The move immediately calls into question the future of Bertelsmann's online operations, including its efforts to resuscitate file-swapping upstart Napster. It also casts doubt on wide-ranging and expensive Bertelsmann e-commerce plays such as the joint venture with US book retailer Barnes & Noble, Web retailer CDNow and the European online retail operation BOL.com.
More broadly, Middelhoff's exit completes a rout of flashy media executives who briefly sang the praises of the Internet at three of the world's largest media companies, only to lose their jobs. The departures of AOL Time Warner CEO Gerald Levin and Chief Operating Officer Bob Pittman, Vivendi Universal's Jean Marie Messier, and now Middelhoff, do not necessarily disprove the transformative effects of the Internet. But if nothing else, they underscore the idea that once-hyped changes will take effect far more slowly than the vanguard had predicted.
"If you look at the cycle of how these industries develop, it starts out with technological advances, goes through a gold rush, and then you have a classic shakeout," said P.J. McNealy, research director with GartnerG2, a division of research firm Gartner. "We're clearly in shakeout mode."
The executive exodus comes months after it became painfully clear to almost everyone that the Net will not soon live up to its early promise --a realization that contributed to a dizzying decline in the stock prices of AOL Time Warner and Vivendi Universal over the past year. It also comes as the industry is grappling with the effects of an economic downturn that gutted advertising sales and a meltdown in the telecommunications industry that could postpone widespread deployment of high-speed Internet connections, a key stage in the industry's digital makeover.
The impact of that transformation has been felt most clearly in the music industry, which has engaged in nonstop litigation for more than two years to stem the tide of copyrighted material over the Web while fumbling in its efforts to create paid online services that could eventually replace the compact disc. Whether or not that experience proves that a revolution in the media business is inevitable, one thing is certain: A new crop of leaders is being called upon to create the blueprint for the future of the industry.
