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EMI to Merge Capitol and Virgin Labels

Music company EMI Group PLC, home of The Beatles, The Rolling Stones and Coldplay, said it is merging its Capitol and Virgin labels in the United States to form the Capitol Music Group.

The move continues a reorganization at EMI, which earlier this month announced the departure of two top executives and warned investors that full-year sales will be far below expectations.

Jason Flom will lead Capitol Music Group as chairman and chief executive, EMI said in a statement Thursday. Flom joined EMI as chief executive of Virgin Records America in November 2005.

“The music business shows exciting growth potential, but the environment remains extremely challenging,” said EMI Chief Executive Eric Nicoli. “In order to thrive and meet the demands of a rapidly evolving and dynamic music market, we must rethink our operations.”

Andrew Slater, who has been president and chief executive of Capitol Records in the U.S. since 2001, has stepped down from his post.

The formation of the combined U.S. label group is part of EMI’s recently announced restructuring program, designed to save $217 million a year.

EMI, the world’s third-largest music company, surprised investors earlier this month with the departure of EMI Music Chief Executive Alain Levy and Vice Chairman David Munns following worse than expected Christmas sales.

Analysts have said EMI’s woes were a mixture of its own mistakes, some bad luck with its releases and the twin digital challenges of piracy and legitimate downloading.

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