April 12 – April 19, 2007 Edition

Bertelsmann Dominates
U.S. Book Club Market
With Bookspan Buyout

4/11/07—German media conglomerate Bertelsmann’s buyout this week of Time Inc.’s 50% share in Bookspan, leaves Bertelsmann the only major club operation for books, music and DVDs in American. The book club operation, which had been a joint venture between Time and Bertelsmann, embraces nearly 8 million members of 40 book clubs including Book-of-the-Month and Literary Guild/Doubleday Book Club. The sale was valued at $150 million, according to an article in the Wall Street Journal.

Bookspan is the leading marketer of book clubs and merchandise via direct mail and e-commerce in the U.S., with sales of about $700 million last year. The company will be merged into Bertelsmann’s BMG Columbia House operation, as part of its DirectGroup. CEO Markus Wilhelm will leave the company.

The Journal said that more than 20 million Americans, mostly females in their 40s, continue to belong to book and music clubs.

The more interesting question is what does Bertelsmann plan to do with Bookspan? The media conglomerate owns Random House, Inc., the world’s largest English-language trade book publisher, which recently introduced the popular Insight Service (Authorlink: March 15, 2007), a set of programming tools that allow Internet applications to view and search digitized book content. It would not be surprising to see Bertelsmann unveil innovative uses of the Internet for book club subscribers. The German media company in 2006 finished its most successful year in its history, announcing a 7.9 percent increase in revenues to €19.3 billion, attributed to its own accelerated organic growth and portfolio effects. Commenting on the year-end financial report in March, Bertelsmann AG’s Chairman & CEO Gunter Thielen declared: “We are already preparing for the next period of growth. We plan to actively shape the digital future, worldwide, with our innovative media content and services.”

DirectGroup CEO Ewald Walgenbach told the media that the investment demonstrates Bertelsmann’s faith in direct marketing as a viable marketing channel, while other companies have avoided the channel in the face of growing impact of the Internet for book audiences’ attention.

Time, which had been a partner with Bertelsmann in Bookspan since 2000, will now be entirely out of the book business, having sold Warner Books and Little Brown to Hachette Book Group last year.