Bertelsmann reported its 2007 earnings yesterday. For the year, BMG revenues declined by 27.8% to €1.5 billion and operating EBITA (basically operating profit) dropped 46% to €93 million. Physical revenues dropped 17% while digital increased 40%. Digital accounted for 17% of BMG's revenue (up from 12% in 2006). BMG's revenue from Germany dropped 19.2% to €130 million.

The earnings release and annual report emphasize the emergence of 360 deals (called "partnerships" and "partnerships" in the annual report) BMG signed during the year, as well as the company's expansion into artist management, concert promotion and merchandising. Those new facets certainly added some revenues during the year. The company lost a good deal of revenue in 2007 when it sold its publishing division to Universal Music Group.

The annual report laid out BMG's revenue, operating EBIT and number of employees for the last five years. Revenues, from 2003 to 2007, were €2.712 billion, €2.547 billion, €2.128 billion, 2.017 billion and €1.456 billion. Operating EBIT for those years was €54 million, €162 million, €177 million, €173 million and €93 million. Number of Sony BMG employees (total for the joint venture) from 2003 through 2007 was 4880, 4259, 3597, 3009 and 2851.

Put another way, BMG's revenue has dropped 46.3% over the last five years and at a cumulative annual rate of 11.7%. The number of Sony BMG employees has dropped 41.6% over the last five years and at a cumulative annual rate of 10.2%.

And there is continued talk about Bertelsmann's possible sale of BMG. From the Times Online: "Thomas Rabe, chief financial officer, said: 'What we will do depends on price. Of course, the EMI price is a good price for a seller, but we would not be interested in selling if we were offered a figure based on the current valuation of Warner Music. The market is undervaluing music assets.'"

Since Bertelsmann has been looking for somebody to take its half of the joint venture, one would expect Rabe to insist the market has undervalued music assets.

Helpful links:

• 2007 Annual Report (8.1MB PDF)
• Investor Conference Call Presentation (PDF)