‘Fifty Shades of Grey’ Helps Germany's Bertelsmann to Stronger Financials
BERLIN– E.J. James’ sexy bestseller Fifty Shades of Grey has all of Bertelsmann grinning.
The Fifty Shades trilogy, which also includes Fifty Shades Darker and Fifty Shades Freed, has sold more than 10 million books so far this year for Random House, the publishing group owned by German media giant Bertelsmann. The Fifty Shades phenomenon helped Random House to a record first half, lifting all boats. The publishing division earned $1.19 billion (€947 million) in the first six months of 2012 and booked an operating (EBIT) profit of $142 million (€113 million).
Overall, group profits across all of Bertelsmann’s operations were up 31 percent in the first half to $442 million (€353 million) while turnover from continuing operations inched up 5 percent to $9.5 billion (€7.6 billion).
The book boom helped Bertelsmann paper over weaknesses in RTL Group, its core television and radio broadcasting business. The division, which controls European channels such as Germany’s RTL and M6 in France as well as production giant FremantleMedia, makers of American Idol, saw operating profits drop $59 million (€47 million) for the half as advertising markets in several European countries soften and broadcasters squeeze production companies on licensing margins.
Another significant contributor to Bertelsmann’s healthy first half was the stronger performance of its print services division Arvato, which halved its operating losses to around $38 million (€27 million), against €58 million over the same period last year.
But as one of the world’s largest media firms, Bertelsmann is not building its future on efficiency and erotic literature alone. Thomas Rabe, the company’s new CEO, has announced plans to radically reform the staid conglomerate to push it firmly into the digital world and reduce its dependency on traditional advertising revenue and slower-growth territories such as Western Europe. Bertelsmann has opened new corporate centers in India and Brazil to capitalize on the boom markets there and is making expansion in Asia and South America a priority over the next four years.
"In sum,developments during the first half were positive overall (but) we want to accelerate this momentum…to gradually reshape Bertelsmann over the next few years,” Thomas Rabe said.
For the full year, Rabe said Bertelsmann expected “moderate revenue growth” and an increase in net profit. “However, the subdued economic prospects and the euro crisis, whose repercussions are challenging to gauge, making it difficult to predict future developments at this time,” he added.