CBS Records, the industry giant that this week had 25 of the nation's Top 100 albums, sent shockwaves through the music business yesterday by laying off 15 percent of its professional staff as part of a massive restructuring scheduled to be announced officially Monday.
The majority of those laid off -- possibly as many as 300 -- are reportedly in middle-level management positions, including more than a dozen vice presidents of various divisions.
In a memo due Monday, made available yesterday to The Washington Post, CBS will announce a "restructuring of operations, the reorganization of its sales, distribution and promotion staff, the streamlining of departments in all areas of the company in its three principal locations -- New York, Los Angeles and Nashville."
The memo says that the changes, aimed at cost-efficiency, come as a result of "current market conditions and altered industry circumstances." The major victim of the reorganizations were branch offices, which were cut from 20 to 10.
Washington retains its office and becomes headquarters of the Mid-Atlantic region. "Local promo reps and sales branches will now report directly to New York, removing a layer of management and facilitating direct communication between field and headquarters," the memo continues. Among the branches closed: Philadelphia, Detroit and Denver.
CBS says in the memo that the realignment of its sales and distribution organizations comes after more than a year of "careful study," that the changes "come at a time when virtually all segments of American industry have recognized the need to impose stringent cost-cutting measures in view of today's business conditions" and that most of the cutbacks had come in management as opposed to "those who function primarily in the marketplace."
CBS, along with the Warner/Elektra/Atlantic (WEA) conglomerate, is the dominant force in the American record market. It has acquired a reputation for leadership in the industry and often is among the first to recognize problems.
In 1979, for example, when annual record and tape sales fell to $3.67 billion, after peaking the previous year at $4.13 billion, CBS was the first label to announce major layoffs. That action, after years of steady growth, presaged a wave of industry-wide cutbacks. So yesterday's action, on the heels of the most sluggish summer for record sales and concert attendance, could be a chilling preview of things to come.
Under the restructuring, Epic, Portrait and other CBS-associated labels will be combined under one national promotion structure. The memo says that Top 40 promotion would have as many local representatives as before, but that "a new promotion structure for other radio formats will coincide with the realities of today's marketplace." This reflects the currently depressed state of radio, with its increasingly restricted formats, and of the market. Fewer new artists are able to break onto the airwaves.
Despite its high number of top albums, CBS has both big sellers and big failures, with an almost nonexistent middle ground. Fewer records are accounting for a greater number of sales. Figures from the Recording Industry Association of America indicate that although platinum albums (sales of 1 million units) were up 24 percent for the first half of 1982 compared with the same period last year, gold albums (sales of $1 million) were down 31 percent for the same period, the lowest total since 1971. The association reports that 84 percent of the albums released today don't make back their costs.
A number of other reports have swept the industry in recent months, including the absorption of at least one major label by its parent label company; the possible merger of Capitol and EMI/America; the probable co-venturing of RCA and Polygram Records in a distribution arrangement. Last week, Capitol Records shuttered one of its three pressing plants because of diminished demand. There have also been smaller cutbacks at a number of companies.
Factors for the industry downturn include home taping, record piracy and counterfeiting, the increasingly difficult economy in which leisure dollars are a rarer commodity, the influx of video games, which now take in $5 billion a year. Significantly, WEA has become the distributor for Atari games and cartridges, which now account for a large proportion of the company's profits.