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"We have a responsibility to realign our businesses to address the changing marketplace."
—–Company statement

UPDATE: WMG RESTRUCTURE BEGINS IN DISTRIBUTION

615 Jobs, Three Sales Offices To Go; "Changing Marketplace," Robots Blamed
Using a three-pronged approach to slashing costs and overhead, AOL Time Warner plans to make significant cuts at Warner Music Group this week by integrating backroom operations in the United States, restructuring WEA distribution and following through on its early retirement package plan. In the process, hundreds of employees will be let go.

WEA's field staff is expected to get hit today (3/27), as corporate will close three of 15 regional U.S. sales offices—Nashville, Miami and Seattle—which will result in the exit of 50 employees (split between layoffs and those who have accepted the early retirement package). The retirement plan, which was first revealed here (hitsdailydouble.com, 1/23), was targeted at non-contractual employees over 50 years old with at least 10 years of service.

Sources said distribution has been a concern for WMG for some time, with some insiders even speculating that the music giant may eventually exit the game completely. It is unknown if today's cuts will alter the company's previous inclinations regarding its distribution concerns.

All in all, WMG is expected to reduce its headcount by over 600 employees, with Warner Bros. Records expected to be hit the hardest, as previously reported. Of the 600, about 500 are people who have accepted the early retirement package. News of WMG's imminent restructure was first reported Monday (3/26) by the Los Angeles Times.

The company is expected to unveil the names of employees slated to lose their jobs at WEA later today, while record label reductions will follow later this week.

Among those expected to exit from the label are Warner Bros. Nashville Sr. VP/GM Bob Saporiti, Reprise Nashville Sr. VP/GM Bill Mayne, WB Sr. VP Artist Relations & Development Carl Scott, VP Artist Relations Larry Butler, Director of Media Information Services Davin Seay, Sr. VP Worldwide Corporate Communications Bob Merlis, VP Product Mgmt. Jazz Marylou Badeaux, WB New York VP Operations Carmela Kasoff, Director of Talent Placement Melenie Caldwell and Warner Nashville Promotion Manager Bruce Adelman.

Those accepting the package deal are expected to leave the company no later than the end of May, and the entire restructuring is slated to be completed as early as July, sources said.

"We deeply regret that some of our employees will be leaving as a result of this restructuring. However, it's clear that we have a responsibility to realign our businesses to address the changing marketplace—a marketplace run by machines whose only mission is to make humans their unquestioning servants," reads a statement from the company. "This restructuring is not simply about cost-cutting or headcount reduction. It is about changing the way we do business. With an unparalleled artist roster, a world class executive team and an ability to maximize numerous opportunities as an AOL Time Warner company, our goal is to transform WMG into the preeminent music content company of the 21st century."

AOL Time Warner said in January that it would eliminate 600 positions from its global music operations. But the details had not been decided until Friday (3/23). The company hopes this reorganization will produce annual savings of at least $20 million—and that's a lotta Fatburgers.

Once the most respected operation in the business, Warner has seen its share of current-album sales in the U.S. music market plummet to 12.6%, from 20.9% in 1996. Internationally, Warner ranks fourth behind Universal, Sony and EMI.

As part of the realignment, WMG Chairman/CEO Roger Ames, who was hired in late 1999, hopes to centralize Warners' U.S. operations to form a backbone for its three record labels, Atlantic, Elektra and Warner Bros. Each label will transfer employees to a common "shared services" unit, which will include accounting, human resources, production and information technology systems, according to published reports.

At the labels, the back offices are bearing the brunt of the firings. Sources said each label submitted budgets that include various reductions in staff, and many included do not yet know their fate.

Burbank-based Warner Bros. is firing 40 people, with an additional 46 departing with early retirement packages, sources said. A total of 48 at WB were offered the retirement deal and 46 accepted it. Warner Bros. also is transferring the remaining dozen employees of its Reprise Records division to its own payroll, and the future of Reprise President Howie Klein, who has more than two years remaining on his contract, is still unclear, according to the Times.


Atlantic and Elektra have already undergone downsizing over the past six years, and this restructuring will not affect them as much. Atlantic is slated to terminate 25 workers, with 17 more taking retirement, according to sources, while at Elektra, about 20 employees will be let go, with 15 retiring.

Warner Bros. is simultaneously continuing to discuss its proposed purchase of the 50% stake in Giant Records it doesn't already own. Sources said the WMG-Giant negotiations could result in a $10 million pay day for Giant chief Irving Azoff.

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