New Strategic Priorities: Focus on Club Businesses

Involvement with BOL in Germany, Switzerland, the Netherlands and Sweden will be phased out

Guetersloh, Germany (ots) - As part of its strategic reprioritization, DirectGroup Bertelsmann will focus exclusively on successfully steering its worldwide media club businesses. The group will withdraw from stand alone eCommerce media businesses in Europe. A variety of possible withdrawal scenarios are being looked into for the BOL businesses in Germany / Switzerland and the Netherlands and for the Bokus holdings in Sweden (formerly: BOL) with their roughly 140 employees. DirectGroup is holding on to its BOL joint venture in Italy and to its Chinese operations. Both BOL businesses are already fully integrated into the respective local clubs. The supervisory board has received a proposed resolution from the executive board regarding this subject.

Businesses not affected by the current changes include the U.S. based BeMusic, where the e-commerce activities of CDNOW are fully integrated with the BMG MusicService music club, and the 36.2 percent share holding in barnesandnoble.com.

The international BOL ventures currently account for less than four percent of DirectGroup's total turnover. After its dovetailing with local club operations, synergetic effects overall lagged behind expectations. BOL is growing, but being a start-up venture it is not yet profitable. As a retail enterprise BOL will not be able to meet Bertelsmann's return targets in the coming years.

Says Ewald Walgenbach, DirectGroup CEO: "The teams headed by Arndt Roller in Germany and Switzerland, Daniel Ropers in the Netherlands, and Anders Ringnér in Sweden and their predecessors have done first-class entrepreneurial pioneer work in the past few years and deserve our acknowledgement. BOL is now Europe's undisputed No. 2 in media product e-commerce, and is in fact the market leader in the Netherlands. We are parting from BOL because of new strategic priorities within DirectGroup. We have set ourselves the goal of resolutely leading the division as a whole to profitability in its core markets and businesses, based on proven business models. Our management is devoting its energy to the turnaround of several club companies that are still operating at a loss, as well as to the ongoing improvement of our operative business. Profitable club ventures like in France, Spain or the US that managed to significantly improve results within the last year do prove the viability of the membership-based business model."

The Internet, an integral part of the company's club businesses, remains an important field of growth and innovation. The Web is now used for new member recruitment, customer retention, and as an additional marketing and sales channel. Today, club members order on all the various channels, i.e. catalogs, shops, phone and the Internet. 108 of our worldwide clubs now offer their members online-shops. Several clubs recruit up to 40 percent of their new members on the Web. The revenue share generated on the Internet lies between 4 and 25 percent depending on the club. In fiscal year 2000 / 01, the clubs generated some Euro75m in revenues on the Internet. Advertising and distribution costs are particularly low on the Internet an DirectGroup's goal is to expand its Internet services to customers in the club businesses.

About DirectGroup

DirectGroup Bertelsmann integrates Bertelsmann's global media direct-to-customer businesses. Roughly 55 million customer-relationships and approx. 25 million Unique Visitors per month secure DirectGroup's position among the largest enterprises in media commerce. Cornerstone of this success are the Book Clubs with its 28 Mio. members in 19 countries incorporating strong brands like France Loisirs, Book-of-the-Month-Club, Der Club or Circulo de Lectores. Members have access to the Clubs' product range via catalogue, internet or one of the 600 worldwide club shops. Add to this BeMusic the US music distributor constituted of the BMG MusicService club and the Internet shop CDNOW. A 36,2 percent stake in renowned online retailer barnesandnoble.com is also part of DirectGroup.

About BOL

BOL is DirectGroup's international online media and entertainment

shop. Launched in 1999 it currently operates in 6 countries (China, Germany, The Netherlands, Switzerland, Sweden and Italy). A single BOL media shop offers up to 900,000 books, 300,000 music-cds and a wide variety of videos, DVDs and computer games. With its 2,5 million customers it will generated revenues of nearly Euro 100 million in fiscal year 2000/01.