Bertelsmann at a Glance
Description of the Business
Bertelsmann operates in the core business fields of media, services and education in around 50 countries worldwide. The geographic core markets are Western Europe – in particular, Germany, France and the United Kingdom – and the United States. In addition, Bertelsmann is strengthening its involvement in growth markets such as Brazil, India and China. The Bertelsmann divisions are RTL Group (television), Penguin Random House (books), Gruner + Jahr (magazines), BMG (music), Arvato (services), Bertelsmann Printing Group (printing), Bertelsmann Education Group (education) and Bertelsmann Investments (funds).
Bertelsmann SE & Co. KGaA is a capital market-oriented but unlisted partnership limited by shares. As a Group holding company, it exercises central corporate functions. Its internal corporate management and reporting follow the Group’s organizational structure, which consists of the operating divisions plus Corporate Investments and the Corporate Center.
Bertelsmann aims to achieve a faster-growing, more digital, more international and more diversified Group portfolio. Businesses in which Bertelsmann invests should have longterm stable growth, global reach, sustainable business models, high market-entry barriers and scalability. The rapidly expanding education business is being developed into the third earnings pillar alongside the media and service businesses. The Group strategy comprises four strategic priorities: strengthening the core businesses, driving the digital transformation forward, developing growth platforms and expanding into growth regions. In the financial year 2018, steady efforts continued to focus on implementing the strategy in line with these priorities.
As part of strengthening core businesses, RTL Group invested in local and exclusive content that enhances both linear and non-linear services, and intensified its focus on own productions. “Becoming” by Michelle Obama was the most important publication of the year for Penguin Random House, published simultaneously in all of its markets. With new magazines such as “Guido,” “JWD” and “Dr. v. Hirschhausen’s Stern Gesund Leben,” Gruner + Jahr continued to build media products around famous personalities. In the reporting period, Gruner + Jahr completed its focus on the core markets of Germany and France. The successful merging as of 2019 of CRM activities at Bertelsmann and the Saham Group continues the strategic development of Arvato’s CRM businesses. The new Group Majorel will push the continued expansion of the global presence and digital transformation of the service portfolio in coming years.
As part of the digital transformation, RTL Group expanded its video-on-demand offerings, for example with the relaunch of TV Now in Germany, and merged the online advertising marketers SpotX and SmartClip. In France, Groupe M6, together with partners, plans to create a joint online video platform, which aims to provide French television programming of all formats and all genres, live or on demand. Germany’s Verlagsgruppe Random House acquired the audiobook publisher DAV, thereby strengthening its offerings in the growing audiobook market. Gruner + Jahr continued to expand the app discovery platform AppLike, and Arvato grew its service business with customers from the IT and tech industries.
In the area of growth platforms, the RTL Group production unit Fremantle profited from the return of “American Idol,” and produced new series such as “My Brilliant Friend” and “Deutschland 86.” BMG’s acquisitions included the world music label World Circuit Records, and BMG signed a global publishing agreement with former Beatles drummer Ringo Starr. Arvato continued to organically expand its logistics and financial services activities. In addition, Arvato invested in the Israeli fintech start-up Secured Touch. The education business bundled in the Bertelsmann Education Group was further strengthened by the acquisition of the US online education provider OnCourse Learning. The company provides digital corporate and advanced training courses, particularly to clients in the healthcare sector. The Bertelsmann Education Group also acquired a majority stake in the US university services provider HotChalk.
In the growth regions, Bertelsmann further expanded its global network of investments in digital companies, making multiple new and follow-on investments worldwide through the funds grouped under Bertelsmann Investments. For example, Bertelsmann Asia Investments (BAI) invested in the Chinese music streaming platform NetEase Cloud Music and increased its investments in the financial service provider Linklogis and the e-commerce platform Club Factory. At the same time, BAI successfully divested a number of stakes, including shares in the dating app Tantan. Bertelsmann Brazil Investments (BBI) successfully acquired a majority stake in Afferolab, a corporate training service provider in Brazil. In addition, Penguin Random House announced the increase of its stake in the Brazilian publisher Companhia das Letras. In India, Bertelsmann India Investments (BII) invested in the direct-to-consumer food platform Licious and increased its investment in the social media portal Roposo. Furthermore, Penguin Random House expanded its local offerings in India by acquiring the publisher Hind Pocket Books.
Bertelsmann will continue to push ahead with its ongoing transformation in 2019 in line with the four strategic priorities. Compliance with and achievement of the strategic development priorities are continuously examined by the Executive Board at the divisional level through regular meetings of the Strategy and Business Committee and as part of the annual Strategic Planning Dialogue between the Executive Board and the Supervisory Board. In addition, relevant markets and the competitive environment are analyzed on an ongoing basis in order to draw conclusions concerning the further development of the Group’s strategy. The Executive Board is also supported by the Group Management Committee (GMC) on issues of corporate strategy and development. This Committee is composed of executives representing key businesses, countries and regions and select Group-wide functions.
The Group’s content-based and entrepreneurial creativity is also very important for the implementation of its strategy. Bertelsmann will therefore continue to invest in the creative core of its businesses. Simultaneously, innovation competence is very important for Bertelsmann and is a key strategic component.
Value-Oriented Management System
Bertelsmann uses BVA for assessing the profitability of operations and return on invested capital. BVA measures the profit realized above and beyond the appropriate return on invested capital. This form of value orientation is reflected in strategic investment and portfolio planning and the management of Group operations and, together with qualitative criteria, forms the basis for measuring the variable portion of management compensation.
Please refer to the following excerpt for detailed information on Bertelsmann's major subsidiaries and participations as of December 31, 2018.
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