After a quiet few years on the new-media front, Bertelsmann is jumping into digital investment.
Company has formed a $63 million venture-capital fund to invest in digital biz and tapped Richard Sarnoff, who has functioned as Random House tech czar and runs a similar fund there, to head it.
Venture fund Bertelsmann Digital Media Investments will be used to invest in emerging technologies and companies, Sarnoff said.
In certain cases, BDMI could buy a startup outright, but most of the time, the investment will likely take the form of a minority stake. Company’s larger buys would be handled separately at the corporate level.
The media giant has set up a company in Luxembourg to execute and house BDMI’s investments. Sarnoff will remain based in Gotham, reporting to Bertelsmann chief financial officer Thomas Rabe.
Bertelsmann, the privately controlled multinational that is the fourth-largest media company in the world by revenue, also may invest in startup initiatives within the company.
Bertelsmann has major footholds in a number of media and entertainment businesses, notably book publishing in the U.S. and Europe (Random House), music around the world (Sony BMG), television in Europe (RTL) and magazines in Europe (Gruner & Jahr).
Sarnoff wasn’t specific about the projects in which the fund may invest but said investments are more likely to be in sectors where digital penetration has lagged, like print media and television, as opposed to music.
“It makes sense to invest at the beginning of the transformation rather than the end, because in many cases it’s too expensive at the end,” he told Daily Variety.
Move provides the next chapter in what has been an unusually twist-filled story for the conglom.
Under the previous regime of topper Thomas Middelhoff, it was aggressive about new media before it was fashionable.
And Bertelsmann made an investment in Napster when the firm was anathema to big music companies.
But since Middelhoff was ousted in favor of Gunther Thielen several years ago, Bertelsmann has dialed back investments and been more reluctant to make the big splashy buy along the lines of News Corp.’s purchase of MySpace. As a private firm, Bertelsmann has felt none of the Wall Street pressure to invest in digital companies that its public counterparts have experienced.
In some ways, though, fund follows the approach of divisions like News Corp.’s Fox Interactive Media, which has recently said it will move away from larger pickups in favor of acquisitions of or investments in earlier-stage companies.
Sarnoff also played down reports from earlier in the week that Bertelsmann could be interested in starting a MySpace-like service for music and video.