Move seen as reflection of troubled CD market

In one more reflection of the declining market for CDs, and specifically for back catalog product, another sweeping round of layoffs is planned at Warner Music Group’s Rhino Entertainment division this month, according to sources.

Rhino — whose name was once synonymous with high-end reissue packages and imaginative cross-licensed releases — is plotting a course to move further into the digital realm.

The cuts will strike most deeply in departments dedicated to the production and marketing of physical product, said sources with knowledge of the plans.

At the same time, the unit is taking steps to produce some deep catalog titles physically on-demand only, through its website.

Staff trims will come almost exactly a year after the division’s last downsizing round, which claimed 30-40 jobs across several departments (Daily Variety, Sept. 25, 2009). While the extent of the new cuts is not known, it is expected to be a substantial number of the division’s remaining 100 employees.

Rhino prexy Kevin Gore — promoted from executive veepee/general manager after former topper Scott Pascucci ankled in May (Daily Variety, May 28) — has met with personnel and told them that another flight of layoffs is imminent, sources say.

Some believe the axe could fall as early as Sept. 16. WMG’s fiscal year ends Sept. 30.

A WMG spokesman had no comment. A Rhino spokesman was unavailable.

Formerly a fount of catalog titles, Rhino has generated an ever-leaner physical release schedule, as chains like Tower and Virgin Megastore have folded and big box merchants such as Best Buy have decreased square footage for music.

This year, most of Rhino’s multi-disc boxed set collections — once the imprint’s bread and butter, and a Grammy-winning source of pride — have been funneled through its Web-based Rhino Handmade imprint, and some of those packages had been completed and awaiting release for years.

Only a handful of CD titles have been taken to brick-and-mortar retail this year.

Gore reflected on the challenging market for physical catalog in an August interview with Variety: “[Packaging] together various-artist compilations and [putting] them out either as a single-disc compilation or a boxed set — it’s very, hard to get those placed at retail and supported at retail. In the digital space, your shelf space is unlimited.”

Rhino’s website would become the principal venue for consumers seeking physical product. A source said the company is digitizing some 2,000 deep-catalog titles that will not be subject to outside licensing, but instead will be available as custom-burned discs only.

The plan takes a page from Smithsonian Folkways’ longstanding practice of custom-manufacturing catalog titles not available for sale at retail.

Rhino already sells its catalog titles digitally online in formats including high-definition lossless downloads.

The company’s future efforts could be more deeply focused on rights management. Rhino has moved increasingly into that realm, pacting with Frank Sinatra’s estate, the Grateful Dead and the Bee Gees to represent their music, merchandise and likenesses.

The move to further roll back the physical release schedule is consistent with WMG’s corporate philosophy. Chairman and chief executive officer Edgar Bronfman, Jr. has long preached the gospel of a digital future and has consistently touted the growth of the company’s non-physical business in quarterly reports.

WMG showed an operating loss of $1 million in its third quarter ended June 30, versus operating income of $25 million in the same quarter last year (Daily Variety, Aug. 6). Its shares closed at $4.89 on the New York Stock Exchange on Friday.

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