Bertelsmann to Buy Columbia House

Bertelsmann, Germany’s largest media company, said Tuesday that it had agreed to buy Columbia House Co., a membership-based seller of DVDs and music, from buyout company Blackstone Group to expand its business in North America.

Guetersloh-based Bertelsmann will combine Columbia House with its U.S. music club BMG Direct to create broader offerings for the clubs’ members, the company said. Bertelsmann will pay about $400 million, according to a Wall Street Journal Europe report, citing people familiar with the deal.

Bertelsmann spokesman Jens Herrmann declined to confirm that figure, though he said it “points in the right direction.”

“The move gives us strategic access to the growing business with DVDs, as well as broadening our customer base in the U.S. market,” said Ewald Walgenbach, chief executive of DirectGroup Bertelsmann, the company’s direct-to-consumer unit.

Bertelsmann, owner of U.S. publisher Random House Inc., has been trying to lower costs and spur growth through smaller acquisitions.

Clubs that market books, music and DVDs to subscribers face competition from Amazon.com Inc. and other Internet retailers. But the models are different: Clubs typically offer deep discounts on initial purchases and charge higher prices thereafter.

Such clubs remain viable businesses, though the situation for CDs and DVDs may be different from that for books, said Theresa Wise, a media analyst with Accenture in London.

“Bertelsmann is the leader in the book-club business and has done exceedingly well on that basis, and just because there’s Amazon I don’t think book clubs are going to go away,” she said. “Subscription can be very powerful, especially in some markets such as Germany.”

Columbia House has more than 8 million regular customers in the U.S., offering DVDs of movies from most major Hollywood studios, according to Bertelsmann. BMG Direct offers customers more than 14,000 music titles.