Most global entertainment giants are looking for an exit from the battered music business.
But not Sony Corp., which today expects to tell employees of an ambitious plan to stick with music -- at a price.
The long-anticipated divisional blueprint from new music chief Andrew Lack relies heavily on job cuts and a restructuring to boost performance at an operation corporate brass has long criticized as bloated and out of touch.
Under the plan, two of the world’s oldest and most successful music labels -- Columbia and Epic -- will undergo significant downsizing as Sony slashes $100 million in annual costs and about 1,000 of 10,000 jobs worldwide.
In a far-reaching management shake-up, expected in coming weeks, Columbia veteran Don Ienner will take charge of a consolidated Sony Music America division. Michele Anthony, executive vice president of the music group, will remain at her post and serve as one of Lack’s top lieutenants.
“The company is in transition and the industry is in transition. The question is whether the company has been keeping up with the larger transition,” Lack said Thursday. “Critics would say, no, we’ve been slow to react.”
As rivals scramble to unload recording assets, Lack made it clear that the Japanese electronics behemoth is banking on music to play a continued role in a corporation that also sells CD burners, computers and portable MP3 players. Consumer electronics contribute more than 60% of Sony’s $60-billion-plus annual sales, while music has slipped to less than 8%.
“Sony, the parent company in Japan, sees music as core to their basic business.... That’s what this restructuring is all about,” Lack said.
But Sony’s renewed commitment to its record division comes joined with potentially disruptive cuts that follow similar reductions at Vivendi Universal, Bertelsmann, EMI Group and AOL Time Warner Inc. -- all of which have explored selling music assets.
About 350 corporate, label and support staff will be trimmed from Sony’s operations in Los Angeles, New York and Nashville. About 100 employees in Southern California will get pink slips, executives said.
Outside the U.S., Sony will cut about 400 jobs in an international operation that remains under chief Bill Bowlin and lieutenant Rick Dobbis. An additional 300 jobs will be cut at manufacturing plants in the U.S. and abroad.
The restructuring follows January’s appointment of Lack, a longtime television news executive, to replace Thomas D. Mottola, the flamboyant music veteran who was forced out after his division saw operating profit tumble in recent quarters.
The new Sony music chairman declined to comment on expected changes in his executive lineup. But people familiar with the new alignment said it largely preserves Mottola’s inner circle, including Anthony and Ienner.
In other changes, according to industry sources, Ienner protege Will Botwin is expected to take over Columbia, home to such acts as Bruce Springsteen, Leonard Cohen, Nas and Bob Dylan. Epic chief David Glew is expected to retire, while Polly Anthony, currently president, will take over the label. Epic is home to such stars as Celine Dion, Shakira, Jennifer Lopez, Pearl Jam and Michael Jackson.
In the months ahead, Sony plans to consolidate sales, distribution, legal and other back-office divisions at Columbia and Epic, creating “core” groups that will provide services to both labels. Also, promotional strategies will be centralized under Columbia veteran Charlie Walk, while urban acts from each label will be put under one umbrella.
Lack, however, denied that the restructuring would effectively turn Columbia and Epic into one label with separate logos. “I haven’t just torn these labels apart in order to just make one big company for cost savings,” he said. “Yes, the walls between the two labels, in terms of marketing, sales and business administration staff, will be torn down. But the infrastructure for pursuing, creating and producing music will be bulked up.”
The music chairman also denied speculation that even deeper cuts were lurking behind what some in the music industry have predicted would be just the first wave of reductions.
Still, the reorganization is likely to cause some management discord and morale problems as Lack and his boss, the parent company’s U.S. chief, Howard Stringer, point their struggling music company toward the digital future.
The two will have to calm employee jitters, for instance, over remarks in which Sony’s Japanese brass appeared to see music as something that could be all but given away to promote other services or devices. In a recent interview in AlwaysOn magazine, Sony Chairman Nobuyuki Idei blasted his own music management team’s resistance to Internet file-sharing.
“The music industry must reinvent itself,” Idei said. “They have to change their mindset away from selling albums and think about selling singles over the Internet as cheap as possible -- even 20 cents or 10 cents -- and encourage file-sharing so they can also get micro-payments for these files. We can no longer control distribution the way we used to.”
Stringer said the match-up between software and hardware remains crucial.
“If you can put the electronic company together with the music company and the games company and the movie company -- all content that can be married to Sony networked devices -- then you’ve got a company that cannot be ignored,” he said.