Posted on 09/02/2002 8:13:34 AM PDT by shrinkermd
Bertelsmann, the privately owned German media group, is considering the outright sale or closure of its online books and music operations - the second largest in the world - in the latest phase of its restructuring.
The move signals a strategic U-turn following the resignation of Thomas Middelhoff as Bertelsmann chief executive following in a boardroom coup in July. Mr Middelhoff had hoped to transform the company into the global leader in book and music retailing.
Bertelsmann's management board, however, has approved plans to scale back or withdraw entirely from e-commerce operations.
The German group is understood to be in talks with several online companies, including Amazon, the US-based internet retailer, over the sale of its Bol.com books business and its BeMusic subsidiary. Bankers have valued Bol.com and BeMusic, both part of Bertelsmann's DirectGroup division, at €2.1bn and €120m respectively.
Under the plans, Bertelsmann is also expected to withhold further funding from Napster, the controversial online music business accused of flouting copyright rules.
Napster, acquired by Bertelsmann in May, is due to emerge shortly from Chapter 11 bankruptcy protection in the US. But the music-swapping service is likely to close without funding guarantees from Bertelsmann.
Officials at the German group declined to comment on Sunday.
The shake-up follows last month's appointment of Ewald Walgenbach as head of DirectGroup, which comprises book and music clubs with more than 40m members and e-commerce ventures including CDNow, Bol and barnesandnoble.com.
Mr Walgenbach, formerly Bertelsmann chief operating officer, replaced Klaus Eierhoff at DirectGroup amid continued losses in the division. It lost €40m on sales of €1.5bn in the six months to December last year, the last period for which figures are available.
Weak revenues and volatile demand are thought to have persuaded Mr Walgenbach to withdraw from online retailing to concentrate on book clubs.
Industry analysts have cut the valuation on DirectGroup from €3.8bn to €2.9bn, citing turmoil among e-commerce platforms.
Bertelsmann made no comment on the likely impact on jobs or future sales at DirectGroup.
The retreat from e-commerce marks the biggest about-turn since Gunter Thielen, a veteran Bertelsmann director, became chairman and chief executive in July.
Mr Thielen outlined plans to devolve more decision-making to divisions such as DirectGroup, which accounts for 15 per cent of global sales. The division is hoping to break even in the first half of this year on sales of €1.5bn.
It's possible that they think they'll be able to use things like DMCA to legislate the Napsters away, and go back to the old days.
It does seem short sighted to get completely out of the business.
True. Most people simply will not pay anywhere near full price when they're only getting the words instead of an actual physical object. Also, I think not enough people have PDAs. Reading books on a laptop is tolerable, but on a desktop it just feels like you're spending more time at work.
Why Napster should be a money-loser indefinitely is puzzling as well. Someone is thinking very short-term.
Well, to be fair to them, they've been shut down for almost two years now, while Bertelsmann has been sitting on their hands trying to figure out what to do with it. And I think some of the lawsuits against them are still in court. Of course, the Napster P2P protocol is still out there and thriving via open servers.
The owner of Baen has figured out that posting books on the net increase sales of the dead-tree editions far beyond what you might expect. This is a publisher that doesn't believe its customers are nothing but thieves looking for a free lunch. They get it big time, and have managed to create at least one loyal customer who looks for their books whenever I'm in a bookstore.
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