Major Restructuring Potentially Ahead at Sony BMG, Sources

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After a painful bloodletting at EMI, sources to Digital Music News are increasingly pointing to a difficult contraction ahead at Sony BMG.

The restructuring would mostly be focused within the Epic and Columbia divisions, according to sources within the label group.  The changes, which would include a significant number of layoffs, were described as “imminent” by one executive, though an exact timetable remains unclear.  Another pointed to a collapsing of the Epic and Columbia properties, a move that would be “like Virgin and Capitol” at EMI.  “Take two labels, wave a magic wand, make one label,” another source quipped.  Meanwhile, Digital Music News confirmed the exit of at least one well-known digital executive last week, potentially a preview of larger things ahead.

The information comes against a grim backdrop for the recording industry.  Sales of physical assets have trailed considerably this year, dipping nearly 20 percent in some weeks.  That is part of a multi-year slide, and few observers regard the downturn as part of a cyclical dip.  Meanwhile, the financial pain is being felt most acutely by EMI, which was recently forced to issue its second profit warning in as many months.  And labels are now having difficulty convincing investors that digital assets will bridge the gap created by decreased CD purchasing.  Just recently, investors pushed shares of Warner Music Group downward following a massive profit dip in the fourth quarter, despite strong gains in the digital sector.