BERLIN — Bertelsmann chairman and CEO Thomas Middelhoff ankled Sunday and is reportedly taking the top job at floundering state-controlled telco Deutsche Telekom.
While Middelhoff promised a revolution when he took the reins of the former hymn-book publisher, the high-flying media chief apparently proved too adventurous for the German giant’s conservative old guard.
The news is yet another shock to Germany’s media industry, still reeling from the collapse of the Neuer Markt and a slew of insolvencies of once-leading media companies, including Bertelsmann’s longtime rival the Kirch Group.
His unexpected exit also comes as media congloms around the globe struggle to make their recent acquisitions work. AOL Time Warner’s Robert Pittman ankled 10 days ago as his company’s stock price hit new lows, and Vivendi Universal’s Jean-Marie Messier was ousted earlier this month after the company’s debt ballooned dramatically.
In a statement, Bertelsmann said Middelhoff was leaving due to differences with the supervisory board over the strategic direction of the privately held media giant.
Middelhoff’s plans clashed with those of longtime majority shareholders the Mohn family.
Indeed, the group’s supervisory board chief Gerd Schulte-Hillen was instrumental in Middelhoff’s exit. Having seen Bertelsmann’s profits tumble in an increasingly tumultuous climate, Hillen apparently persuaded the Mohns to force Middelhoff out.
He will be replaced by Gunter Thielen, fellow exec board member and head of Bertelsmann’s media services division Arvato.
Although the Mohns originally encouraged Middelhoff’s entrepreneurial spirit, his deal to fund online song-swap company Napster at a time when the music industry was suing the renegade site, was a step too far for many execs. The chief exec’s drive to spruce the company up in time for an IPO also rankled many of the old-timers.
In eerie parallels to his media ally Messier, the 49-year-old Middelhoff often describes himself as an American with a German passport; like Messier, Middelhoff’s appetite for deal-making and love of the Internet spooked some board members.
Indeed the maverick chief exec fought hard to transform the company into a 21st century media conglom and global player and whip it into shape for an eventual public listing.
Following his appointment as chief exec in 1998, Middelhoff convinced shareholders and the company’s old guard to embrace the new economy and expand the group’s terrestrial TV holdings.
Under Middelhoff’s leadership, Bertelsmann consolidated its hold on pan-Euro broadcaster RTL. Another of his moves was to end Bertelsmann’s involvement in the Premiere pay TV joint venture with Kirch, which eventually bankrupted the Bavarian-based TV kingpin.
Random House takeover
Middelhoff did not neglect Bertelsmann’s traditional publishing business: He also led the takeover of U.S. publisher Random House, transforming Bertelsmann into the world’s leading book seller. He also sought, without success, to make BMG the world’s leading music label.
Unlike the growing number of media honchos forced to step down in an industry struggling with falling revenues, troubled mergers and fruitless acquisitions, Middelhoff sidestepped some of the pitfalls that have caused companies like AOL TW, Viv U and Deutsche Telekom to stumble.
Bertelsmann is in the middle of switching over from a mid-year to mid-year business year to a January-December business year.
In last year’s rump-business year, it cut debts from €1.91 billion ($1.88 billion) to $415 million and managed dramatic cuts in losses from Internet investments.
While Middelhoff’s exit may signal a safer and less risky course for Bertelsmann, his reputation remains untarnished, and observers agree that he could be just what Deutsche Telekom needs.
The telco’s former chairman, Ron Sommer, was forced to step down earlier this month after the low stock price became an issue in the election battle between Chancellor Gerhard Schroeder and conservative challenger Edmund Stoiber.
Helmut Sihler, Deutsche Telekom’s former supervisory board chairman, has temporarily replaced Sommers until a chief exec is found.
Deutsche Telekom would not comment on reports that it had offered Middelhoff the top job.
(Reuters contributed to this report.)