Napster bites into Bertelsmann profit

Legal deal cuts half-year earnings

Net profit at Bertelsmann took a major hit from the Napster legal settlement, which contributed to an 86% drop in half-year earnings for the German media giant.

The conglom on Tuesday posted a net profit of s51 million ($69 million) vs. $480 million a year earlier.

Bertelsmann ended its litigation with record labels this year in connection with the P2P music-swapping service.

The group said the first half of the year had been “a favorable economic environment” for the company: Operating profit (before interest and tax) rose 1.9% to $969 million on revenue of $12.1 billion, which grew 1.3% after adjustments for portfolio and exchange rate effects.

The continuing growth of pan-European broadcaster RTL Group, which has been bolstered by increased TV advertising and a flourishing TV production biz, contributed the lion’s share of revenues ($3.9 billion), followed by media services division Arvato ($3 billion), magazine publisher Gruner + Jahr ($1.9 billion), direct-to-customer unit Direct Group ($1.67 billion), book publisher Random House ($1.1 billion) and BMG ($857 million).

“Bertelsmann had a gratifying first half,” said chairman-CEO Gunter Thielen. “We are also pleased to have arrived at important out-of-court settlements in connection with Napster, which eliminates a potential significant risk for Bertelsmann’s future.”

Bertelsmann is awaiting a decision from the EU Commission, expected by October, as the latter reappraises the Sony BMG joint venture, adding that it expected the review to result in clearance.

Company also confirmed its positive forecast for the year, saying it expected to exceed 2006’s revenue and operating profit, which reached $26 billion and $2.5 billion, respectively.

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