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electronic MUSICIAN

Bertelsmann eyes sale/close of Web units-sources

September 10, 2002

By Merissa Marr, European media correspondent

LONDON, Sept 1 (Reuters) - German media group Bertelsmannis looking to sell or shut its book business Bol.com and pullthe plug on music service Napster in a clamp-down onloss-making ventures, sources close to the company said onSunday.

Bertelsmann [BERT.UL] has held talks with online companiesincluding U.S. retailer Amazon about Bol.com as it looks toscale back online operations including Napster after the ousterof high-flying CEO Thomas Middelhoff, the sources said.

Privately owned Bertelsmann's new chief executive GunterThielen has been reviewing the group's sprawling onlinebusinesses that were so heavily championed by Middelhoff, in abid to concentrate on profitable operations.

Bertelsmann's owners installed Thielen last month as theysought to steer the group on a more conservative path afterMiddelhoff's aggressive expansion aimed at propelling the groupinto the ranks of global giants such as AOL Time Warner.

Sources familiar with the situation told Reuters in Julythat Napster could be among the first casualties and Bol.com'sfuture was also hanging in the balance. Sources said on SundayBertelsmann was now closing in on a decision on their future.

"Bertelsmann is not happy with Bol.com and I would expectsome kind of decision on its future soon," said one source."Napster's future is still also extremely uncertain."

Bertelsmann's DirectGroup division, which houses thee-commerce businesses, confirmed it was considering strategicoptions of non-core operations but declined to commentspecifically on Bol.com or Napster.

DirectGroup stomached some $125 million in Internetstart-up losses in the second half of last year. As lossescontinued, Thielen replaced the head of the division KlausEierhoff with Bertelsmann's former chief operating officerEwald Walgenbach.

Other operations under Walgenbach's spotlight includeonline bookseller Barnes & Noble.com. The future ofBertelsmann's music operation BeMusic has also come intoquestion.

It is not the first time Bol.com has come under review.Last year, Bertelsmann closed a number of its loss-makingoperations but the online book retailer has still struggled tomake a mark.

The writing has also been on the wall for Napster sinceMiddelhoff's sudden departure, sources say. The former chiefexecutive had been one of the few supporters within the groupof the U.S. Web service that once had 60 million followers.

Middelhoff had wanted to relaunch Napster as a legitimateonline music subscription service and agreed to buy its assetsout of bankruptcy. However, the service has been embroiled in alegal battle with the major music groups.

Sources close to the company say the timing of any shutoffof funding to Napster would depend in part on U.S. judicialdevelopments.

Elsehwere in the Bertelsmann empire, the group is alsolooking to sell its publishing arm BertelsmannSpringer and iscurrently in talks with potential buyers, sources familiar withthe situation say.

Bertelsmann is expected to focus instead on core assetsincluding television, book publishing and music. The group ownspan-European broadcaster RTL Group and theworld's leading book publisher Random House.

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