MCA and Warner Bros. Near Agreements on German Pay TV

Two Hollywood studios are nearing agreements to sell movie and television rights packages in Germany in transactions that will likely give the Kirch Group a defining lead over rival Bertelsmann in launching digital pay TV businesses there.

Sources said Monday that MCA Inc. is within days of announcing an agreement with Kirch for digital TV rights, making it the fourth major studio--after Sony, Paramount and News Corp. (the owner of Twentieth Century Fox)--to ally with Kirch.

Although analysts and industry executives could not estimate the value of the deal, sources said MCA would probably get a generous price as a result of marathon six-month negotiations in which it apparently played the two large German media conglomerates against each other.

Bertelsmann and Kirch, which both have large interests in German free and pay TV, have been in a race for programming for digital TV services.

“That Kirch won implies that MCA got a huge amount of money,” said one competitor. “I thought Kirch would leave MCA for the competition for antitrust reasons and because of what it would cost to top Bertelsmann.”

Kirch has spent aggressively to corral programming for a digital service called DF1, which will launch 17 pay channels beginning Sunday.

Since January, the media giant has signed a 10-year deal with Paramount that could be worth an estimated $2 billion and a $1 billion, five-year agreement with Sony for movie and TV rights. Earlier this month, News Corp.’s BSkyB satellite service in Britain spent $305 million for a 49% interest in Kirch’s DF1. (News Corp. is expected to bring programming from Twentieth Century Fox to the alliance.)

Separately, Warner Bros. is said to be near a satellite licensing pact with Kirch, although that deal is not as symbolic as the MCA development. Although both Sony and Warner Bros. have traditionally done business with both Kirch and its rival broadcaster, RTL, MCA has worked exclusively through RTL, which is partly owned by Bertelsmann.

Neither Warner Bros. nor MCA would comment, but sources said both companies would split rights between RTL in free television and Kirch in pay television.

The only major studio that has not sold off digital pay TV rights in Germany is Walt Disney Co.

Although some analysts predict Germany could be Europe’s largest pay TV market, many executives are skeptical that Kirch’s heavy investment will pay off any time soon. Unlike France, Germany already has a wide array of television choices, with 10 free channels. The only other pay service, Premiere, which is jointly owned by Kirch, Bertelsmann and France’s Canal Plus, has only 1 million subscribers after six years.

Analysts question German consumers’ willingness to spend more than $700 on a decoder box to unscramble the digital pay channels.

Though Bertelsmann plans to launch a digital TV service in Germany this fall, it is unclear where its programming will come from. Industry sources doubted that Kirch would invite Bertelsmann into DF1 as a partner, despite their mutual interest in Premiere.

Times’ wire services contributed to this report.