Middelhoff Proves Too Racy For Bertelsmann

London, July 28: | Updated: Jul 30 2002, 05:30am hrs
Thomas Middelhoff promised a revolution when he took the reins of former hymn-book publisher Bertelsmann, but the high-flying media chief ultimately proved too adventurous for the German giant’s old guard. Middlehoff joined the growing ranks of ousted media chiefs on Sunday after being forced out in a fierce battle with Bertelsmann’s conservative supervisory board over the direction the media group should take.

The 49-year-old, who describes himself as an American with a German passport, leaves behind a legacy of deal-making that transformed Bertelsmann into a television-to-music empire ranking as the world’s fifth largest media group. He was stopped in his tracks as he attempted to steer the German ship towards a flotation with cries for “Internet-speed” change in a bid to create an empire to challenge the likes of AOL Time Warner and Disney.

It was too much for Bertelsmann’s old-timers who had long fought to protect the conservative culture of the secretive group which is home to music arm BMG and publisher Random House. Indeed, the group’s supervisory board chief Gerd Schulte-Hillen was instrumental in Middelhoff’s exit. Having seen Bertelsmann’s profits tumble in an increasingly tumultuous climate, Hillen persuaded the group’s controlling shareholder, the Mohn family, to force Middlehoff out.

Middelhoff is the third high-profile media chief to lose his job this month. His one-time ally, Jean-Marie Messier was axed as chief of Vivendi Universal in a boardroom coup earlier this month while AOL Time Warner’s chief operating office Robert Pittman was also forced to step down.

Like Messier, Middelhoff’s appetite for deal-making and love of the Internet spooked some executives, but he fostered a close relationship with the Mohn family patriarch Reinhard Mohn.

Taking the reins in 1998, Middelhoff moved his wife and five children to a farm near Bertelsmann’s isolated headquarters in Gutersloh and set on a crusade, snapping up assets including Random House and taking control of Europe’s biggest commercial broadcaster RTL Group. Shuttling around the world on the Bertelsmann jet, Middelhoff quickly gained a reputation for his infectious optimism and US media giants started to take note after he announced plans to take the company public. But Bertelsmann is not like other media groups.

The group, which started life as a hymn-book publisher in the 19th century, is controlled by and feeds much of its earnings into the Bertelsmann Foundation, a social research institute.

Mohn, an 80-year-old philanthropist and fifth generation member of the founding family of the group, took over after the second world war and built a successful business on book clubs. But by the time Middelhoff took the reins, he found a company with wildly uncompetitive margins and rampant internal rivalry after years of being shielded from public scrutiny.

While Mohn encouraged Middlehoff’s entrepreneurial spirit, he strove to keep the group true to its roots. Middlehoff’s deal to fund controversial online song-swap company Napster at a time when the music industry was suing the renegade site, was a step too far for many executives.

The chief executive’s drive to spruce the company up in time for a flotation also rankled many of the old school executives. Middlehoff knew it would not be an easy task, but his exit took many by surprise. Sources said the supervisory board raised its concerns earlier this month but his exit was finalised on Sunday, replaced by Bertelsmann old-timer Gunter Thielsen. Middelhoff is not expected to be out of a job for long and he was already being rumoured on Sunday as a candidate for the new chief executive of Deutsche Telekom.