Bertelsmann is an international media company with divisions in broadcasting (RTL Group), print and digital trade publishing (Random House), magazine publishing (Gruner + Jahr), outsourcing services (Arvato), and printing (Be Printers). The company operates in fifty countries. Random House is a fully owned subsidiary with nearly 200 imprints in 15 countries, publishing 10,000 titles annually with sales of 400 million copies. The company also publishes 47,000 e-book titles in English, German, and Spanish annually. 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. All in all, Gruner + Jahr encompass 500 media activities, magazines and digital communications. 25.1% of Gruner + Jahr is owned by the Jahr publishing family in Hamburg. Bertelsmann’s “Direct Group”, the division responsible for book clubs, was dissolved by 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 for these activities.
Key Company Developments in 2012 & 2013
Bertelsmann closed a “solid” fiscal year 2012 with “positive impetus” mainly from Random House. While the group result amounted at 16.07 billion EUR, Random House contributed 2.14 billion EUR (13.4% of corporate revenue) and Gruner + Jahr 2.22 billion EUR (13.9%). Due to the huge success of E.L. James’s bestselling “Fifty Shades” trilogy, earnings of the trade book publishing group have nearly doubled from 185 million EUR in 2011 to 325 million EUR in 2012.
Ownership, Mergers & Acquisition, Internal Organization:
Bertelsmann AG changed to Bertelsmann SE & Co. KGaA, a partnership limited by shares (KGaA), on August 20, 2012. KGaA is a proven legal form for businesses owned by families or foundations. The conditions of ownership and the structure of the group will remain unchanged.
The upcoming Penguin merger and full acquisition of Random House Mondadori is expected to offer new options for Random House to expand into the Latin American book market.
“The planned merger will offer authors an unparalleled variety of publishing options and will foster even more effective publication of book content – in traditional as well as digital formats. These are the best preconditions for the future of these two great publishers—and for strengthening one of our core businesses: the book,” according to Chairman and CEO Thomas Rabe. With the consent of the Chinese trade ministry in early June 2013, Random House and Penguin have a green light for their merger. The fusion is expected to be finished at the end of July 2013.
In 2012, Random House launched Random House Author Portals in the United States and Canada. The platform provides information about sales, royalties, and rights deals for newly published and backlist books to authors and their agents. More than 2,300 authors signed on as Portal users by the end of the year.
Random House started a strategic partnership with Bertelsmann sister company Fremantle Media to develop scripted television programming based on fiction and nonfiction books published by Random House’s imprints worldwide. An arrangement through Random House Television in the United States will provide the authors with greater opportunities.
Bertelsmann announced plans at the company's annual results conference in Berlin to develop an education business division with the long-term potential to generate 1 billion EUR in sales.
During Bertelsmann’s China conference in late October 2012, Random House CEO Dohle stated that "China is an important market to us, and it also offers a great learning experience for us….We'll not be in a rush, but will seek partners, learn about readers' tastes and establish a more solid foundation here.” Bertelsmann CEO Rabe noted that the group will strengthen its investments in the education and digital media worldwide, “and likewise in China.”
Gruner & Jahr entered the Indian market in 2008 and has gained momentum there and in China. The group is active in three different segments in Asia: magazine publishing, corporate publishing, and digital marketing. With Gruner & Jahr’s marketing company Ligatus established in Germany, Austria, the Netherlands, France, Spain, Sweden, and Belgium, they continued to internationalize by entering the Italian and Turkish markets in 2012.
While Bertelsmann’s core markets are Europe and the United States, the group is focusing on emerging markets in Brazil, India, and China. The Brazilian operations established a new Corporate Center in São Paulo.
Last year, Bertelsmann opened a Corporate Center in India and invested 3 million EUR in the India-based online learning platform WizIQ.
Digital now accounts for more than 22% of Random House Group UK net sales according to RH UK CEO Gail Rebuck. The same is true for worldwide group income, according to Dohle.
By the end of 2012, the company produced 47,000 e-book titles (against 40,000 titles in the previous year) in German, English, and Spanish. Bertelsmann’s publishing imprints generate 20% of their global revenues from digital business. In the U.S., this figure is above 25%.
Gruner + Jahr’s Internet portal Chefkoch.de has evolved into the largest food community platform in Europe with more than 200,000 recipes available. Last year the portal generated 49 million visits in December alone, a 35% increase from the previous year.
Bestselling Authors & Titles:
More than 70 million copies in English, German, and Spanish-language multi-country editions in less than one year turned E.L. James’ “Fifty Shades of Grey” and its two sequels “Fifty Shades Darker” and “Fifty Shades Freed” into a global phenomenon. “Our strategy was to maximize the phenomenon by taking the books, which could have been seen as strictly romance-genre publications, and publishing them as novels with broad appeal for a more general female readership. All of our publishing efforts, from marketing to PR messaging to retail positioning, emanated from that strategic idea: reaching a mainstream audience”, says Anne Messitte, who served as publishing director of Vintage Anchor Books until Dohle promoted her to executive vice-president of the Knopf Doubleday Group, after Messitte bought the series for Vintage. Each week brought a new print run up to 900,000 copies.
While revenues grew from 15.07 billion EUR to 15.25 billion EUR in 2011, the operating profit (EBIT) was below 2010’s, due to structural changes and investment in new business, as Bertelsmann’s new CEO Thomas Rabe explains. 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 1.75 billion EUR 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 e-book growth especially in North America and the UK. The opposite is true for Gruner + Jahr. Here, revenues rose to 2.29 billion 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.
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.