A month after it dismissed its tech-minded chief executive, Thomas Middelhoff, the German media conglomerate Bertelsmann is harshly pruning his Internet ventures.
Bertelsmann plans to shut down or sell its main online book-selling service, BOL.com, and has held exploratory talks with its chief rival, Amazon.com, people close to the deliberations said Monday.
BOL.com was the centerpiece of Middelhoff's plan to turn Bertelsmann from the world's No. 1 owner of book clubs, including the Literary Guild, into an equally dominant electronic merchant. But it has been a financial sinkhole -- with projected losses of US$39 million this year -- and Bertelsmann's new bosses are not in a forgiving mood.
"The strategy is to make money as soon as possible in our core businesses in our core markets," said a senior Bertelsmann executive, who spoke only on the condition that his name not be used. "Unfortunately, this doesn't include BOL.com."
Amazon.com, the world's largest online bookseller, would be an obvious buyer of BOL, which has US$98 million in sales and operations in Germany, the Netherlands, Scandinavia, Italy, Britain and China. Executives familiar with the talks cautioned that they had not progressed far.
"There are talks, there is contact," said the executive. "I'm not saying there are negotiations."
A spokeswoman for Amazon declined to comment.
Bertelsmann is also turning a cold eye on Napster, the online file-sharing service that Middelhoff once heralded as the future of the music industry.
Napster, which is in Chapter 11 bankruptcy protection, is awaiting a ruling from a judge in Delaware on whether Bertelsmann will be allowed to buy the company's assets in a deal worth about US$92 million.
Under the terms of that agreement, Bertelsmann's offer expires next Tuesday -- the same day the judge is expected to rule. Executives at Bertelsmann said that if the judge rejected their proposal they would abandon the deal, and carve up Napster's assets along with other creditors in a liquidation procedure.
Even if the court were to accept the proposal, Napster faces a dim future at Bertelsmann. It is unlikely to receive additional funding, which means it would be either folded into another division or shut down.
"If you're looking at what the company is winnowing out, you've got to look at Napster," said another Bertelsmann executive.
On Friday, the company's chief financial officer, Carolyn Jensen, testified in court that Bertelsmann's buyout proposal was Napster's last chance for survival. "Napster will have to terminate all employees because we just don't have enough cash," Jensen said.
Bertelsmann's new strategy follows a shakeup orchestrated by Middelhoff's successor, Gunter Thielen. Thielen dismissed the head of Bertelsmann's money-losing direct marketing group, Klaus Eierhoff, and replaced him with Ewald Walgenbach, who had been Bertelsmann's CEO.
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