Bertelsmann Profit Drops on Napster Costs, Writedowns
March 18, 2008 at 6:31 AM (PT)
BERTELSMANN AG said 2007 profit fell on writedowns at its book and CD club and lawsuit costs from the NAPSTER download service, reports BLOOMBERG NEWS. Net income dropped to 216 million euros ($341 million) from 2.14 billion euros a year earlier. Earnings last year were boosted by the sale of the music publishing unit to VIVENDI SA for $1.63 billion euros. Sales dropped 2.6 percent to 18.8 billion euros. BERTELSMANN predicted net income will at least double this year.
"In 2007, we made extensive value corrections and removed risks such as the NAPSTER legal dispute with the relevant expenses," CEO HARTMUT OSTROWSKI said.
OSTROWSKI, who became CEO at the start of the year, has said he may cut some of BERTELSMANN's underperforming businesses as he seeks to bolster the ARVATO services unit as well as RTL television, and expand in countries including CHINA and INDIA. ARVATO runs call centers and printing presses, and offers administration services to cities.
For NAPSTER, payments to settle copyright-infringement claims filed by WARNER MUSIC, EMI GROUP and other record companies will probably total 393 million euros for 2006 and 2007 combined. The payments helped to avert a $17 billion class-action lawsuit. WMG, EMI and other music companies accused BERTELSMANN of contributing to copyright infringement by investing in NAPSTER. The music industry has fought for years to combat illegal downloading of songs over the Internet. NAPSTER started as a free music-swapping service in 1999 and is now a paid download service. BERTELSMANN has denied any wrongdoing.