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 When Middelhoff outlined Bertelsmann’s goals in 1999, he told TIME his benchmark was Amazon.
Today he still believes in e-commerce, even though Amazon’s shares have plunged. "The only thing that has changed is the hype of the stock market," says the ceo of the 166-year-old German media giant, which owns Random House publishing, the BMG music business and much else.
"We have to integrate the Internet into all of our core businesses." As he tries to do so, he will have another $6.2 billion in cash, due in January from AOL Time Warner as part-payment for Bertelsmann’s 49% stake in AOL Europe. At the moment TV is Bertelsmann’s best business, thanks to the February purchase of a majority stake in RTL, the biggest producer of programming outside Hollywood. But he is determined to prove that fans will pay for music downloaded from the Web.
Later this year Napster will release a new version of its file-swapping software with built-in copyright protection. If all goes well, Bertelsmann will convert its loan to Napster into a 56% stake in the firm. MusicNet, which bundles the catalogs of BMG, Warner Music and EMI, plans to license music for online use.
EMI also intends to license its repertoire to Pressplay, a rival distributor set up by Sony and Vivendi Universal. That could signal a change for the industry: until now, players haven’t agreed on digital distribution issues. Maybe EMI will push them toward a consensus — consumers would appreciate it.
The Vision Thing: "I was always convinced subscriptions were the way to go, even when everyone else was betting on advertising models like Yahoo. I believe Napster will have a steady stream of subscription revenues in future."
Forward Spin: Napster will have to prove it is significantly better than free services. The challenge is to offer music at acceptable prices with the features people want most, like the ability to listen to downloaded songs on any device.
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