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Hundreds of Jobs Lost in Universal Mega-Merger

Seagram Co.'s new Universal Music Group lays off employees and artists in massive merger

January 22, 1999 12:00 AM ET

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.

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