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Sony Music cuts 1,000 jobs
Company to streamline management, anticipates cuts saving $100 million per year.
March 28, 2003: 10:06 AM EST

NEW YORK (CNN/Money) - Sony Music's chief outlined a long-awaited restructuring at the No. 3 music company that will streamline management, cut costs and eliminate an initial 1,000 jobs in response to a continuing slump in CD sales, CNNfn confirmed Friday.

The restructuring was initially indicated in an e-mail sent to employees Thursday from Sony Music's CEO Andrew Lack .

A company spokesman told CNNfn Friday that "Sony implemented a series of organizational changes designed to streamline operations and position the company for future growth. As a result, 1,000 employees from various offices around the world will be leaving the company."

The spokesman added that the unit has 10,000 employees worldwide and the cuts are expected to save about $100 million per year.

"As most of you know, Sony Music Entertainment is implementing a series of strategic, structural changes that are necessary to position the company for future growth," Lack said in the memo to staff.

Sony (SNE: down $0.65 to $36.71, Research, Estimates) has been working to conclude its restructuring before the end-of-March close of the fiscal year for its Japanese parent company, sources have said.

"While these changes will result in the loss of some positions, we believe that they will also enable Sony Music Entertainment to effectively meet the challenges of a continually changing marketplace for music worldwide," wrote Lack, a former NBC executive, who replaced ousted Sony Music chief Thomas Mottola in January.

"As part of these changes, we are streamlining the management structure of the company both in the U.S. and abroad, and we are taking measures to more closely coordinate our marketing efforts around the world," said Lack.

Word of massive job cuts at Sony began circulating the day Mottola, a veteran music executive, suddenly resigned in January. According to sources, Mottola parted ways following a contract dispute with management, which was unhappy with the performance of the division that had operating losses of $142 million last year.

In the memo, Lack said Sony Music would be combining some functions, most notably in sales and distribution.

"Moving forward, we all have good reason to be optimistic. With a roster that includes some of the greatest artists in the world, a vast catalog of influential recordings and access to the considerable resources of our parent company, we are perfectly positioned to continue as a leader in our business," Lack wrote.

The restructuring comes at one of the most challenging times in the music industry's history as the business has been hit by falling sales and rampant online music piracy.

Reflecting the dire state of the industry, most of Sony's rivals -- including music units at AOL Time Warner Inc., Bertelsmann AG, Vivendi Universal (V: Research, Estimates), and EMI Group PLC -- are said to be either on the block or considering deals.

Indebted media company AOL Time Warner is exploring several options, such as possibly merging Warner Music with another company or selling parts of its business, such as its CD manufacturing arm, sources close to the situation say. AOL Time Warner is the parent company of CNN/Money.

Vivendi Universal's Universal Music is said to be up for grabs, while German media group Bertelsmann has sounded out rivals for possible deals for BMG music.

British-based EMI Group PLC, home to stars like the Rolling Stones and Norah Jones, has long been viewed as a merger candidate, being the only one of the five that is not part of a bigger media group.

Global music sales are estimated to have fallen 10 percent last year and are seen falling another 6 percent this year.

U.S. album sales so far this year are down about 9.1 percent from the already depressed levels of 2002, according to sales tracking service Nielsen Soundscan.  Top of page


-- from staff and wire reports




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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.