German Upstart Swallows Telemunchen, Eyes U.S. Ally

Frankfurt, Germany -- One of the newest players in the
German TV business last month took a stake in well-established programmer Telemünchen
Group (TMG).

Munich-based EM.TV and Merchandising A.G. assumed a 45
percent stake in the company, which had been owned entirely by businessman Herbert
Kloiber. EM.TV officials also said they expect to unveil a partnership with a major U.S.
company later this year.

TMG is the second-largest TV rights distributor in Germany,
behind the Kirch Group. Its holdings include TV channels in Hungary and Austria, as well
as stakes in Germany's RTL2 and tm3 networks.

EM.TV made a name for itself earlier this year, when it
started Junior. a kids' channel and programming-distribution joint venture, Junior with
Kirch. That deal, which gave EM.TV full access to Kirch's library of children's shows,
made EM.TV one of the world's largest owners of kids'-TV rights.

Junior is distributed as a full-fledged channel on Kirch's
digital direct-to-home platform Premiere World, and as a branded block on the commercial
broadcast channel Sat.1.

EM.TV chairman Thomas Haffa said the price paid for the TMG
stake was "moderate" without disclosing further details. Analysts estimate it at
800 million deutsche marks ($430 million).

The impending deal with a U.S. firm would allow the German
firm "to introduce our kid's Junior branding worldwide and become a player in the
world league," said Florian Haffa, EM.TV's chief financial officer. "Our partner
should also own a children's program stock of his own, distribution channels and maybe
some production facilities."

Clearly, News Corp. makes for a likely suspect. Though
incorporated in Australia, it has huge U.S. assets, including the 20th Century
Fox film studio and Fox Kids. With the TMG purchase, EM.TV and News Corp. are now joint
ventured in tm3.

Kloiber sold a stake in that channel to News Corp. late
last year. Originally tailored for a female audience, tm3, shook up the industry earlier
this year when it snagged rights to the Champions League, a major European soccer
tournament. That jacked up the channel's viewing share, which previously stood at less
than 1 percent in prime time.

News Corp. is believed to be planning to leverage its tm3
asset in order to launch a rival digital-DTH platform to Kirch's Premiere World. Analysts
believe one of the first channels in this bouquet would be News Corp.'s German Fox Kids
offspring. Jochen Kroehne, tm3's general manager, admits such a digital scenario has been
envisioned, but is not a high priority.

"We first need to get the Champions League on tm3
working," he said.