FRANKFURT (AFP) — Bertelsmann, the fifth largest media group in the world and owner of broadcaster RTL, said Tuesday its profit fell sharply last year due to charges for problems with its book and DVD unit Direct Group.
Net profit at Bertelsmann, which is active in radio and television, publishing and music, fell to 405 million euros (640 million dollars) from 2.46 billion dollars, a statement said.
The results were hit by a write-down of 414 million euros on Direct Group, which is having problems with book, record and DVD clubs in the United States.
Bertelsmann finance director Thomas Rabe said the unit's future was under consideration. CD sales would be terminated and the rest of Direct Group North America would be sold, a process due to begin "in the coming weeks."
No decision had been taken yet regarding other Direct Group divisions, he said.
Elsewhere, with the exception of the profitable RTL broadcaster, Bertelsmann units mostly faced serious challenges, it acknowledged.
The music division Sony BMG was dealing with falling CD sales as people downloaded songs from the Internet and publisher Gruner + Jahr was hit by the launch costs of Jasmin, a French woman's magazine that folded after just a few months on newstands.
US publisher Random House suffered meanwhile from an unfavourable comparison with previous years' results that were boosted by sales of US author Dan Brown.
In all, Bertelsmann sales slipped 2.8 percent to 18.8 billion euros and it was hit by a total of 854 million euros in one-off charges, which included a fine by the German anti-cartel authority for collusion in the television advertising market.
Its printing unit Prinovis was the object of a writedown as well and Bertelsmann also took a charge related to payments in a conflict that pitted it against EMI and Universal over music downloads from the website Napster.
For 2008, Bertelsmann, a private company held by the family of its founder, forecast net profit of at least double the 2007 level and sales growth of between one and two percent, Rabe said.
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