German media giant Bertelsmann and America Online will team up to launch a $100 million European online service, both companies announced last week.
Bertelsmann will put up the cash and America Online the know-how for the 50-50 joint venture, which is scheduled to begin offering interactive services in Germany, France and the U.K. sometime this year.
Additionally, Bertelsmann will acquire a 5% stake in Nasdaq-quoted America Online, and the U.S. company will make room on its board of directors for an as yet unnamed Bertelsmann rep. The equity stake is valued at approximately $50 million. Bertelsmann has an option to eventually acquire up to 10%.
The partners plan to extend the service throughout Europe and expect their initial investment to turn a profit by 1999.
The announcement boosts competition among Europe’s young online business. In the U.S., online is growing three times as quickly as the music market and five times as fast as cable television, according to Bertelsmann figures, yet Europe remains an untapped market. H& R Block-owned CompuServe, for example, numbers a mere 224,000 members in all of Europe.