Napster lawsuits hit Bertelsmann profits

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COLOGNE, Germany -- German media giant Bertelsmann matched last year's third quarter revenue figures, booking 4.3 billion euros ($6.3 billion) in sales and improved operating EBIT by 11.7% to 314 million euros ($458 million) over the same period, the company announced Wednesday.

But legal problems -- including claims resulting from Bertelsmann's 2002 bailout of illegal filesharer Napster and a 96 million euros ($140 million) fine against German on-air advertising agency IP Deutschland -- weighed down results in the first nine months of 2007.

Net profit to Sept. 30 was just 132 million euros ($193 million), a fraction of the 384 million euros Bertelsmann earned over the same period last year. Revenue in the nine month period was up slightly at 13.3 billion euros ($19.4 billion).

Operating EBIT was up 4.7% to 1.03 billion euros ($1.5 billion). Stripped of one-off portfolio effects -- specifically Bertelsmann's sale of its BMG Music Publishing arm to Vivendi Universal and its stake in French pay TV group TPS, operating EBIT jumped 13.6% in the first nine months.

Earlier this year, Bertelsmann settled what it says will be the last Napster lawsuit. By the end of 2007, the German company expects to have paid out a total of 393 million euros ($574 million) in Napster-related claims.

Another blow to Bertelsmann's bottom line came last month when German anti-trust authorities fined the group's television ad agency IP Deutschland. Authorities found that the so-called share of advertising deals set up by IP Deutschland and competitor SevenOne Media (a subsidiary of broadcaster ProSiebenSat.1) amounted to a de facto duopoly of the German TV ad market. IP Deutschland was fined 96 million euros ($141 million), SevenOne Media 120 million euros ($175 million).
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