Bertelsmann moves away from Internet

Bertelsmann AG is reassessing its e-commerce businesses across Europe. The company will withdraw from stand-alone e-commerce sites and concentrate on its offline book and music club businesses, and Web-based book and music clubs such as it runs in the U.K., it announced Tuesday.

DirectGroup Bertelsmann is the division responsible for Bertelsmann's global direct-to-customer businesses. It will now look at withdrawing from online book sales in Germany, Switzerland and the Netherlands, where it uses the brand, and in Sweden, where it trades as Bokus, Bertelsmann said in a statement.

These businesses may, however, be adapted to follow the business model of in the U.K., which runs as an online book club and is very successful, Gerd Koslowski, vice president of corporate communications for DirectGroup, said Wednesday.

Book clubs send regular magazines to their members, offering a range of books at a reduced price. Members commit to buy a certain number of books per year. The e-commerce Web sites outside the U.K. impose no membership or minimum purchase requirements.

The BOL ventures in Italy and China will be retained, because these businesses are already fully integrated into local book and music clubs, Koslowski said.

"The Italian BOL is part of a joint venture and our partner wanted us to keep BOL going. It is totally folded into the club, with functions and back-end services tied together. The same is true in China," Koslowski said.

DirectGroup is currently in deficit and so has decided to focus on the business models that work, Koslowski said.

"If you look at the revenue streams, BOL only accounts for 3.5 percent (of DirectGroup revenue) and it's not profitable," he said. Only in the U.K., with a different model, does BOL make money, he said.

"So that's one of our strategic options -- to change all the businesses to the U.K. model, to sell them, or to do a management buyout. We announced the basic decision (to pull out of e-commerce) in response to rumors, but now we need to look at the options, talk to partners and figure out what we can do."

Bertelsmann's U.S. online music-sales Web site BeMusic is integrated with the BMG Music Service music club and will not be affected, while Bertelsmann's 36.2 percent share in the online bookstore will also be retained, the company said.

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