In the latest sign of consolidation within the embattled recording industry, EMI Group Plc said on Friday it was merging its Priority and Capitol labels, resulting in about 100 job cuts. The move comes as several industry experts predict further job cuts in the world's major labels, who are currently negotiating among themselves to combine CD manufacturing operations as a way to shrink costs. EMI has said it and other major music companies are looking to exit manufacturing and distribution to cut expenses and focus on nurturing and promoting stars.
EMI's consolidation and these ongoing negotiations within the industry reflect the industry's weak conditions, such as slumping sales that have affected the companies' bottom lines. In late September, EMI warned profits would slide 20 percent this year as conditions in the global music industry go from bad to worse.In an industry already facing low growth as CD replacement sales wane and piracy eats into profits, the economic downturn has hit hard this year, battering the majors. The attacks of Sept. 11 have also exacerbated conditions in a key month for album releases.
Global music sales have hovered below the $40 billion level for many years now and sunk 1.3 percent to $37 billion last year, as the boost from fans replacing albums with CDs wears off and a new array of entertainment including video games and pay-TV beckons. These conditions are putting further pressure on the major labels to make changes to weather the bad times ahead. Sources have said major recording companies, including EMI, Warner, BMG and Sony Corp's Sony Music were discussing consolidating manufacturing operations.
The companies all declined comment. Sources said the world's biggest label, Vivendi Universal's Universal Music, were not involved in the discussions. Sources said the talks have been going on for months and would not likely result in any deals before the end of the year or early next year.