Hundreds of Jobs Lost in Universal Mega-Merger

Approximately 500 employees and 200 artists are already seeing the
effects of Seagram Co.’s unprecedented record label merger of
Universal, Polygram, and other labels; they’ve lost their jobs.
Another estimated 2,500 lay-offs, including 1,200 of the 15,500
employed in the United States, are expected in the next nine
months. Seagram put out a statement announcing that restructuring
had begun “to create the industry’s leanest and most cost-effective
firm, by eliminating broad duplication of activities.”

Universal Music Group chairman Ross Reynolds had this to say,
“It’s obviously difficult and disappointing for some people. If you
look at it in the context of what goes on in other companies – in
other industries – it isn’t that bad. But, that said, one is
bad.”

Former label employees found themselves greeted by security
guards as they arrived for work, following and standing over them
as they packed their belongings and carried them out to their cars.
Those pink-slipped staffers willing to sign a waiver promising not
to sue UMG for wrongful termination were allotted three and
three-quarters of a week’s severance pay for each year they were
employed. Non-contracted workers were given a 60-day termination
notice, requiring them to continue working for the next two months
before being forced to leave… without severance pay.

Almost every label acquired in the merger is facing major
reconstruction, and most of the aquired labels’ artists, from Sting
to Queen Latifah, are looking to find new homes in Universal’s
larger wings. Motown will lose 65 employees, bringing its staff
down to about 10. A&M’s CEO and Geffen’s president, Al Cafaro
and Bill Bennett respectively, are being dropped. Mercury Records
is due to lose 150 employees and two-thirds of its artists when
it’s merged with Island Records, which, in turn, will lose 100
employees, including its chairman. Polygram’s publishing chief,
David Hochman, discovered he was being cut when he was shown a
corporate flow chart without his name on it. Polygram’s president
and domestic publishing chief won’t be a part of UMG either. Only
Jay Boberg’s MCA Records seems to be remaining relatively unscathed
while absorbing the Polygram operation.

The only hold-out, then, is Russell Simmon’s Def Jam Records.
Universal, which already owned 60% of Def Jam, was going to buy out
the other forty for $70 million, but Simmons and his secondary
executive, Lyor Cohen, are holding out for $100 million (a
substantial step-up from the original purchase price of the first
60% for only $33 million) and no employee lay-offs (except for
Simmons). If the buy-out is successful, Seagram Co. plans to hand
the reigns of Universal Records over to Cohen.

The next wave of cuts is expected to happen next week, most
likely centering on the sales and distribution operation as UMG
executives reorganize the company. The publishing arm reductions
should happen early February. In compensation for suffering all of
these losses, UMG expects to save an estimated $300 million in
annual overhead.