Bertelsmann eyes sale/close of Web units-sources

Sep 10, 2002 12:00 PM

By Merissa Marr, European media correspondent

LONDON, Sept 1 (Reuters) - German media group Bertelsmann is looking to sell or shut its book business Bol.com and pull the plug on music service Napster in a clamp-down on loss-making ventures, sources close to the company said on Sunday.

Bertelsmann [BERT.UL] has held talks with online companies including U.S. retailer Amazon about Bol.com as it looks to scale back online operations including Napster after the ouster of high-flying CEO Thomas Middelhoff, the sources said.

Privately owned Bertelsmann's new chief executive Gunter Thielen has been reviewing the group's sprawling online businesses that were so heavily championed by Middelhoff, in a bid to concentrate on profitable operations.

Bertelsmann's owners installed Thielen last month as they sought to steer the group on a more conservative path after Middelhoff's aggressive expansion aimed at propelling the group into the ranks of global giants such as AOL Time Warner .

Sources familiar with the situation told Reuters in July that Napster could be among the first casualties and Bol.com's future was also hanging in the balance. Sources said on Sunday Bertelsmann was now closing in on a decision on their future.

"Bertelsmann is not happy with Bol.com and I would expect some kind of decision on its future soon," said one source. "Napster's future is still also extremely uncertain."

Bertelsmann's DirectGroup division, which houses the e-commerce businesses, confirmed it was considering strategic options of non-core operations but declined to comment specifically on Bol.com or Napster.

DirectGroup stomached some $125 million in Internet start-up losses in the second half of last year. As losses continued, Thielen replaced the head of the division Klaus Eierhoff with Bertelsmann's former chief operating officer Ewald Walgenbach.

Other operations under Walgenbach's spotlight include online bookseller Barnes & Noble.com. The future of Bertelsmann's music operation BeMusic has also come into question.

It is not the first time Bol.com has come under review. Last year, Bertelsmann closed a number of its loss-making operations but the online book retailer has still struggled to make a mark.

The writing has also been on the wall for Napster since Middelhoff's sudden departure, sources say. The former chief executive had been one of the few supporters within the group of the U.S. Web service that once had 60 million followers.

Middelhoff had wanted to relaunch Napster as a legitimate online music subscription service and agreed to buy its assets out of bankruptcy. However, the service has been embroiled in a legal battle with the major music groups.

Sources close to the company say the timing of any shutoff of funding to Napster would depend in part on U.S. judicial developments.

Elsehwere in the Bertelsmann empire, the group is also looking to sell its publishing arm BertelsmannSpringer and is currently in talks with potential buyers, sources familiar with the situation say.

Bertelsmann is expected to focus instead on core assets including television, book publishing and music. The group owns pan-European broadcaster RTL Group and the world's leading book publisher Random House.