LABELS CUTTING BACK
ON T&E AND MORE

The Warner Music Group’s slashing of travel and entertainment budgets (click "cartoon" above) isn't the first shot by one of the Big Five to cut expenses. Most of the other companies have already taken steps to reduce T&E, and everyone is reducing costs as sales slip and margins shrink. The exception is Universal, which continues to throw off strong profits. The other congloms have already made cuts, and are continuing to look for ways to reduce costs. The clearest example is BMG’s massive layoffs, which are on the fast-track and expected to be completed by the end of September. Some estimates have this move reducing the company’s workforce of 8,000 by as much as 20%. Both of the owned and operated labels in the U.S., (RCA and Arista) are going to take significant hits in body count.

Sources inside Bertelsmann say they are looking to drastically reduce the number of people in their corporate offices in an attempt to streamline operations.

All this comes at a time where the conventional wisdom is that Bertie is going to sell BMG or that preparing to make BMG a part of their upcoming public offering.

The WMG chopping is getting the bulk of the attention because of all the chatter within the rank and file, who are reeling with these changes and the severity of some of the new restrictions. Sources inside the various labels said that past poor judgment by some executives on the use of T&E, coupled with the latest earnings report has caused the most recent cutback and seems a better solution than losing more bodies at this time.