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"I am in a good mood because I know there are enough possibilities around to reach my objectives."
——Thomas Middelhoff
BERTLESMANN’S AGGRESSIVE NEW COURSE
Middelhoff Says Profits Are Soaring And BMG Not For Sale
History teaches us that when the Germans go on the offensive it’s best to pay attention.

Reeling from the failure of the proposed merger with EMI, Bertelsmann chief Thomas Middelhoff has gone on the attack.

Middelhoff said in an interview with German daily Sueddeutsche Zeitung published Saturday that just because the EMI merger failed to go through, BMG would not be put up for sale, and the future of the company remains bright.

The talkative Middelhoff’s most recent comments contradict statements made in July, when he said the sale of BMG could be possible under certain conditions.

“At [that] time, I was worried that we could be sandwiched between unrestricted online distribution and the stagnation in the CD business,” he said. “We are already market leaders in digital music distribution.”

Referring to the company’s year-end results, Middelhoff said he looks to a rise in net profit above the previous year's 1.3 billion marks ($592.8 million), and expects sales to soar by around 8 billion marks to more than 40 billion marks.

In his attempt to conquer the music world, Middelhoff once assured the industry that BMG would become the world’s top music major. But, with the failed merger attempt and his questionable investment in Napster, the executive may have spoken too soon, as his music group currently ranks fifth among the five majors, trailing Universal, Sony, EMI and Warner.

Putting a positive spin on recent events while looking to a post non-merged world, BMG CEO Rolf Schmidt-Holtz, said last week that the company was looking to make cooperation deals or small acquisitions of independent labels following the collapse the EMI deal (hitsdailydouble.com 5/3). “We can easily cooperate with anybody,” Schmidt-Holtz told Reuters. “I may also think about some acquisitions...but not comparable with EMI... they would be acquisitions in order to broaden our trading basis.”

Middelhoff declined to comment on speculation about a possible purchase or investment in Edel Music, or an attempt to increase its 20% stake in Zomba/Jive, the Clive Calder-owned jewel in BMG’s crown.

Meanwhile, word from this week’s German weekly Der Spiegel is that BMG missed earning targets and could report a full-year loss of around 180 million marks ($82 million), which will surely add pressure on BMG to build marketshare.

Citing knowledge of an internal document, today’s Der Spiegel said that earnings before interest and taxes in the first half year to Dec. 31 were hit hard by “write-offs of unsuccessful music labels and shareholdings.” Earnings were also affected by more than 15 million marks in severance payments to former BMG managers, the magazine said.

A spokesman for the company contradicted the report, saying, “We do not report our division's results before the end of the business year. “But we expect [BMG's] results [to be on par with] the previous year's level.” The spokesman, however, added that the current 2000/2001 business year was hit by one-off charges on the back of structural changes and the introduction of a new management team at the end of 2000.

In regards to the ill-fated EMI merger, London’s Financial Times on Sunday said that when Middelhoff left Brussels last week, he was surprisingly upbeat—considering his plans for world music domination had been squashed by European regulators. His meeting with EU Competition Commissioner Mario Monti reportedly resulted in Monti telling him that a merger with EMI would not escape a lengthy anti-trust investigation, and a full-body cavity search.

“I have lost my bet, but I am in a good mood because I know there are enough possibilities around to reach my objectives,” Middelhoff told the Financial Times from St. Tropez. “I think there is a case for continuing to provide the Commission with information about the music market, and perhaps what could not happen today will happen in a year.”

Through the intense partnership discussion, the Times reports that the two groups could capitalize on their relationship, probably through a distribution and manufacturing partnership, which EMI has said, could yield annual cost savings of $50 million and they’re passing the savings on to you through this exclusive TV offer.

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