Bertelsmann AG is the one of the largest media corporations in the world (third as of 1995). Headquartered in Gutersloh, Germany, Bertelsmann is an international media conglomerate with major investments in book and magazine publishing, records and music publishing, broadcasting, on-line services, and other allied entertainment and information products.

A privately owned corporation dating back to 1835, Bertelsmann was revived after World War II by Reinhard Mohn, a fifth generation member of the founding family. In the 1950s, Bertelsmann established itself as a major publisher through its book clubs. To this day, publishing remains the center of Bertelsmann's profitability (and accounts for 55% of total sales). That profitability was enhanced in the 1970s with the purchase of a 74.9 percent interest in Gruner + Jahr, the German newspaper and magazine publisher of such titles as Stern and Geo, and the 1986 purchase of Bantam Doubleday Dell, the second largest trade publisher in the United States. Book clubs continue to be an important growth area for Bertelsmann, as the corporation recently expanded into Eastern Europe, China, and Latin America.

Bertelsmann also has major investments in the music industry, handled by its entertainment arm based in New York, Bertelsmann Music Group (BMG) Entertainment. In 1986, Bertelsmann made a major move into the entertainment industry with its purchase of RCA records. Also owners of the Arista and Ariola labels, BMG has become the second largest record club operator in the United States. BMG has sought to use its position in the music industry to expand further into other forms of media entertainment--namely music television. Bertelsmann was recently a participant in a joint venture with Rupert Murdoch's Star TV satellite broadcast system in Asia, forming Channel [V], a music video channel that replaced Viacom's MTV on the satellite feed. And though plans were later canceled, Bertelsmann had announced that it was joining with Tele-Communications Inc. (TCI, America's largest cable television provider) in offering a hybrid music-video, home shopping cable channel to compete with MTV and VH-1 in the United States.

Ever since the German television market opened its previous public-based system to commercial competition in 1985, Bertlesmann's strong financial position in the media marketplace has allowed it to become one of the two dominant forces in the commercial television market (the other being the Kirch Group). Bertelsmann is part owner (39%) of RTL Plus, Germany's most successful and profitable commercial channel, which has recently developed several spin-off channels and has established itself as a major player in television production circles in Cologne. Bertelsmann also teamed with France's Canal Plus to launch Germany's first pay television movie channel, Premeire.

Courtesy of Bertelsmann, Inc.

Not all Bertelsmann television ventures, however, have been so successful. In 1993, the company launched an infotainment channel, Vox, which has generally been a disaster. After only 15 months of operation, the company said it would shut down operations at Vox. The channel was saved, however, by substantial investments made by Rupert Murdoch (49.9%) and Canal Plus (24.9%). Bertelsmann blames such flagging performance on German licensing and anti-trust regulations, and on the low levels of advertising allowed by law. Indeed, German law has generally slowed the pace at which large media concerns such as Bertelsmann have been able to dominate the market. As a result, Bertelsmann has sought to develop joint ventures with other German and foreign media firms.

Bertelsmann has joined with Canal Plus in a programming venture to jointly fund the purchase of program and movie rights, as well as create a Europe wide network for pay television. In addition to owning several film and television production companies, including Ufa Film und Fernsehen, Stern-TV, and GEO-film, Bertelsmann has also formed a production company with the U.S. ABC Television Network. And though Bertelsmann has also shown substantial interest in purchasing a movie studio, it has made no offers. The industry press reports that management at Bertelsmann believes the company must make the transition from print to audio-visual based media products if the company is to continue to be successful in the future.

Another area of diversification for Bertelsmann is on-line services. The company recently bought a five percent stake in America On-line (AOL), and has begun a joint venture with AOL in Europe. Finally, Bertelsmann had planned a joint venture with the Kirch Group and the state telephone monopoly to provide video on demand and other pay services for television--plans that were denied authorization by the European Commission in Brussels. In short, while Bertelsmann's current financial strength derives from its publishing and music related businesses, the company continues to advance its interest in the growing markets of television, film, and computer based technologies, and should continue to be a major force in those areas for years to come.

-Jeffrey P. Jones

FURTHER READING

Bagdikian, Ben H. "Conquering Hearts and Minds: The Lords of the Global Village," The Nation (12 June, 1989)

Burke, Justin. "Commercial TV Struggles With Tight German Laws", Christian Science Monitor (4 May, 1994).

Dempsey, Judy. "Going Online for European Expansion," Financial Times (5 May, 1995)

Kleinsteuber, Hans J. and Bettina Peters. (1991 ). "Media Moguls in Germany," in Jeremy Tunstall and Michael Palmer (eds.) Media Moguls (New York: Routledge).

Smith, Anthony. The Age of Behemoths: The Globalization of Mass Media Firms :New York: Priority Press Publishers, 1991.