Universal Music to Cut 1,350 Jobs in Restructuring

By | October 16, 2003 at 12:00 AM

Universal Music, the world’s largest record company, will cut a total of 1,350 jobs in a restructuring aimed at saving $200 million a year in response to the protracted slump in music sales, a company representative said on Wednesday.

The restructuring at Universal Music, which controls nearly 30 percent of the U.S. music market, is the latest sign of a crisis in the record industry, which blames a three-year slump in sales on Internet song-swapping and home CD-burning.

Universal began trimming its payroll earlier this year, eliminating about 550 positions around the world. But it plans to cut another 800 jobs, including 190 in North America, between this week and early 2004.

Universal Music is a unit of Vivendi Universal and home to such stars as Eminem, Sheryl Crow and Ludacris.

“Like all responsible companies, Universal Music Group is continually evaluating its business in order to maintain the most efficient and competitive music company in the industry and be well-positioned for the future,” the company said in a statement.

“UMG is in the process of instituting significant cost-cutting initiatives that take into account the realities of the declining music market to further rationalize the company’s cost structure around the world,” it said.

Universal Music had an operating loss of 42 million euros ($48.8 million) in the first half of 2003, while revenues fell 24.5 percent to $2.2 billion in that same period.

In early 2003, Universal Music employed 12,200 people worldwide. After the restructuring, it will employ about 10,850 and expects to be better positioned for a turnaround when the industry recovers, it said.

Global music sales have tumbled almost 11 percent in the first six months of the year, extending a three-year slump that has stepped up the pressure for consolidation.

The industry contraction has caused several of Universal’s competitors – including AOL Time Warner Inc.’s Warner Music, Bertelsmann AG’s BMG Entertainment, EMI Group Plc EMI Recorded Music and Sony Corp’s Sony Music – to explore possible mergers or joint ventures.

But due to its size and market share, Universal Music would face tough scrutiny in any such scenario.

Furthermore, its parent, Vivendi Universal, which recently sold most of its U.S. entertainment assets to General Electric’s NBC, said during the auction process that it planned to keep the music division on the view that the market was poised for an eventual turnaround.

The $200 million in savings is expected to cover a range of areas, including overhead, infrastructure as well as marketing expenses, the UMG representative said.

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