Bertelsmann to buy DVD seller Columbia House

[Hardbopjazz]

FRANKFURT (Reuters) - German media conglomerate Bertelsmann is set to buy U.S. direct CD seller, Columbia House, for $400 million to bolster its ailing club business in a deal it had walked away from four years ago.

Bertelsmann agreed to buy Columbia, which had $800 million in sales last year, from private equity firm Blackstone and will add it to U.S. CD seller BMG Direct, Bertelsmann's DirectGroup division said in a statement on Tuesday.

The club business, the root of Bertelsmann's rise to be the world's fourth-largest media group, has struggled with an aging and declining membership as people flock to the Internet to buy books or CDs. Its sales fell five percent last year.

Bertelsmann, with up to 3 billion euros ($3.9 billion) under its belt for purchases, last month already bought French bookstore chain Privat in another deal to beef up DirectGroup, its least profitable unit.

"This once again clearly demonstrates that all signs at Direct Group are pointing to growth following its successful turnaround," said Bertelsmann Chief Executive Gunter Thielen in a letter to employees, a copy of which was obtained by Reuters.

Bertelsmann had been in talks to buy Columbia from Time Warner and Sony in 2001, but could not reach a deal. Blackstone bought its stake for $410 million a year later. Since 2001, Columbia has lost about a third of its sales.

A person familiar with the discussions said Bertelsmann was buying Blackstone's 85 percent stake as well as the rest of the company, which is owned by Time Warner and Sony, and was paying $400 million for all of it.

The purchase is the latest in a string of smaller deals Thielen has done over the past year to boost growth. He said in the letter they will add about 10 percent in sales in 2006.

Bertelsmann on Tuesday closed the merger of its gravure printing operatings with that of German newspaper publisher Axel Springer, christening the new company Prinovis.

Magazine arm Gruner + Jahr bought special interest magazine publisher Motor-Presse Stuttgart; services unit arvato merged its receivables management business with Infoscore; and music unit BMG merged with Sony Music in a landmark deal last year.

"All these acquisitions enhance our core businesses," Thielen said in the letter. "They reinforce the growth that our divisions self-generate, as well as potentially strengthen them for future competition."

Bertelsmann last week said first-quarter sales were almost flat as it fell behind in U.S. music sales and German TV advertising failed to pick up strongly. ($1=.7791 Euro)

[GA Russell]

I'm confused! Does Sony now own the BMG and Columbia labels, while Bertelsmann owns the BMG and Columbia Record Clubs?

I didn't know that the BMG Record Club does so much business that it made the company a major player in the industry.

I wonder what the sales volume of a typical Blue Note reissue is for the record clubs.

[Hardbopjazz]

I'm confused! Does Sony now own the BMG and Columbia labels, while Bertelsmann owns the BMG and Columbia Record Clubs?

I didn't know that the BMG Record Club does so much business that it made the company a major player in the industry.

That's what it looks like.