Obviously aware that many of his listeners held copies of the morning's Financial Times, with its gloomy vision of bad times in Gütersloh, Bertelsmann president Thomas Middelhoff led off the company's annual meeting September 27 with some very good numbers: a 21% increase in turnover for the business year ending June 30, with sales reaching the dollar equivalent of $17.86 billion; EBITA up 79%, to $2.82 billion; net income up 44%, to $863 million.
But analysts observed that much of the group's income came from divestitures, such as the sale of the group's 50% stake in AOL Europe and its participation in the network operator mediaWays. It was also reporting a full year of sales of TV-radio market leader RTL for the first time. Without these exceptional items, growth would have been close to zero. Satisfactory performances in the Gruner + Jahr magazine companies, Bertelsmann Springer professional publishing and the global book group now called Random House, as well as in the printing and services division, were offset by plunges in music (BMG) down 8% and Internet businesses (in the Direct Group), where start-up losses amounted to over $400 million. In the previous year, Middelhoff countered, Bertelsmann had sold its AOL investment for considerably more than its Internet losses for the latest business year. At present, 31% of Bertelsmann revenues come from U.S. business, another 31% from Germany, as much again from the rest of Europe.
He assured his listeners that Bertelsmann is properly structured to make money in direct-to-consumer businesses both online and off "when money is being made again." He spoke ironically of the skepticism expressed at earlier annual meetings about group investments in TV, for persistence had won out. Today Bertelsmann is a market leader, and the same persistence, he promised, will see the group dominate the markets for e-commerce and other online activities.
This CEO, who rose to the top via new media, seemed to reserve his kindest words for the book division and its chief, Peter Olson. Worldwide revenues rose 9.3%, to about $1.85 billion, and EBITA reached $160 million, from approximately $137 million in fiscal 2000. Revenue gains were driven by Random's English-language properties in North America, the U.K. and Australia/New Zealand. (Note that the worldwide clubs, no longer part of the book division but included in the Direct Group, accounted for 18% of total revenues.)
Revenues at the professional publishing subsidiary Springer increased 9.5%, to approximately $666 million.
A Chat with Olson
In a postconference interview with PW, Olson indicated the present goal of Random's electronic publishing program: the drive to digitize and to continue to invest in building an electronic publishing infrastructure. Random's digital archive will store every feature of the printed book, including illustrations and flap copy, thus allowing future exploitation in any format, and this without requiring a commitment to a particular delivery system now. But Olson is convinced that printed books will remain the dominant form, with electronic publishing a supplementary business, just as audiobooks are today. Web publishing can serve, for example, to introduce new authors who if successful would go into print.
In other news, Bertelsmann said that in the future, its annual reports would be based on the calendar year. In addition to the New York headquarters project, Bertelsmann will be showing its strength in Germany with an imposing Berlin "embassy." This doesn't signify a shift away from world headquarters in that small town in north Germany; according to informed Bertelsmanners, if the group ever does move from Gütersloh, it could as easily go to New York as to Berlin. And the talk in the corridors was that the group probably won't get a stock exchange listing by 2003, as had been rumored.
