Bertelsmann is an international media company with divisions in broadcasting (RTL Group); print and digital trade publishing (Random House); magazine publishing (Gruner + Jahr); and outsourcing services (Arvato). The company operates in fifty countries. Random House is a fully owned subsidiary, with nearly 200 imprints that publish 10,000 titles annually with sales of 400 million copies. Printing and publishing division Gruner + Jahr is present in over 30 countries including China, Italy, the Netherlands, Spain, and France, where the group’s largest foreign company Prisma Média is the second-largest magazine publisher. Gruner + Jahr encompass 500 media activities, magazines, and digital communications. The Jahr publishing family in Hamburg owns 25.1% of Gruner + Jahr. Bertelsmann’s Direct Group, the division responsible for book clubs, has been dissolved effective June 30, 2011. The Direct Group's remaining activities in Germany, Spain and Central Europe have been transferred to Corporate Investments in order to assess future options.
Key company developments in 2011 & 1st half year 2012
While revenues grew from 15.07 billion EUR to 15.25 billion EUR, the operating profit (EBIT) was below prior year’s result, caused by structural changes and investment in new business, according to Bertelsmann’s new CEO Thomas Rabe. RTL Group contributed the lion’s share with 38.2% of total revenues. Random House, covering 11.5% of corporate revenues, recorded a decline in revenue to 1749m€ due to exchange rate effects and a slight increase in operating profits to 185 million EUR, which was helped by cost-cutting efforts and lower returns, owing to positive signs of ebook growth in e-book business in North America and the UK. The opposite is true for Gruner + Jahr. Here, revenues raised to 2.29 EUR, thanks to a positive performance in Germany, and turnover dropped to 233 million EUR. Outside Germany, losses in physical book sales could be offset by the growing online and digital business in the US and UK.
Ownership, mergers & acquisition, internal organization:
Finance director and former head of Sony’s digital business Thomas Rabe replaced Hartmut Ostrowski as chief executive in Oct. 2011 after Ostrowski stepped down to join the Bertelsmann's supervisory board for personal reasons. Following his appointment, Rabe initiated a Group-wide dialog: “I’d like to position Bertelsmann for stronger growth, make it more international and more digital.” He first established a new Executive Board seat for Corporate Development and New Businesses. Additionally, a new Group Management Committee (GMC) was formed by Rabe that focuses on the company’s strategic priorities, namely consolidation, digital transformation, growth platforms, and regional expansion. GMC is composed of members of the Executive Board and selected executives from the group.
New digital businesses will be established over the next few years following the criteria of global growth and low cyclicality. Right now, Bertelsmann is already modeling ten-to-twelve entrepreneurial approaches on the example of successfully launched scalable platforms such as the University Ventures Fund, which opened the door to the fast-growing international higher education market. This private-public partnership is built upon a $100 million fund launched in January 2012 by education veterans who are driven by the aim to bring private capital to higher education programs at thirty colleges and universities in the US and Europe. Bertelsmann spent $50 million and is the giant among a large number of smaller investors.
Rabe has already shown interest in taking over the STM publishing of Springer Science + Business Media, in an interview with the manager magazine ().
Since 2008, Bertelsmann has been selling off most of its international book club division “Direct Group”. After divestments in the US and the UK, the declining operations of the club business and the bookstore chain chapitre.com in France were sold to the US private equity firm Najafi in May 2011.
The remaining club business, most notably in Germany and Spain, will be reorganized within the Corporate Investment department, according to Ostrowski: “The decision to reorganize the remaining club businesses completes the scale-back of Direct Group, and thus concludes a large strategic task.” A disposal of the Eastern European book distribution business in Russia, Ukraine, the Czech Republic and Slovakia is progressing. On July 1, 2011 the group opened its retail stores of the German book club Der Club to the public. Up to that time only members could buy books. Now, those who carry a bonus card get a discount of up to 25%, while all other customers have to pay the full price. Club operations in Spain were continued in a joint venture with the Planeta Group.
Gruner & Jahr entered the Indian market with the acquisition of Mexposure Media Group. In the US, Random House bought the digital media agency Smashing Ideas.
The great demand for e-books grants Random House a triple-digit-percentage digital revenue growth. By the end of 2011, the digital transformation yielded 40,000 e-book titles in German, English, and Spanish. Meanwhile, sales of printed books decreased, especially in English-speaking countries.
Bestselling authors & titles:
The top title of 2011 was Christopher Paolini’s fourth and final Inheritance installment. The title sold three million hardcover, e-book and audiobook editions for its first eight weeks eight weeks. 228 titles reached the New York Times bestseller list. Some of these bestselling titles come from George R.R. Martin’s fantasy series A Song of Ice and Fire, which sold eight million copies in North America in 2011. Random House Germany received a boost from the nonfiction hardcover Steve Jobs, by Walter Isaacson.
Key points for analysis & conclusions:
Note: Figures are based on sales generated in calendar 2011 or—for corporations with a fiscal year—from fiscal 2011. Data are from publicly available sources and include sales of books, journals, and digital products. Because publishing data were unavailable, Pannini and Disney/Hyperion are excluded from the rankings. The listing and publisher profiles were compiled by international publishing consultant Rudiger Wischenbart under the aegis of Livres Hebdo.