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Business

Viacom Snaps Up German MTV Rival Viva

MTV owner Viacom last week announced it would be buying a majority stake in German rival Viva Media. Critics fear the buyout could crush competition in the music video market.

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The much-loved German music broadcaster VIVA has been bought by Viacom

Rumors of the planned bid had been circulating for months, so it was no big surprise when U.S. media giant Viacom revealed Thursday that a group of 14 Viva shareholders, including media conglomerates Time Warner Inc. and Vivendi Universal, would be selling Viacom 75.8 percent of the Cologne-based music TV broadcaster's shares, an offer supported by Viva's management.

The deal, which values Viva at €308.8 million ($373 million), is Viacom's largest ever acquisition outside the United States.

Bill Rhoedy, president of MTV Networks International, said the takeover wouldn't be stopping there. Viacom is now expected to make a further offer for the remaining 24.2 percent. "We want to acquire 100 percent," he stressed in Frankfurt last week. "Germany is the largest cable and satellite market in the world outside the U.S.," he added, saying, "we believe there's enormous potential for growth in this market and Viva will help consolidate us in Germany and Europe."

Tom Freston, Viacom's co-president, echoed his statements. "Acquiring Viva is a top priority to drive MTV's expansion in Germany," he said, emphasizing that "it's a critical TV market globally."

Former rivals

The two-step deal is by no means without its critics -- first and foremost because Viacom's acquisition of loss-making Viva will increase MTV's presence in Germany from two to four channels and make it the dominant force within Germany's music-television landscape.

Viva first hit TV screens in 1993, charged with challenging MTV's hegemony by promoting the German music industry.

Heike Makatsch

Heike Makatsch

Viva's two channels soon cornered a market share of 3.2 percent in the target audience of 14-to-29-year-olds, beaming in to some 32 million homes. The station gave homegrown bands such as Die Fantastischen Vier and Guano Apes their breakthrough and helped launch the careers of a whole host of German celebrities, including Stefan Raab and Heike Makatsch (photo), who recently appeared in the British hit film "Love Actually."

With insiders concerned that Germany's domestic music scene will now have to take a back seat, MTV insists it will still be concentrating on local culture. "We're not going to just replant a U.S. brand in Germany," Catherine Muehlemann, manager of MTV Central, told reporters. "We want to keep our focus local."

Regulatory issues

Nonetheless, the deal may attract regulatory scrutiny. According to Reuters, industry sources expect major music labels and German TV channels to complain to cartel officials about the deal, arguing that it gives Viacom a stronghold on which videos are broadcast as well as the related advertising market.

Simon Guild, deputy head of MTV Networks Europe, told Reuters that he did not expect "material regulatory issues" but admitted the deal would have to be submitted to authorities for approval.

Viacom also pointed out that the deal was subject to German merger and media ownership approvals.

Shares rise

Viva operates two music channels in Germany, while its Brain Pool unit produces TV shows and movies such as the hugely popular comedy shows "TV Total," "Ladykracher" and "Anke Late Night." It owns a 51 percent stake in its Viva Plus TV channel, while the rest is owned by Time Warner Inc., which is now selling its stake to Viacom.

Recent years saw Viva hard hit by the German advertising slump, with net TV advertising sales falling 20 percent since 2000. In 2003, it posted losses of €42 million.

But once the Viacom bid was clinched, Viva's shares were up 5.3 percent at €12.64, trading just one cent shy of the offer price, €12.65 a share, and hitting their highest level for almost two years. Viva stock more than doubled over the past year on speculation of a takeover, and the bid represents a 21 percent premium over its average share price over the three months before the offer.

Haim Saban

Haim Saban

Other potential bidders for the troubled German broadcaster had included ProSiebenSat1, the private broadcaster controlled by U.S. billionaire entrepreneur Haim Saban (photo).

But none were able to compete with the Viacom bid, which marked a new milestone in MTV's global expansion and made Viacom the third-biggest player in German television after Bertelsmann-owned RTL and Saban-owned ProSiebenSat1.

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