Bertelsmann AG - Assignment Example

Canadian Media Theorist Marshall McLuhan prophesied more than forty years ago that media would turn the world into a ‘global village’. He coined the term ‘global village’ and predicted the cultural effect of the internet. The advance media technologies act as extension of human sense. Technology makes it possible to communicate globally and transcend beyond time and space. Today a handful of media owners dominate the world’s mass media. Amongst these media moguls – the lords of the global village – stands out Bertelsmann/BMG, that ranked 271st in the 2005 Fortune Global 500. while it is based in Germany, it has interests and companies worldwide. It has its presence in nearly sixty countries. Bertelsmann AG was founded in Germany in 1835 by Carl Bertelsmann. His great-great-grandson, Reinhard Mohn, built this into a global company after the Second World War. Currently Liz Mohn, wife of Reinhard, is the CEO of Bertelsmann AG. Bertelsmann AG is one of the worlds biggest media companies with six subsidiaries. Bertelsmann is an ‘enterprise for entrepreneurs’ with interests in music (Sony BMG), entertainment (RTL Group), publishing (Random House), media and communication service (Arvato), journals and periodicals (Gruner + Jahr), and media and entertainment products (DirectGroup). It has 100 percent shareholding in Random House, Arvato, and DirectGroup, while in Sony BMG, 50 percent shareholding is with Sony Corporation of America. In the RTL group, 10.2% shares have been traded to the public while 25.1% shareholding is with the Jahr family in Gruner+Jahr. Random House is the world’s largest publisher and it alone ships over one million books a day (Mediachannel). Its online store for books, music and DVDs are at Barnes&Noble.com This group has 22 television stations and 18 radio stations in ten countries. Gruner Jahr is Bertelsmanns magazine division, publishing 80 magazines worldwide. This group publishes nine dailies in Germany and Eastern Europe, including the Berliner Zeitung. The Bertelsmann Music Group or BMG operates in 54 countries. The other ventures include BMG music service and BMG music publishing. Everything that is produced in the world impacts the environment, the people involved in the production, the buyers, the shareholders, the partners, the society in general. The employees need to be motivated to participate in the success; they need to be given the right training and development too. Health, security of its people, proper handling of the waste thereby taking care of the environment, and having ethical business dealings are essential to the success. Bertelsmann believes that entrepreneurial spirit, good business and good citizenship are two sides of the same coin. Characteristics like independence and self-responsibility have steered the company to such great heights. Bertelsmann group has demonstrated its responsibilities towards its employees but also special responsibility to the society. To make a valuable contribution to the society is one of the core values of the company and features high in its goals. It maintains a decentralized corporate structure. With its six corporate divisions and 1380 companies worldwide, the group is involved a variety of projects. While Bertelsmann has been conducting employee surveys in Germany since 1977, at the international level it was first started in 2002. This was done with a view to foster corporate culture of partnership. More than 84,000 employees were invited to give a personal assessment of their immediate work environment. The reports are then summed up and without names mentioned, they are handed over to the immediate supervisor who has to take clues and make changes wherever necessary. This is an excellent way to foster growth. The survey revealed that financial success of the company is directly linked to the corporate culture of partnership. Local work conditions were improved on the basis of the findings of this survey. People in any organization are the assets and they are the ones who make a company successful. Gunter Thielin, the chairman and chief executive of Fives parent company Bertelsmann, joined Bertelsmann more than 25 years ago (Banham, 2006). He has proved how business excellence can go hand in hand with social responsibility. He has also been successful in reviving the media companys decentralized corporate culture of partnership. In recognition of his leadership of international media corporation, Thielin will be awarded with the Media Person of the Year award at this years Cannes Lions International Advertising Festival. Under his leadership, the company has significantly increased profits but Thielin express appreciation for the people who are responsible for it. Thielin has also overseen the merger of BMG and Sony Music Entertainments into Sony BMG. Bertelsmann AG plans to buyout of Belgian billionaire Albert Freres 25.1 percent stake. To this effect, the group has selected four banks namely Barclays Capital, BNP Paribas, Deutsche Bank AG and Royal Bank of Scotland Group Plc to manage a loan (Bloomberg, 2006). The loan will be paid in two tranches. Part of it will be syndicated to a group of core banks in the near future, and a significant portion will be paid by retained cash flow from operations. In the meantime, Bertelsmann BMG has begun the sale process for its BMG Music Publishing business (AFX, 2006). The Mohn family is the majority shareholders in the firm and they have agreed to buy back all the shares to avoid a flotation of the group. With the 1 billion Euros that Bertelsmann expects to receive from the sales, they would be able to part-finance 4.5 billion Euros buyback of 25.1 percent of its own shares from the Belgian investor Albert Frere. Earlier, in order to raise funds to buy out Frere, in February 2006, Bertelsmann Ag had also explored the possibility of Sony buying part or all of Bertelsmanns 50 pct stake in Sony BMG (AFX, 2006). This stake could be valued at USD 2.5 billion. Even restructuring the partnership with Sony could generate quick cash and hence they are exploring all possibilities. The Mohn family has direct control over Bertelsmann AG and is not interested in putting the shares in the stock market. They have posted a net profit of about 55% in the first quarter in 2006, and they want to maintain freedom for the executive board to manage the business (Moulson, 2006). Napster Inc., an online music downloads website had some 38 million users back in 2000. At that time, Napster had decided to go in for partnership with Bertelsmann AG, owner of one of the worlds largest record labels. Napster until then helped its members to find music files on other people’s computers and make copies for themselves. The software was free and people could build a music store without ever visiting any store. This naturally made the record labels sit up but Bertelsmann’s proposal became a lifesaver for Napster. Bertelsmann agreed to extend a huge loan to Napster in exchange for equity. It also agreed to develop a service that would generate revenue for artists and publishers (Joe, 2000). Bertelsmann expected other record labels to sign up with the scheme to share their vision of a secure file-sharing community (Morse, 2000). The tall plans and vision of both the companies were set aside when the US Bankruptcy court blocked Napsters sale for $8 million to Bertelsmann (Vance, 2002). Napster had filed for bankruptcy protection despite Bertelsmanns providing close to $100 million in loans and other financial support. Officials of Bertelsmann did not seem perturbed with the judge’s decision, though. Bertelsmann is not only a major player in the German or the European media landscape but a major player in the US media too because of its ownership of Random House, which is America’s largest book publisher. They had signed a $1 billion contract with web portal Terra Lycos in 2002 (AllBusiness). Bertelsmann agreed to spend an initial $325m within six months but were having second thoughts about spending the rest of the amount committed. The CEO Thielen also took the bold initiative to sell off its online assets like BOL.com and tying up with amazon.com to operate its site for a share of profits (Wetfeet). These facts and figures are a clear indication that Bertelsmann AG, the fifth largest media company in the world, and Europe’s biggest media company, means business. It has clearly defined goals, objectives, takes care of its people and the society in general, and is a conscious business organization that is concerned with what it gives back to the society. Bertelsmann is truly one of the lord’s of the ‘global village’. McLuhan stressed that that electronic technology "fosters and encourages unification" but the power of media to construct and represent the world rests in the hands of a few. This fact itself is unknown to most people and they seem to be contented with the local media, which is vital to the minority groups and to the third world countries. The power of representation of the local media rests with the local community, which provide a means for the community to be linked to the world. When the giant business houses like Bertelsmann Ag have the steering under their control, people see the world through their eyes. References: AFX News Limited (2006), Sony mulls buying out Bertelsmanns stake in Sony BMG - report, 28 June 2006 AFX News Limited (2006), Bertelsmann says has begun sale process for BMG Music Publishing, 28 June 2006 AllBusiness (2002), Bertelsmann to scale back E1bn Terra Lycos ad deal., 28 June 2006 Banham M (2006), Bertelsmann chief Thielen takes top Cannes media prize, 28 June 2006 Bloomberg (2006), Bertelsmann Mandated Four Banks for Loan to Buy Freres Stake, 28 June 2006 Joe S (2000), Music Fans Are Likely to Be Turned Off by Napster Fees, 28 June 2006 MediaOwners, Bertelsmann AG, 26 June 2006 MediaChannel, Global Media Giants, 28 June 2006 Morse A (2000), Napster, Bertelsmann scout out more players, 28 June 2006 Moulson G (2006), Update 2: Bertelsmann to Buy GBL Stake for $5.8B, 28 June 2006 Vance A (2002), Judge Blocks Sale of Napster to Bertelsmann AG, 28 June 2006 Wetfeet (n.d.), Bertelsmann AG, 28 June 2006 Read More