Bertelsmann—the German Giant

▪ 1999

      The announcement on March 23, 1998, that German media giant Bertelsmann AG would acquire venerable American publisher Random House sent shock waves—and several important messages—throughout the industry. The news astonished industry observers, especially because in recent years other large media companies had been trying to divest their trade-book operations. For the first time, more than half of the new U.S. trade books (general adult fiction and nonfiction) would be published by foreign-owned companies. In addition, Bertelsmann announced that it would merge Random House with Bantam Doubleday Dell, which it already owned, and thereby create a colossus with projected revenues two to three times those of its leading competitors.

      The firm began in Germany in 1835, when Carl Bertelsmann founded a religious print shop and publishing establishment in the Westphalian town of Gütersloh. The house remained family-owned and grew steadily for the next century, gradually adding literature, popular fiction, and theology to its title list. Bertelsmann was shut down by the Nazis in 1943, and its physical plant was virtually destroyed by Allied bombing in 1945. The quick growth of the Bertelsmann empire after World War II was fueled by the establishment of global networks of book clubs (from 1950) and music circles (1958). By 1998 Bertelsmann AG comprised more than 300 companies concentrated on various aspects of media.

      Led by Mark Wössner and, after November 2 by Thomas Middlehoff, Bertelsmann was also aggressively adding to its publishing interests. The Random House deal was quickly followed by an agreement in May to purchase Portuguese publisher and retailer Bertrand. Bertelsmann cemented its position as the world's largest book-club operator with the purchase in June of the outstanding 50% stake of Book Club Associates, Great Britain's largest book club. In July Bertelsmann successfully bid for Falken Verlag, an independent literary publisher, and later it obtained 50% of Doyma, the biggest medical publisher in Spain, adding it to its Argentine publisher Sudamericana. In Canada it was revealed in September that the German juggernaut had been quietly moving to take over Doubleday Canada Ltd. Bertelsmann also moved to become a major player in the on-line bookselling business internationally.

      Worldwide, Bertelsmann ranked third among media companies, lagging behind only the Walt Disney Co. and Time Warner Inc. It employed 58,000 people, of whom 24,000 worked in Germany. During fiscal year 1997-98, Bertelsmann earned more than $15 billion in revenue, with roughly 25% being generated by its music, book publishing/book-club divisions and another 17.5% from magazines and newspapers.

PETER J. CURWEN

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