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Bertelsmann Net Profit Tumbles 25% in ’02

Times Staff Writer

German media conglomerate Bertelsmann said net profit plummeted 25% last year after a charge arising from its purchase of the independent Zomba record label.

But earnings, excluding such one-time expenses, rose to $997 million at current exchange rates, up about 63%, as the company’s Random House book division and BMG music unit saw improved results.

For the record:

12:00 AM, Mar. 27, 2003 For The Record
Los Angeles Times Thursday March 27, 2003 Home Edition Main News Part A Page 2 National Desk 1 inches; 51 words Type of Material: Correction
Bertelsmann -- An article in Wednesday’s Business section on the earnings of Bertelsmann misstated the date of an agreement that allowed the head of independent record label Zomba to exercise an option to sell his company to the German media giant. Zomba had had the contract option since 1996, not 2001.

Privately held Bertelsmann said net income slid to about $1.03 billion. Gains from the sale of its stake in AOL Europe were offset by a $1.4-billion drop in the value of Zomba, which had seen sales slow after scoring breakthroughs with such acts as Britney Spears and ‘N Sync.

Bertelsmann’s total revenue declined to $19.4 billion, down 3.5% from a year earlier. The company blamed the drop-off on a weaker U.S. dollar, flagging music club sales and a decline in its distribution of independent labels’ recordings.

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Bertelsmann was forced to pay about $2.7 billion for Zomba last year after the label’s owner, Clive Calder, exercised a contract option that BMG had agreed to a year earlier. The purchase is by far the most expensive label acquisition in music history.

Excluding Zomba’s net income, BMG earnings of $133 million contrasted with an $84.2-million loss in 2001, owing to a dramatic cost-cutting effort and a series of blockbusters from such acts as Avril Lavigne, Pink and the late Elvis Presley.

Bertelsmann has been retreating from investments in Internet-based businesses launched under former Chief Executive Thomas Middelhoff, who was ousted last year after a showdown with the company’s supervisory board. Middelhoff had clashed with Germany’s Mohn family, which controls 75% of the conglomerate’s shares, over taking the company public.


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