Bertelsmann Faces The Music Amid Layoff Reports

By | July 5, 2001 at 12:00 AM

German media giant Bertelsmann’s shakeup of its flagging music division looks set to continue with U.S.-based subsidiary Bertelsmann Music Group (BMG) reportedly looking to lay off hundreds of employees in its efforts to cut costs and raise profits.

Rumors followed the appointment last week of former BMG Germany chief Thomas Stein to head BMG’s European division. Stein replaces Richard Griffiths, who is leaving the company by mutual agreement after six months in the job.

“We have a new European management team and everything is being reviewed,” said a BMG Europe spokeswoman in Munich, who confirmed that BMG’s top management would be holding a strategy meeting next week in Spain.

The Wall Street Journal reported Tuesday that BMG was ready to lay off several hundred employees. The company has some 5,000 employees worldwide, 700 of those in Germany.

BMG said it could not confirm the story, but added it is looking to lower costs and boost efficiency.

BMG’s labels include RCA Records, home of Christina Aguilera and Elvis Presley, and Arista Records, whose roster includes Carlos Santana and Whitney Houston.

BMG reportedly generated losses of at least $150 million in the year ended June 30. The company did not comment on the figures. In the previous year BMG posted revenues of $4.7 billion and $212 million in profits.

Stein’s appointment comes three weeks after BMG’s chief administrative officer, Konrad Hilbers, was replaced by Michael Smellie, who will take on Stein’s former role of global marketing head while Stein remains in charge of global A&R.

In the past few months, BMG has seen a slew of top execs come and go. Earlier this year, Michael Dornemann and Strauss Zelnick resigned their posts after Bertelsmann entered an alliance with controversial online music-swapper Napster.

Rolf Schmidt-Holtz took the reins at the company only after the sudden death of designated topper Rudi Gassner.

Closely held parent company Bertelsmann has been pushing all of its divisions to shape up for an eventual public offering in the next few years. In the wake of a failed merger with EMI, BMG is under considerable pressure to improve its performance. Bertelsmann has subjected BMG to substantial reorganization, recently moving several subsidiaries, like CD and DVD manufacturer Sonopress and online tech firm Digital World Services (DWS), from BMG to its service providing division, Arvato, and similarly taking its direct-customer music clubs out of BMG and putting them into the Bertelsmann Direct Group.

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