BUSINESSWEEK ONLINE : NOVEMBER 13, 2000 ISSUE
COVER STORY The Man behind Project Thunderball The grande latte can really work wonders. Bertelsmann's negotiations with Napster Inc. began in early September at a California law office. The legal setting should come as no surprise, considering the two were parties to a bitter legal dispute over Napster's alleged facilitation of copyright infringement. But they began to approach a rapprochement when Andreas Schmidt, CEO of Bertelsmann eCommerce Group, and Hank Barry, CEO of Napster, retired to a less formal locale: a Starbucks in Palo Alto, Calif. ''We had a coffee and a donut and found we shared a common vision,'' Schmidt recalls. He then launched Project Thunderball, the code name for the deal to bring Napster in from the cold. The Starbucks meeting was typical Schmidt. Direct and informal, the 39-year-old hardly seems the usual European businessman. A high school dropout, Schmidt built his first career with Germany's border police. Yet after making the switch to journalism, he has risen quickly to Bertelsmann's top ranks. His task: make sure the world's third-largest media company rules the Net, rather than getting vaporized by it. ''We have to reinvent ourselves as a digital company, not as a media company,'' Schmidt says. The Napster deal, Schmidt's brainchild, is a perfect case in point. The company attracted millions of music lovers. But it also threatened the very existence of BMG and other music companies. By agreeing to finance Napster as it coaxes users into paying for music, Bertelsmann is trying to turn a threat into an opportunity. Nobody knows whether it will work. But at least Schmidt can already claim to have pulled off some big transformations. He turned to journalism after an accident with a practice hand grenade damaged his hearing and made him unfit for border duty. He joined Bertelsmann unit Gruner + Jahr in 1993, where he founded several magazines and launched 20 Internet sites. That brought him to the attention of Bertelsmann CEO Thomas Middelhoff, who made Schmidt president and CEO of AOL Europe, a joint venture with America Online Inc., in 1998. Schmidt's experience as a startup specialist, along with a colloquial command of English, came in handy in the sensitive negotiations with Napster. ''Andreas really bridged the gap,'' Middelhoff says. With Napster, Schmidt is executing Bertelsmann's grand plan. Middelhoff wants to make Napster a platform for selling all of the company's content, including Random House books and magazines like Inc. But Schmidt must find still more ways to push Bertelsmann products on any kind of digital device available, from electronic books to Palm Pilots to mobile phones. He's certain to use Bertelsmann's massive financial clout to acquire more Internet upstarts. Which means he could become one of Starbucks' best customers. By Jack Ewing in Frankfurt _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Bertelsmann: A New Net Powerhouse? COVER IMAGE: A New Net Powerhouse? TABLE: The Deal TABLE: The Building Blocks of Bertelsmann TABLE: Dueling Net Strategies The Man behind Project Thunderball Commentary: Napster: Tune In, Turn On, Pay Up ONLINE EXTRA: Middelhoff: ``Somebody Has to Take the Lead'' INTERACT E-Mail to Business Week Online

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