Bertelsmann has recently announced to leave the music business by selling its 50 per cent of Sony BMG to Sony. It will keep some music rights business, but it will mean that Bertelsmann is concentrating on fewer tiers in publishing. What has grown from a German publisher into a worldwide entertainment company, will now specialise in broadcast services, including online, and print products.
Bertelsmann has been in music business since 1958, when it founded the Ariola label and set up its own vinyl record lines in the company base Gutersloh (Germany). As it grew the company bought entertainment companies like RCA Victor. By 2004 Bertelsmann became partner in the joint-venture Sony BMG with Sony Music. Now the holding Bertelsmann AG has decided to sell its shares in this joint venture and leave the music business. Most renown fact of Bertelsmann music was the loan of 80 million dollar it wanted to give to the online service Napster, which was seen an illegal download service by the other four major music companies. The deal fell through and Napster went bankrupt.
The 750 million euro Bertelsmann will get by selling its shares in Sony BMG will go to the RTL Group’s television business. By beefing up the television segment, Bertelsmann indicates that it wants to be a major player in the European television market.By amputating the music business from its business, Bertelsmann has started to shift into the tier gear. From a general publishing company with books, newspapers and magazines, music and television and with book clubs, the company is narrowing its field of activity. The company was between 1995 and 2000 the European partner and executioner of AOL in Europe, but sold the business. It started distributing books and music through Bol, but again sold off the distribution business as well. Now Bertelsmann is still in the print business with books, newspapers and magazines as well as in the television business.
Television can be seen as the major future business for Bertelsmann. At the heart of the commercial broadcast company is selling advertisement on television and on the supporting internet sites. There is no synergy between television and the print part of the company. The newspaper and magazine business is mainly German. The book business is international but is not used as a carrier for advertisement; as such it is a steady bringer of revenues, not being dependent on advertisements, but on the best sellers.
By shifting into the tier gear, Bertelsmann will get into the same split as AOL Time Warner. Between the RTL television division and the print product department will be no synergy in content, advertisements and distribution. The only common characteristic is the fact that they are part of the cultural industry, which relies on bestsellers. Of course AOL Time Warner is still finding itself in a more complicated business area: online, television, music and print. All their business tiers are in the cultural area and dependent on bestsellers. But since 1999 the company and the subsidiaries have found out that their content business is no playground for content cross-overs and business synergy. Where Bertelsmann has cleared its business model to two adjacent tier areas, AOL will still have to split AOL fromTime Warner or cut two business areas.
Update 22July, 2008: Bertelsmann through Grunner un Jahr has shown interest in acquiring Reed Business Information division from Reed Elsevier, according to the Süddeutsche Zeitung. The bidding process has started with interest from capitl investment companies such as Bain Capital, but also from publishers like McGraw Hill. The take over amount is likely to be over 1 billion euro.
Blog Posting Number: 1195
Tags: print, online, television, music
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