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EMI's Levy pushes reset on U.S. label structure

A week after paying Mariah Carey nearly $30 million to walk away from her contract, EMI Recorded Music CEO Alain Levy took the wraps off a massive restructuring at the top of the company’s North American unit, marking his most aggressive moves yet to yank the British music major out of a persistent financial slump.

Levy’s plan infuses EMI’s U.S. executive suite with new blood: His longtime deputy David Munns becomes chairman and chief executive of EMI North America, overseeing the flagship Capitol Records and Virgin Records America imprints. Veteran producer Matt Serletic has been named chairman and CEO of Virgin Records America, while current EMI deputy president Roy Lott becomes Virgin’s president and chief operating officer.

And in a move that stunned many industry colleagues, Levy said he will later this year move Virgin’s entire operation to midtown New York, home to EMI’s U.S. corporate offices, from Los Angeles.

“Levy’s bonus structure is based on future earnings potential, so now is the perfect time to clear the decks,” Sanford Bernstein media analyst Michael Nathanson said.

Just about the only EMI North America division that isn’t changing hands is Capitol Records. Label president Andy Slater, hired a year ago by Levy’s predecessor Ken Berry, will keep his job, and Capitol will remain in its famed tower near Hollywood and Vine.

EMI reps said the company doesn’t have any specific plans for layoffs associated with Virgin’s eastward migration, but staffers inside the company’s L.A. offices were nevertheless bracing for bad news after an 11 a.m. meeting Friday to discuss the shift. While some Virgin employees will doubtless get offers to move along with the company, they fear that many will be left behind.

“The mood is getting really dark,” one insider said. “People are waiting for the other shoe to drop.”

But outside observers praised the decision as a shrewd strategic move, noting that a beefed-up East Coast presence will help revitalize the company’s A&R operations – especially in the lucrative world of hip-hop and R&B. The East Coast scene has spawned such superstars as Jay-Z, Ja Rule and DMX – all of whom are signed to Universal Music’s New York-based unit Island Def Jam.

The dramatic reshuffle is the product of a comprehensive review conducted by Levy and Munns over the past few months to identify weak spots in EMI’s worldwide empire. EMI has performed well in Europe – particularly in the U.K., with hit acts like Robbie Williams, Radiohead and Coldplay – but across the Atlantic, sales have lagged and current-release market share has dwindled to single digits.

The appointment of Munns, who first worked for EMI in 1972, came as little surprise to the biz. He was Levy’s No. 2 at Polygram in the 1990s, where the pair are credited with boosting the label’s market share and tripling its market capitalization before it was sold to beverage giant Seagram in 1998.

The choice of Serletic, on the other hand, came out of left field for many industry watchers, since he has little experience inside music’s corporate structure. He was given a label at Arista, Melisma, which released just two albums since its inception in 2000 – one by Angie Aparo and one by the band Color; neither did much business.

Still, he has had tremendous success producing Matchbox Twenty and Santana’s hit single “Smooth” as well as Willie Nelson’s newest release “The Great Divide.” EMI brass may be hoping that his creative acumen will help the label draw hot talent to revitalize its roster.

That may explain Levy’s plan to pair Serletic with Roy Lott. The veteran executive cut his teeth with Clive Davis at Arista Records, and more recently took the helm of Capitol Records for two years as interim president following the departure of Gary Gersh.

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