the tremors caused by Vox's crash go beyond Bertelsmann. Up- market commercial TV has been dealt a body blow. High-brow Vox's start-up advertising said it all. 'Every day you lose 1,000 brain cells. Save the rest]'

Inspired by Channel 4 and CNN, the idea was to produce a news and current affairs driven station, financed by advertising, and aimed at the thinking person. But the idea flopped.

While its turnover of DM18bn and DM1.5bn group operating profits come mainly from book clubs and publishing, Bertelsmann is no amateur in the world of TV. It owns 38.9 per cent of RTL, the most successful German commercial channel, 7.2 per cent of its down-market off-spring, RTL 2, and 37.5 per cent of the pay-TV station, Premiere.

Last year RTL, which reaches 90 per cent of German households, made a pre-tax profit of DM130m, and for the first time pipped the public channels, ARD and ZDF, to the ratings post, with a 19 per cent national share.

ARD and ZDF, which are funded through a mixture of licence fees and advertising, had an audience share of 17 and 18 per cent respectively.

Overall, commercial television's share in Germany has reached a little over 50 per cent. Vox, in its early months at the beginning of 1993, managed to crawl to a miserable 0.7 per cent.

'Snooze TV', was how Friedrich Nowottny, programme director of the public station WDR, described Vox, while Helmut Thoma, head of RTL said, 'After three weeks I would have switched it off and started again.'

One of the reasons Manfred Lahnstein believed so strongly in Vox was his conviction that the German advertising market had lots of room to develop. He forecasts gross advertising revenues reaching DM13bn by the year 2000, from about DM8bn today.

In the recent past, TV advertising revenues had been returning annual double-digit growth rates. But Mr Lahnstein miscalculated. 'The TV market is already crowded, and advertisers are becoming more target-oriented,' said one Bertelsmann insider.

Within a month of launch in the summer of 1993, Vox abandoned its highbrow ambitions and plunged down market, running more cheap shows and old films. But here it ran into the established private stations. Worse, the switch drove up costs, as new entertainment programmes had to be found.

The investors' business plan allowed a six-year period before Vox made money, but no one had foreseen costs would rise so quickly towards the total start-up ceiling of DM540m. On 22 February, the Suddeutsche Verlag, publisher of one of Germany's most respected national dailies, with a 20 per cent stake, used an escape clause and bailed out. It was soon followed by the Westdeutsche Landesbank, with 25.1 per cent.

On 31 March Bertelsmann jumped, too. 'It was not the laws of nature that made us fail, rather we just did not manage to get on top of the programming and convincing the market.

'Such things happen in business, even with us,' confessed Mark Wossner, Bertelsmann's chief executive.

(Photograph omitted)