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 (video), 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 fast-growing, digital, international and diversified Group portfolio. Businesses in which Bertelsmann invests should have long-term 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; digital transformation; expanding growth platforms; and expanding into growth regions. In the financial year 2019, steady efforts continued to focus on implementing strategy in line with these priorities.
Strengthening the core businesses included both organic successes and important strategic acquisitions. RTL Group expanded its broadcasting lineup in France, and acquired free-to-air children’s channel Gulli and five pay-TV channels from Lagardère. In Germany, VOXup is a new linear channel providing a versatile array of familiar Vox formats, free-TV premieres and new in-house productions. At the end of the 2019 financial year, Bertelsmann announced the planned acquisition of the remaining shares in Penguin Random House held by co-owner Pearson. This makes Bertelsmann the sole shareholder of the world’s largest trade book publisher. In addition, Penguin Random House increased its share in the book publishing business, with continued organic growth and also through acquisitions that include the British children’s book publisher Little Tiger Group and a shareholding in the US publisher Sourcebooks. Gruner + Jahr enlarged its personality magazine portfolio with a cooperation between “Brigitte” and the psychotherapist and best-selling author Stefanie Stahl. At the beginning of 2019, Bertelsmann and the Saham Group completed the merger of their global CRM businesses under a newly formed company, Majorel. The global print businesses of Bertelsmann Printing Group were restructured organizationally. The new cross-division structure is based on a “single-company approach.” Another emphasis in the reporting period was strengthening collaborations and alliances – for example, the Bertelsmann Content Alliance in the content business and the Ad Alliance in advertising and marketing.
The digital transformation progressed as digital businesses were continually expanded. RTL Group reported not only an increase in paying subscribers for its streaming services, but also an increase in viewing time on the platforms TV Now in Germany and Videoland in the Netherlands. In France, the RTL Group company Groupe M6 is developing a technical platform for Salto – the pay streaming service it operates with TF1 and France Télévisions, to be launched in 2020. Gruner + Jahr launched “Stern Crime Plus,” its first paying subscriber model for digital journalism. The Bertelsmann Content Alliance initiated the Audio Alliance to increase its audio offers, and started producing podcasts and distributing new podcasts on its Audio Now platform.
The Group’s growth platforms were expanded further and recorded overall significant organic growth. Fremantle is continuing its drama productions with the second season of drama series “American Gods,” and was successful with formats such as “America’s Got Talent: The Champions” in the United States and the second season of the UFA production “Charité” in Germany. BMG expanded its presence in Asia by opening a branch in Hong Kong, and reported successful publications of artists like Kylie Minogue and Jason Aldean in the recordings business, and Bring Me The Horizon, Juice WRLD and Lewis Capaldi in the music publishing business. New or expanded agreements were signed in the recordings business – for example, with the singers Richard Marx and Natalie Imbruglia and the band Seeed; and in the music publishing business with Neil Finn of Crowded House, Cage The Elephant, and Mick Jagger and Keith Richards of the Rolling Stones. Arvato Supply Chain Solutions attracted many new customers, and Arvato Financial Solutions initiated the creation of the pay-after-delivery business and a new digital “Know Your Customer” platform to offer companies and banks a powerful tool. Arvato Systems continued to expand its portfolio of IP-based solutions by introducing a serialization solution for prescription medication as well as starting a VPN access service. In the online education segment, Relias continued to expand its customer base and integrated the healthcare division of OnCourse Learning, a company acquired last year. Bertelsmann announced that it will provide around 50,000 scholarships for classes provided by the US-based online university Udacity in the areas of the cloud, data and artificial intelligence as part of the continuing digital education campaign “#50000Chancen.”
Bertelsmann expanded its global network of start-up investments in growth regions and made around 80 new and follow-up investments during the reporting period. At the end of 2019, Bertelsmann Investments held some 230 investments in young companies and funds, mainly through its four international funds. During the reporting period, Bertelsmann Asia Investments (BAI) included the e-commerce platform Ding Dong Fresh, with which customers can order fresh groceries and have them delivered to their home. Furthermore, this fund was successful in several exits, including the sale of all the shares in the tech company Bigo. Bertelsmann India Investments (BII) invested in the online loan market platform Rupeek, which is currently focused on issuing loans with gold as collateral. In Brazil, Bertelsmann acquired 100 percent of Afferolab, one of the country’s largest corporate training providers. In addition, Bertelsmann Brazil Investments (BBI) assisted in preparing the successful IPO of Afya, a Brazilian education company. Bertelsmann holds a stake in Afya via a fund participation with its partner Crescera Investimentos. Penguin Random House expanded its presence in South America with its acquisition of the publishing group Ediciones Salamandra, operating in Spain and Latin America, and by purchasing the literature and educational publisher Editora Zahar in Brazil through Companhia das Letras.
Bertelsmann will continue to push ahead with its ongoing transformation in 2020, 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, 2019.
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