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"In a difficult economic environment, Bertelsmann has mastered a year of forward-looking strategic and operational initiatives..."
—-Thomas Middelhoff, Bertelsmann Chairman/CEO
MUSIC, AD WOES HAVE
BERTIE GIRDING
Bertelsmann's Net Earnings Rise, But Music, Weakened Advertising Drag It Down
No one's drinking any Lowenbraus over at Bertelsmann headquarters, despite a reported rise in net earnings.

Taking away gains from stock sales (of AOL Europe) and other one-time effects, though, the German media giant giant's 2000 earnings fell 3.3% to $1.11 billion from last year's $1.5 billion in the company's seven business divisions, which range from book publishing to music.

Overall, the company earned $2.91 billion on revenues of $18.47 billion in the fiscal year ending June 30, which was up 79% from 1999's total of $1.63 in earnings on revenues of $15.22 billion. The earnings rise was basically driven, though, by the $3.22 billion the company reaped from selling its stake in AOL Europe and network operator Mediaways.

Bertelsmann boss Thomas Middlehoff tried to put a positive spin on the results, because that's his job: "In a difficult economic environment, Bertelsmann has mastered a year of forward-looking strategic and operational initiatives. Our future vision is of an integrated media company that generates appealing content and fosters talent on one hand, and sustains in-depth, trusting relationships with its customers, club members and subscribers on the other. And, no, I don't have change for a deutsche mark."

The company's music sector proved a particular drain, with its N.Y.-based BMG division posting a $4.5 million EBITDA loss and a one-time write off of $250 million for restructuring, which will total 600 jobs worldwide. They've also spent up to $100 million trying to develop online file sharer Napster into a viable business. Bertelsmann vowed to stick with its music interests and promised improved margins of 6-8% over the next two or three years. The company's newspaper and magazine arm Gruner & Jahr has also been hurt by the decline in advertising, though its TV arm, RTL Group, seems to have avoided the trend, despite recent profit warnings.

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