Bertelsmann eyes post-Napster rebound
EmptyNEW YORK -- German media giant Bertelsmann AG swung to a first-quarter loss dragged down by €114 million ($154 million) in copyright settlements related to its funding of online music service Napster in 2000. However, the company Tuesday lauded organic revenue growth of 1.7% and said it remains on track to hit full-year goals, which include growth projections in revenue and operating profit.
"Overall, we got off to a good start this year, and we expect to achieve our financial targets for 2007," Bertelsmann chief financial officer Thomas Rabe said. "We are pleased to have reached out-of-court settlements about Napster with most plaintiffs and claimants."
Europe's largest media company posted a loss of €70 million, compared with a year-ago profit of €99 million.
Revenue at the privately held Bertelsmann fell 1.9% to €4.38 billion because of the company's €1.63 billion sale last year of its BMG Music publishing unit. The sale raised money that allowed the firm, based in Guetersloh, Germany, to buy back a 25.1% stake held by Groupe Bruxelles Lambert SA, which in turn allowed Bertelsmann to stay private and in the hands of the Mohn family.
Adjusted for the music publishing sale and foreign exchange effects, revenue rose 1.7%, according to Bertelsmann.
The Napster settlement costs include "mainly expenses for out-of-court settlements made with EMI (Group) and the Warner Music Group as well as provisions made for possible future settlements," the company said in a statement.
Various music majors accused Bertelsmann of contributing to Napster's copyright infringement as an original investor -- before the online music company changed its business model and became a recognized distributor of licensed music via paid downloads. Bertelsmann has denied any wrongdoing as a Napster investor.
The media company's debt stood at about €6.51 billion as of the end of March, compared with €6.76 billion at the end of 2006, but up from €3.93 billion at the end of 2005.
Bertelsmann said earlier this year it would focus on debt reduction and therefore likely avoid any major acquisitions.
Also Tuesday, Bertelsmann said it has added Karl-Ludwig Kley, 55, to its supervisory board. He is CEO of drugmaker Merck KGaA and replaces Claus-Michael Dill, CEO of DAMP Holding AG, whose term expired.