A company so big it takes up space on the bookshelf, the magazine stand, and on television, Bertelsmann is one of the world's leading media conglomerates. It owns RTL Group, Europe's #1 TV broadcaster with more than 40 channels operating in a dozen countries, and Penguin Random House, the world's top trade book publisher. In addition to these two heavyweights, it owns magazine publisher Gruner Jahr, services unit Arvato, BMG, the music business, as well as Bertelsmann Printing Group, Education Group and Investments. Carl Bertelsmann founded the company in 1835.
One unique quality of Bertelsmann is that its divisions operate more like stand-alone businesses rather than being integrated with one another in a fashion similar to Time Warner or News Corporation. Within its home market of Germany, Bertelsmann competes most directly with publisher Axel Springer and broadcaster ProSiebenSat.
While Bertelsmann is certainly one of the largest European media conglomerates, it is also one of very few: while its TV and publishing businesses range across dozens of countries, most of the company's nearest competitors restrict their activities to just one or two.
RTL brings in over a third of revenue, Arvato around 30%, and Penguin Random House 20%. A restructure took effect on 1 January 2016 that re-formed the struggling Be Printers (alongside other interests) as Bertelsmann Printing Group, and split out Corporate Investments as independently functioning Bertelsmann Education Group, Bertelsmann Investments, and BMG, the music business. The four units together account for around 10% of revenue.
Bertelsmann operates in more than 50 countries worldwide, and the core markets are Germany, France and the UK, as well as the US. Germany is the biggest market at over a third of revenue, while the strongly-growing US makes some 22%. The company is looking to increase its presence in emerging markets, notable India, China and Brazil.
Note: Growth rates may differ after conversion to US Dollars.
In 2015, revenue for the year grew 2% to €17.1 billion. Part of this growth was down to positive exchange rate effects, but earnings also grew in Penguin Random House (by 12%) on the back of strength in the US, and in television in Germany, BMG, and Relias Learning, an online education resource.
The latter helped the group record a huge leap in sales from digital platforms: for RTL in particular, digital revenue increased 72% to upwards of €500 million, doubling its contribution to total revenue.
Be Printer, the struggling print business reporting under the Bertelsmann Printing Group umbrella as of January 2016, continued on its downward trajectory in 2015. It shrank 25.5% on prior year as digital printing and shorter print runs for magazines eat into revenue.
Net income rose 27% on prior year to €538 million, due largely to a lower charge from special items. In 2015 special items, which included sales of various businesses including Be Printers Spain, amounted to €-190 million, up on €-620 million.
Cash flow from operating activities nudged up 7% to €1.6 billion on the back of higher overall net working capital.
Bertelsmann’s strategy rests on two key tenets of embracing the digital transformation and expanding into regions with the biggest growth opportunities. The company also divides its businesses into growth and declining businesses, and allocates investment as appropriate. For instance, the company recognizes that the printing industry is undergoing a structural downsizing and has thus sold Barcelona-based Rotocobrhi and Eurohueco to British firm Walstead Capital in 2015. Gruner + Jahr departed the Italian market amid poor prospects, selling its 50% stake in its joint venture with Mondadori.
Bertelsmann Education Group was created as part of the restructuring that took place on 1 January 2016, and has been supported by the expansion and acquisition of a variety of online education platforms. These include the expanded Relias Learning business, and the acquired Affero Lab, Udacity, HotChalk and Alliant International University.
A fragmentation of RTL’s audience as digital drives a wider variety of choice risks eating into the company’s advertising revenue. The company has responded by investing in online video advertising, for instance in the purchase of student marketing startup Employour, and by developing non-advertising revenue such as distribution revenue. RTL found success in the US and Europe with ‘Deutschland 83’.
China, India and Brazil are Bertelsmann’s biggest targets for revenue growth. In China, the company invested in a large number of startups, in Brazil it bought aforementioned internet learning platform Affero Lab, and in India the company invested in Saavn, the country’s biggest music streaming service.
Random House merged with Penguin Group in 2013 to create the world’s biggest book publisher. The merger came about amid an intensification of competition from online retailers ( Amazon in particular) and supermarkets, and this disruption to the market brought by the adoption of e-books.
Mergers & Acquisitions
Bertelsmann makes a large number of acquisitions each year to adapt to shifting media currents, but also has to be aware of antitrust laws given its leading market position in many lines of business. The company made a series of acquisitions in the online learning space, including Relias Learning, Udacity, HotChalk and Alliant International University, as well as Saavn.
At year-end, G+J acquired the student marketing specialist Employour.