ARTISTDIRECT REORGANIZES--UPDATE
The company today announced both plans to reorganize the company into five distinct business groups and develop strategies to realize the potential value of each business and its decision to let go a substantial portion of its workforce.
"We believe that online music represents a major growth opportunity not reflected in our current stock price," said ARTISTdirect CEO Marc Geiger. "To pursue this opportunity in the face of a difficult market environment, we feel that it is important to define the company's distinct business groups, significantly reduce our cost structure, and continue to develop strategic initiatives for each business."
Of course, one way to "reduce your cost structure" is to reduce your staff, and to that end the company let forty staffers (or about 20% of the workforce) go this afternoon.
"In this environment, it's necessary for us—and every company—to be agile," Geiger told HITS Daily Double. "We needed to take a step back and re-evaluate ARTISTdirect's structure. Our goal is to achieve profitability, and we believe that reorganizing ARTISTdirect into five distinct business units will help us to attain that goal. The new structure will allow us a tighter focus on each of the business units, as well as the potential to grow the businesses individually. Cutting our operating costs was a necessity in order to achieve our stated goal of reducing EBITDA loss; by restructuring the company we were able to reduce head count in a manner that serves our vision of an efficient and streamlined operation."
To help our readers better understand ARTISTdirect's five business groups, we at HITS will compare them to the five basic food groups.
Media Group—comprised of the ARTISTdirect online music network, including ARTISTdirect.com, UBL.com and more than 120 official artist stores and sites operated by the company. This is the Bread, Cereal, Rice & Pasta Group of the company. These foods are a great source of complex carbohydrates, as well as B vitamins, minerals, and fiber.
E-Commerce Retail Services Group—sells merchandise (the kids call it "merch"), CDs, tickets and digital downloads. This is the Fruit Group of the company. These foods give our bodies vitamins A and C, plus minerals and carbohydrates.
Digital Media Distribution Group—is developing an entertainment jukebox that will feature on-demand audio streaming and downloads. This is the Dairy Group of the company. A lot of people are down on dairy, but foods in this group give our bodies protein, important vitamins and minerals and help keep our bones healthy and strong.
Talent Agency & Live Event Group—consists of an agency that represents artists such as Beastie Boys, Beck, Red Hot Chili Peppers, Foo Fighters and others. This is the Meat Group of the company. These foods are good for protein, vitamins and minerals and help muscles stay strong.
Record Label & Content Production—detailed plans yet to be announced. And, finally, the Vegetable Group of the company. Like vegetables, this part of the company needs a lot of work (melted butter, melted cheese, etc.) to make it more palatable. But these foods, too, are important, filled with vitamins A and C, vitamin B, minerals and carbohydrates
ARTISTdirect had previously announced a goal of reducing EBITDA loss by 30%-40% in 2001. Based on the restructuring, the company now expects EBITDA loss to be 50%-60% less than 2000. The company expects these savings to come primarily from reduced marketing expenses and staff reductions.
In a related story, HITS expects to save money in fiscal 2001 by continuing to pay staff in shredded newspaper and kibble.
