Bertelsmann Leaves AOL Board

Germany publishing and media house Bertelsmann AG Tuesday finally came to
a decision regarding its awkward position on America Online Inc.’s board of directors.

The continued presence of Thomas Middelhoff, Bertelsmann AG’s chairman and chief executive
officer, AOL’s board was one of the first question
marks to hit once the ISP of the masses announced its decision to take over
Time Warner Inc., the world’s largest media company.

Initially, all the players shrugged off concerns about Bertelsmann’s no
longer certain position in AOL’s game plan. The official reaction: the
activities of AOL Europe were entirely separate from the $182 billion
merger, to which Time Warner brought a mass of overseas content resources.
Today, Bertelsmann’s strange position was resolved by a departure from AOL’s

“As a result of the merger with Time Warner, a competitor of Bertelsmann,
it’s inappropriate
for me to continue as a member of the AOL board,” Middelhoff said.

AOL Vice Chairman Kenneth J. Novack, who was described as a “key architect”
of the Time Warner (TWX) merger, will replace Middelhoff on the board. Novack will
also serve on the four-member committee that will spearhead the integration

Middelhoff was elected to the AOL’s Board in May 1995; during same time the
two companies teamed up for the development of 50-50 joint venture AOL
Europe. At the time, AOL’s (AOL) total network head count was two million, while
latest head count put the figure at more than 22 million.

“Thomas is a world-class business leader, who has been a very active,
effective and respected member of our board for the past five years,” said
AOL’s Chairman and Chief Executive Officer Steve Case. ” I have relied on Thomas a great deal
for counsel, strategic advice and for the unique perspective he brings to
any challenge or issue. He will be missed.”

Case added that he that “the close partnership between AOL and Bertelsmann will certainly continue.”

AOL Europe boasts 3 million members, with 1 million from the AOL
Germany property alone. After months of struggling with telecom regulations
in the region, AOL finally introduced a free ISP service in the U.K. and
flat fees in several other European properties. AOL and Bertelsmann also
launched 50-50 venture for AOL Australia, and Bertelsmann will keep its
minority stake in AOL. Still, the import ISP has not been as well-received
overseas as it had initially hoped.

Speculation had swirled that the two companies might list AOL Europe on an
European exchange over the summer, but recent reports say that the venture
has no immediate designs for an IPO.

Time Warner’s recent merger with EMI also dents into Bertelsmann’s overall
business model — the music tie-up may interfere with Bertelsmann’s goals in
the music industry as well.

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