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Bertelsmann Loses E-Commerce Exec

In an unexpected shakeup, German media conglomerate Bertelsmann AG is reorganizing its e-commerce operation and said one of the group's top execs, Andreas Schmidt, is "leaving the company to pursue new entrepreneurial opportunities."

DirectGroup Bertelsmann, the unit that has been in charge of the company's B2C businesses since July 2000, made the announcement, saying that the company is consolidating its music distribution interests into one business.

Bertelsmann eCommerce Group's efforts to develop digital distribution and e-commerce strategies will be assumed by the DirectGroup's existing U.S. businesses by Dec. 31.

The newly formed business unit BeMusic, which includes record club BMG Music Service, online music retailer CDNow and the digital music service myplay will be responsible for the ongoing music distribution strategy in the U.S. both online and off, Bertelsmann said.

Stuart Goldfarb has been named the new president and CEO of the entire BeMusic business unit, which will be based in New York.

The strategic alliance with Napster Inc. will continue to be managed by DirectGroup Bertelsmann. Bertelsmann and Napster have been developing a new secure service, but it has yet to launch.

Thomas Middelhoff, head of the Bertelsmann management board, has admitted that he overestimated e-commerce growth.

Bertelsmann execs had nice things to say about the 40-year-old Schmidt, who was instrumental in the Napster deal, but published reports elsewhere described him as a "victim" of the restructuring. At Bertelsmann, Schmidt e also negotiated the acquisition last year of CDNow and the more recent deal for myplay.com.

The corporate announcement quoted Klaus Eierhoff, CEO of DirectGroup Bertelsmann, as saying: "Andreas Schmidt has made an essential contribution to the development of digital distribution with his ideas and initiatives. He has played a major role in making Bertelsmann the internationally leading enterprise in digital music distribution today. This is a tremendous achievement for which we are thankful."

Middelhoff said Schmidt "has expanded the position of Bertelsmann in the international e-commerce business with his creativity and commitment. And for that we are grateful."

Schmidt began his career at Bertelsmann in 1994 as editor-in-chief of several magazines including the program guide "TV Today."

Meanwhile, the world's big record labels are finally rolling out online subscription services, capping the music industry's worst year in at least a decade, according to a Reuters report.

PressPlay and MusicNet, which have been developed by the major record companies, will launch soon as well as several smaller independent firms like FullAudio and Listen.com.

MusicNet -- owned by media firm RealNetworks Inc., AOL Time Warner Inc.'s Warner Music, EMI Group Plc and Bertelsmann BMG -- is set to launch in early December at an expected monthly cost of $10 to $20 a month.

Pressplay, owned by Vivendi Universal's Universal Music and Sony Music, has said it also plans to roll out sometime in December.