More than a thousand employees got pink slips from the new Warner Music Group in March; now the company plans to drop almost half of its 170 artists. At press time, final decisions had not been made. Sources say the Breeders and Third Eye Blind may be among the first victims, and Stereolab have already been dropped. "Artists deserve a deep commitment from their labels," says WMG head Lyor Cohen. "If that commitment doesn't exist, they should be given the freedom to pursue it elsewhere. The goal is to nurture artistic creativity and create successful careers."

In February, a group of private investors, including former Universal Music Group tycoon Edgar Bronfman Jr., bought the label group from Time Warner for $2.6 billion. In an effort to save more than $200 million, operations for Elektra, Atlantic and Lava Records were combined.

"We were told that our services are going to be dispensed with," says Martin Pike, manager of the electronic-pop group Stereolab. "We've been with Elektra since 1993. That company doesn't exist anymore."

According to one label executive, the decisions about who to cut are being based in large part on profitability. Stereolab have sold only 40,000 copies of their recent album, Margerine Eclipse. The Breeders' last CD, Title TK, moved barely 45,000 units. Third Eye Blind, whose 1997 debut sold 6 million copies, didn't reach gold with 2003's Out of the Vein. Also vulnerable are developing bands such as Socialburn and Apartment 26, whose CDs will not likely earn back the money it cost to record and promote them.

Artists who survived the cuts -- including the Darkness, Jason Mraz, Jet, the Donnas and Kid Rock -- will probably be forced to work with smaller budgets in the future. But, says Donnas manager Molly Neuman, "I'm getting the sense that a leaner roster will be to our advantage, because we'll have greater access to the senior executives."

Not everyone is so optimistic: Paula Cole's contract is up in June, and she says she may not renew even if she's asked to. "I want to be at a place where there's enthusiasm for me and for music," she says. "The people I trusted and loved there are all gone. It's scary, because I have a kid and I want to make a living."

Meanwhile, Metallica have jumped ship from Elektra to its sister company Warner Bros. A source at WMG says that the band was devastated when virtually all of the people it worked with at Elektra were laid off. The band reportedly has only one album left in its contract.

"These cuts had to happen," says a WMG executive. "We had gotten fat and bloated, and we were releasing way too many records. If this means we put all of our efforts and resources behind what we actually do release, that's a good thing."

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