Music-Industry "Bloodbath" in Wake of Seagram/PolyGram Merger

The axeman cometh, and cometh again. Seagram Company's Universal Music Group, now the world's largest music conglomerate after last year's $10+ billion acquisition of PolyGram NV, is decimating its ranks. The company has closed the doors of several formerly independent record labels, fired hundreds of employees, and plans to unload thousands more in the next few months. Employees and artists alike will soon find themselves without labels.

Last Thursday, January 21, about 500 workers in Hollywood, Universal City, and New York were sent home permanently---the first to be cut in a consolidation program that will eventually affect as many as 3000 UMG workers worldwide. 1200 of the jobs lost will be among the more than 15,000 Universal workers in the US. "Tense and desperate" was one executive's description of the atmosphere in her Universal regional office. "No one knows from day to day who will remain and who will be let go," she said.

Some legendary independent labels, like A&M Records and Geffen Records, are already history---their employees were among those sent packing on Thursday. A&M, which was formed in 1962 by trumpeter Herb Alpert and his partner Jerry Moss, flourished in the 1970s and 1980s with talents like Carole King, Cat Stevens, Joe Cocker, the Carpenters, Peter Frampton, Styx, Supertramp, the Police, and Janet Jackson. Alpert and Moss sold the label to PolyGram for approximately $300 million in 1989 and quit not long thereafter, following disputes with their corporate bosses.

Geffen Records, which lost 110 workers, enjoyed a similar history of introducing many new and hugely successful artists to a music-hungry public. A&M and Geffen will become units of Universal's West Coast group. Mercury, one of the oldest labels acquired by UMG, will be combined with Island Records. Prestigious jazz label Verve will be folded in with GRP, Universal's jazz label.

As many as 200 performers are at risk of losing their contracts, among them country stars George Strait, Shania Twain, and Vince Gill, rockers Melissa Etheridge and Sheryl Crow, vocal group Boyz II Men, alternative act Nine Inch Nails, and opera star Luciano Pavarotti.

Dismissed A&M employees in Hollywood draped their building's logo with a black banner to mark the end of an era as they carried their belongings to their cars---until they were ordered to remove it by a UMG manager. "While change is always difficult, the restructuring of the labels is necessary for us to be more competitive, develop artists' careers, and pave the way for meaningful growth in the future," said a Seagram Company prepared statement.

Alpert said he doesn't think the corporate bottom line "has much to do with music or artists. It's very black and white." His experience at "bottom-line conscious" PolyGram was that "it was hard to make decisions like we used to . . . from the gut, based on feeling, not whether an artist might be able to sell oodles of records." A&M chief Al Cafaro, who was one of the dismissed, characterized Thursday's axing as "a 6.0 on the Richter Scale," and mixing his metaphors, added, "Don't think that there are calm seas on the other side of this threshold . . . there is a 7.0 coming. It's a Wall Street world now."

Corporate downsizings---one of the hallmarks of the 1990s---follow almost invariably from mergers and acquisitions. "Redundant" workers are eliminated and operations are "streamlined" (often at enormous expense) in an effort to "create shareholder value." Investors weren't overly impressed by last Thursday's bloodbath, however. Seagram's stock, which trades on the Toronto exchange, dropped 5% that day. On Friday, it regained less than 2%, closing at $67.75 Canadian.

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