European media giant Bertelsmann and America Online (AOL) have decided to patch up their differences over AOL's expansion strategy. Under a deal heralded as a $250m "strategic global alliance" Bertelsmann has secured an outlet for its on-line content and has agreed to sell its interests in AOL Europe and AOL Australia.
Bertelsmann, which has been allied with AOL for several years, appeared to feel snubbed by AOL's take-over of Time Warner and its subsequent tie-up with rival music group EMI. And its 50% position in AOL Europe, Europe's second largest Internet service provider with a total of 3.8 million subscribers, looked increasingly untenable.
Under the new deal Bertelsmann will immediately sell AOL Australia to AOL, while AOL Europe will be sold back to AOL before February 2002 for a sum in the $6.75bn-$8.25bn range. Bertelsmann says that cash will be ploughed back into its on-line content businesses.
The deal gives Bertelsmann "preferred provider" status for its entertainment, music, educational and information services across AOL's range of interactive platforms. These include AOL, Compuserve, Netscape Online, Instant Messenger, Digital City, Spinner and Winamp. The two groups also struck a range of cross-promotional agreements covering books, music and magazines.
"Bertelsmann is saying they don''t want to be in the access business, but they want to have ownership of the content that flows through those pipes,'''' said financial analyst Abhishek Gami of William Blair, quoted by Bloomberg Europe.