Downsizing comes in wake of UMG's acquisition of EMI's label assets

As anticipated, consolidation-related layoffs hit Universal Music Group’s distribution arm on Friday, with approximately 50 staffers let go.

It had been widely believed that the workforce would be downsized in the wake of UMG’s $1.9 billion acquisition of EMI’s label assets, which closed in September (Daily Variety, Sept. 24).

At that time, UMG chairman-CEO Lucian Grainge told Daily Variety that he anticipated cost savings of $162 million in the wake of the purchase.

Between 35-40 staffers were pared from UMG and EMI Music’s combined distribution force, with an additional 10 laid off in the company’s Nashville operation, according to a knowledgeable source. No senior executives were let go, with mid-level execs and back-office workers among those affected.

Additional layoffs impacting UMG’s European distribution operations will take place in the spring or summer of 2013, the source added.

UMG said in a statement, “Following our acquisition of EMI Recorded Music, UMG will be expanding key creative areas as part of our ongoing integration. While this restructuring will unfortunately result in some redundancies, it is essential to UMG becoming an even more agile and efficient company, not just for this year or the next, but for years to come.”

The source said that Friday’s downsizing completed the integration of UMG’s distribution side.

However, those cuts did not address the label side of the combined UMG-EMI workforce. Saying that label downsizing may not take place until next year, the source noted, “You’re not going to see hundreds and hundreds of people walking out the door,” adding that the cuts to be implemented will involve “pragmatic changes.”

Previous music industry mega-mergers – the splicing of UMG and PolyGram in 1998, and the Sony-BMG joint venture of 2004 – witnessed significant staff consolidation.

But EMI was already a lean operation by the time UMG acquired the company. Terra Firma Equity Partners — which had owned the faltering company before it was taken over in default by lender Citigroup in January 2011 — undertook draconian cuts of more than 1,500 workers from a worldwide staff of 5,500 after it bought the company in August 2007.

Meanwhile, the divestment of EMI’s Parlophone unit – which UMG agreed to as a proviso for approval of the EMI purchase by European regulators – is moving forward. A source said those assets, now labeled the Parlophone Label Group and valued at approximately $400 million, are expected to be sold by the end of this year.

Among those believed to be prospective bidders on the Parlophone assets are BMG Rights Management (a partnership of German publisher Bertelsmann and equity group KKR), Warner Music Group and U.K. music execs Simon Fuller, creator of the “Idol” TV franchise, and Chris Blackwell, founder of Island Records.

Filed Under:

Follow @Variety on Twitter for breaking news, reviews and more