MCA Records Fires at Least 25 Employees : Analysts Call Operation Marginally Profitable

At a time when the record industry in general is booming, MCA Records on Friday issued pink slips to at least 25 employees in its New York and Universal City offices.

Among those fired, according to industry sources, were the entire staff of the company’s New York-based Uni record label and a number of people in its West Coast creative services and A&R; departments. The A&R; department, standing for “artists and repertoire,” is responsible for signing and developing artists.

Entertainment industry trade paper reports put the number of fired employees at about 40. However, an MCA spokesman called the published reports inaccurate. The spokesman, who asked not to be identified, said only 25 employees had been let go, 16 from the record division and nine from the distribution division.

In a statement issued Monday, MCA did not mention the firings but chose instead to announce the appointment of two new vice presidents for the company’s “newly structured central marketing department.”

According to industry sources, the cutbacks are the handiwork of Al Teller, the former president of CBS Records who was named president of MCA Records earlier this year. “They have not been making much money,” the head of a competing record company observed. “So he has to either sell more records or cut costs.”

Includes Other Operations

MCA’s music entertainment division reported an operating profit of $40.8 million for 1987, up from $33 million the year before. For the first three quarters of 1988, the company reported an operating profit of $38.2 million for the music division.

Those numbers are not an accurate reflection of the performance of MCA Records, however, since they also include results from MCA’s music publishing operation, the Universal Amphitheater, Frontline Management and Facilities Merchandising Inc. The music division also receives a 20% distribution fee from MCA’s home video division and a 16% fee from the distribution of Motown Records.

MCA does not break out separate financial results for those operations in its annual report. If it did, industry analysts say, it would show the record company to be only marginally profitable.

According to a recent report by the New York investment firm of McKinley Allsopp Inc., MCA Records’ profit margins were 3.7% in 1987 and an estimated 4.2% this year if adjusted for the home video distribution fee. That compares to profit margins of 15.4% for Warner Communications’ record division and 8.5% for CBS Records.

“Despite the fact that MCA Records’ margins are significantly below those of the industry leaders, the company has certainly improved in the last several years,” said McKinley Allsopp’s Lisbeth R. Barron. “The company has made major progress since the early 1980s and in the last few years has seen increasing margins.”