Bertelsmann Plans Asia Push

Earlier this year Bertelsmann chairman Gunter Thielen traveled to China, India and Vietnam to explore business opportunities there. By the time he returned, he had made up his mind: Europe’s biggest media group must immediately boost its position on the Asian markets in order to profit from the dynamic growth in the region.

In China and India, Bertelsmann has already set up shop. In the Beijing region, for example, the group has already brought in 1.5 million members for its Chinese-language book club. And that's only the beginning.

A million served

"Our team currently sells 20 million books in China," Thielen said Tuesday at the company's board meeting. "That’s the same amount of books as we sell in France. The turnover, however, is only a tenth in China, because there a book costs $1.5 while it costs $15 in France. That’s the big difference and the reason for this is that the Chinese market is still being regulated," Thielen said. "But once that starts changing, the prices will increase and so will our turnover. In a long term perspective of 10 or 15 years, we will multiply our sales in Asia and at some point it will represent at least 10 percent of our revenues," he added.

The company still has a long way to go. Of its approximately €17 billion in revenues last year, just €2 billion came from sales in Asia. With a string of new investments, Bertelsmann is seeking to increase its market share. In China, Bertelsmann wants to invest heavily in printing and publishing houses.

"We will stay away from the music sector," he said. "The bootleg system is so sophisticated in China, you can purchase a disc for $1 at any corner there. That’s why it doesn’t make sense for us to produce discs in China."

A fast growing market

In India, Bertelsmann’s Random House publishing arm, as well as the printing subsidiary Arvato, is already active. Still, business there is only just starting for the media group and the future looks promising, as India currently has growth rates of 7-8 percent per year -- nearly comparable to those in China. Both are markets that bring euros to the eyes of Bertelsmann managers.

"Together they have a population of 2.4 billion people thus representing a third of the world population," he said. "This must become a market one day. Of course if you compare these countries to America, they are still dwarfs. But if you look at their growth rates it’s clear that we must closely watch these markets. And I am positive that we will increasingly position ourselves there."

Today the media giant only makes 3 percent of its turnover in Asia, that’s around €600 million per year. And only 1 percent -- about €200 million -- are being earned in Eastern Europe, which Bertelsmann also views as a promising market for its television, publishing and printing operations.

Currently, Germany remains one of Bertelsmann's most important markets. A third of the company's overall turnover is made here, with 40 percent coming from the rest of Europe and 25 percent in the United States and Canada. Only 3 percent of revenues are currently derived from its Asian units.

Preparing for a mega-merger

The company's book publishing division, based in New York, is the market leader in the United States and Britain. New York is also the headquarters for its worldwide music business, which will soon be merging with Sony's music operations.

With a world music market share of approximately 12 percent, Bertelsmann is expected to be the dominant partner in the joint venture. Last year, Bertelsmann artists including Britney Spears and Justin Timberlake won 22 Grammy awards. And the company's Gruner + Jahr magazine publishing division, the market leader in Germany and France and a strong presence in the U.S., is planning on introducing 20 new glossy magazines around the world.