March 29 – April 5, 2007 Edition

Bertelsmann’s Record
Revenues Fuel RH’s
Virtual Expansion

BERLIN/3/28/07—The German-based international media company, Bertelsmann AG, last week announced its most successful year in history with a 7.9% growth in revenues from €17.9 billion to €19.3 billion, n, reaching an historic high. The company’s world-leading trade book publisher, Random House, also posted improved its revenues and profit despite a slow-growth global book marketplace. RH’s return on sales amounted to 9.3 percent (2005: 9.1 percent). Revenues were up by 6.5 percent to €1.9 billion (2005: €1.8 billion) thanks to a huge number of bestsellers and several corporate acquisitions.

Bertelsmann is not only the company that has it; they’re flaunting it in ways that might prove helpful to the book publishing world in general.

Bertelsmann AG’s Chairman & CEO Gunter Thielen declared: “The figures for 2006 clearly show that we are heading in the right direction. Bertelsmann has never been more profitable. Our 9.7 percent return on sales puts us very close to our ambitious target ROS of ten percent. At this level of profitability, we can generate the cash flow necessary to continue growing without additional debt. 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.”

The story behind the numbers is that Random House, along with other Bertelsmann divisions, truly is moving aggressively into the digital world. Following its launch of the innovative “widget” search and browse experience on its own site in early March, RH’s Bantam Dell Publishing Group this same month became the first North American book publisher to establish a presence in Second Life­the groundbreaking social networking 3D virtual world. It is there that RH opened its virtual Bantam Dell Book Shop and Cafe©. The Bantam Dell Book Shop, located in Second Life on Sheep Island, allows virtual residents to shop for and buy actual books published by Bantam Dell. The new virtual book shop was kicked off March 15 with an online Grand Opening event that featured New York Times bestselling author Dean Koontz, who read an excerpt form his forthcoming novel The Good Guy, to be released May 29. Koontz also fielded questions from “residents” in attendance. Second Life is a 3-D virtual world entirely built and owned by its residents. Since opening to the public in 2003, it has grown explosively and today is inhabited by a total of 5,001,308 people from around the globe. Second Life is a teeming imaginary world where “residents” live, work, play, buy, sell and trade land, businesses and other commodities. The virtual worlds are created by fellow residents. The profit increase in the Random House group reflects an improved performance in North America and Germany, along with Random House UK’s continued high profitability. The 2006 fiscal year saw numerous Random House literary and publishing successes worldwide. In the U.S. the company had an industry-leading 201 New York Times national bestsellers, 37 of them #1 titles—the highest total in the company’s history. In the U.K., the Random House Group commanded more than one-quarter of all positions on the Sunday Times of London national bestseller lists in 2006, including 56 #1 bestsellers. Dan Brown’s “The Da Vinci Code” paperback movie tie-in editions had more than seven million copies in print in North America, the U.K., and Australia, continuing the novel’s spectacular success. Verlagsgruppe Random House successfully launched “Pantheon” as Germany’s first-ever trade-paperback-only imprint, and became one of the top three children’s publishers for the first time. Major portfolio changes during the period under review included the acquisition of the majority share of the prominent nonfiction publisher BBC Books, which became an imprint of the Random House Group U.K. In South Korea Random House bought back all outside ownership shares of its Korean book publishing company, which was subsequently renamed Random House Korea.

Bantam Dell’s entry into the virtual world provides more clear evidence of just how aggressively Bertelsmann and Random House plan to actively shape the digital future.