Bertelsmann Corporation, with headquarters in the small northern German city of Gütersloh, is one of the largest multinational media, information, and consulting corporations worldwide, with a turnover of almost 20 million euros and about 100,000 employees (all figures here are for 2006). If the size of the company is assessed on the basis not of annual turnover but of its credit rating with banks, then for many years Bertelsmann has been the world’s largest multinational information concern, as (unlike many US companies) it has been debt free for a long time.
The following six companies belong to Bertelsmann: Gruner and Jahr magazine publishers (14 percent share of turnover), the television group RTL (29 percent), the publishing house Random House (10 percent), 50 percent of Sony BMG Music Entertainment (10 percent), the Direct Group Bertelsmann with its worldwide book clubs (13 percent), and the consultancy company Arvato (24 percent). Bertelsmann is the world market leader in book publishing (in the USA, it owns among others Random House, Knopf, Doubleday, Ballantine, and Bantam Dell) and book clubs; in the music business Bertelsmann is among the five music majors; and it is market leader in Europe for magazines.
The current Bertelsmann concern began as a small publisher of Christian song and text books, founded in 1835. The publishing house continually expanded and focused on popular novels; at the end of the 1930s it employed 400 people. Up until the 1990s the company claimed to have been opposed to the National Socialists, but research work into the group by historian Saul Friedländer established the opposite: during World War II, Bertelsmann-Verlag was one of the most important suppliers of books for soldiers on the front. Among those who wrote those front books were numerous Nazi authors (for example, Will Vesper and Hans Grimm).
After 1945, Bertelsmann initially focused on the West German market. Overtaking the traditional book business, it took control of the West German book market with special book clubs whose members could buy books regularly and at particularly good prices. Later the company complemented its mail order book business with mass-issue cheap novels sold in bookshops of its own where only club members could buy. By the 1960s the West German book market was too small for the company, so it took its first step toward internationalization by founding the first book club in Franco’s Spain in 1962.
Spain was an obvious choice for Bertelsmann because it was an ideal stepping stone to the large Spanish-language book market in Latin America. Bertelsmann became particularly active in Colombia. Every second book printed in that country comes from one of the two Bertelsmann printing companies. When Spain joined the EU in 1986 Bertelsmann was able to further strengthen its position in the Spanish market.
The year 1986 marked a strategic turning point in Bertelsmann’s internationalization strategy to the extent that it was the year the company began investing significantly in the US media market. After the complete takeover of the company Bookspan from Time Warner Inc. by the Bertelsmann company in early 2007, it is now regarded in the US as the largest direct supplier of music, films, and books.
Whereas the Bertelsmann company has been always innovative in its traditional business sector, the book market, its approach to the new media technologies and markets (pay-TV, databases, the Internet) was mostly conservative. Only when the new and recent growth markets had undergone a phase of self-adjustment, ridding themselves of too many actors, did the Bertelsmann concern enter those markets, simply by buying up existing smaller innovative players in the new technologies and then taking the lead in individual sub-markets with the combined forces of a multinational concern.
With the emergence of the Internet, however, and the disruption of the media and information branch by the dot.com bubble in 2000, Bertelsmann’s former global book market was no longer what it used to be. This became evident, for example, in its purchase and reselling of shares in America Online (AOL) or in the, for Bertelsmann, very expensive copyright court cases involving the commercial online music service Napster. Meantime Bertelsmann’s method of raising capital also changed. While the family company, which is not publicly listed on the stock exchange, traditionally drew its investment capital from its profits, in spring 2007, it founded a private equity fund along with Citigroup, Private Equity, and Morgan Stanley Principal Investments, so as to be able to acquire urgently required capital through the controversial methods of finance investors.
The concern’s turnover allocation in the mid-2000s was also a drastic indicator that the old book world was dead. A quarter of Bertelsmann turnover by then was being made by the services its subsidiary Arvato provided. This company offered technical and administrative services to the most varied companies, heading the conservative think tanks in Germany that were successfully supplying privatization models to German local governments for public institutions and services (schools, roads, hospitals, cultural institutions, etc.). The East Riding County Council in Yorkshire, England, was a showpiece in this respect: for the period 2006 –2014, Arvato took over the entire, formerly sovereign public authority administration of the city for the sum of 200 million euros.
In response to these developments, at the much-frequented Internet site www.antibertelsmann.de, socially involved individuals and groups in Germany set themselves up in opposition to the privatization of public institutions and services by the Bertelsmann Corporation.
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