Two BMG Execs Step Down After Napster Deal

N E W  Y O R K, Nov. 6 -- The top two executives at BMG Entertainment, themusic division of Bertelsmann AG, are resigning, but the Germanmedia giant says the moves have nothing to do with its breakthroughdeal with Napster Inc.

The announcement of the departures of Michael Dornemann,chairman, and Strauss Zelnick, president and CEO, came about lessthan a week after the company announced an online song-distributionpartnership with Napster.

Part of Restructuring, Company SaysBMG spokesman Keith Estabrook said the two executives’departures were related to a restructuring over the past year byBertlesmann CEO Thomas Middelhoff. The changes have moved somedivisions from BMG Entertainment to other segments of the company,he said.

For instance, BMG’s music club and online distribution divisionswere put under the control of Andreas Schmidt, who headsBertelsmann’s e-Commerce Group and was the executive responsiblefor finalizing the deal with Napster. And Sonopress, which makesthe company’s CDs, was shifted from BMG to Bertelsmann’s Arvatoprinting unit.

With the restructuring, BMG will be left resembling an OldEconomy music company, responsible mainly for signing acts andproducing songs, Estabrook said. BMG owns more than 200 recordlabels, including Arista, RCA and Windham Hill, which representsuch artists as David Bowie, Whitney Houston and Annie Lennox.

The deal with Napster, the online music swapping service, markeda sharp break with other members of the music industry, which havesued Napster for copyright infringement and sought to have theservice shut down. A court decision is expected in the comingweeks.

Besides BMG Entertainment, Bertelsmann’s holdings include thebook publisher Random House, CDNow and 40 percent ofbarnesandnoble.com. It has annual revenues of $17.6 billion.

Dornemann, who has been with Bertelsmann for 18 years, iscredited with founding BMG in 1987 by combining the company’sexisting music operations with RCA, which Bertelsmann acquired.Zelnick was named president and CEO of BMG Entertainment in July1998.