The Influence of Private Equity in the Media Sector

The tension between commercial interests and the demands of society and of constitutional law on electronic media has been topical since private broadcasting was introduced. The participation of finance investors such as Private Equity Funds in the media sector seems to exacerbate the attendant tensions, as such funds clearly operate with yet higher expectations of returns and yet shorter time horizons.

At the latest with the investment of the two private equity houses Permira and KKR in the German broadcasting group ProSieben/Sat.1, the interest of broadcasting policymakers in this topic has grown considerably. In cooperation with the Centre for Entrepreneurial and Financial Studies at the Technical University of Munich (www.cefs.de) and the Institute for Journalism Studies and Media Research at the University of Zurich (www.ipmz.uzh.ch), the Hans Bredow Institute was commissioned in October 2007 by the Conference of the Directors of the State Media Authorities to investigate and assess specific topics concomitant on such investments as these.

The proposition was initially examined from the perspective of financial and journalism studies and subsequently from that of media law and regulation, in order to be able to respond to problems of media concentration from a regulatory viewpoint as well as to questions on the general constraints on private broadcasting providers according to broadcasting law.

In arriving at an assessment, the following steps were taken:

• Survey of the already existing investments of active finance investors in the area of German television.
• A description of the situation in a European/international comparison and a presentation of the effect of such investors’ business strategies on the fundamental principles of the German broadcasting system.
• Evaluation of the insights gained by means of the law as it stands as well as indication of options for action under media law de lege ferenda.

The investigation brought to light no more than a few specific risks from the type of investment named. To a certain extent, a risk was attendant on the demonstrably high quota of foreign capital, which can lead to greater pressure for savings, which can in turn affect programme quality. With that, the findings also point, however, to a generally observable phenomenon in the area of media, which can be described as “economisation” and requires further discussions around the further development of the broadcasting (legal) system.

The report was presented to the public in Berlin on 21 May 2008. Apart from German and international case studies, it contains a chapter on broadcasting regulations and strategic analyses of media companies. It is published by Vistas.