German media company Bertelsmann AG said Wednesday its profit in the first nine months of the year fell by almost half because of income tax expenses and one-time items including a legal settlement over Napster.
The company, which owns a range of media properties including European broadcaster RTL Group SA and publisher Random House, said net profit fell to 243 million euros ($309.9 million) in the nine months through September compared with 475 million euros a year earlier. Bertelsmann did not provide quarterly net income figures. Nine-month sales rose 10.3 percent to 13.54 billion euros ($17.27 billion).
The decrease in earnings was the result of tax expenses along with special items, including a 48 million euro ($61.2 million) settlement with Universal Music Group over a lawsuit involving the former music file-sharing platform Napster.
Privately owned Bertelsmann, which is based in Guetersloh, Germany, invested in the original Napster by loaning some $85 million in cash between 2000 and 2001. Napster went off-line in 2001 and has since been reborn as a licensed online music store under new ownership.
Pretax profit rose 8.3 percent to 982 million euros ($1.3 billion) from 907 million euros in 2005, driven in part by an improved European advertising market, but hampered by challenges facing the company's Sony BMG joint venture, including a drop in demand for CDs.
In July, an EU court overturned the European Commission's go-ahead for the merger between the music units of Sony and Bertelsmann AG. That deal, which reduced the number of major record companies from five to four, must now be re-examined.
But Chief Financial Officer Thomas Rabe said the company still expects pretax profit to rise nearly 10 percent for the year.
"We are pleased with the group's operating result," he said. "For the current full fiscal year 2006 we expect a nearly 10 percent increase in operating result and a significantly improved net income year on year."
For the July-September period, the company's sales rose by 2.4 percent to 4.4 billion ($5.61 billion) from 4.3 billion euros in the year-ago period. Pretax profit rose 6.8 percent to 281 million euros ($358.4 million) from 263 million euros, hampered by the 4.5 billion euro ($5.74 billion) buyback in July 2005 of the 25.1 percent stake in Bertelsmann held by Groupe Bruxelles Lambert.
In September, Vivendi agreed to buy Bertelsmann's BMG Music Publishing arm for 1.63 billion euros ($2.09 billion) in a deal that will give the French company the world's largest music publishing catalog and songs by artists such as Coldplay and Robbie Williams. The EU is set to rule on the sale by Dec. 8.
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