Low Sales Week Ushers In Universal Music Cuts

Need a shave and a haircut? UMG CEO Lucien Grainge has started slashing staff.

UPDATE: Today (Jan. 21) UMG has laid off 60 people as part of its company reorganization plans, according to a report in today’s Hollywood Reporter. According to my sources, this is merely the beginning of many more cuts to come. These sources tell me that the plans for the cutbacks were formulated last summer after Lucine Grainge assumed the top spot . It was decided early on not to announce  massive all-encompassing layoffs in one fell swoop as to not freak out Vivendi shareholders. Being as humane as possible given the circumstances, management decided not to begin the cutting at the traditional time that these things are done–Christmas–opting instead not to ruin everyone’s holiday and wait until after the beginning of the year to deliver the bad news.

Today marks a new nadir in the music industry, but not for long. The new album from Cake, Showroom of Compassion, entered the Billboard 200 chart at number one, the band’s first top ten album since 1998 and its first ever number one. Great news, right? Well, it’s a rather dubious honor  since it is also the lowest selling album to ever enter the chart at the top spot. Showroom racked up a pathetic 44,000 units sold, the lowest amount for any number one album since SoundScan began tracking sales 20 years ago. And this can’t be blamed on piracy because who the hell is downloading a Cake album anyway?

Overall album sales were down 15% compared to the same week last year and down 11% year to date from last year at the same time. Now let’s be clear, there’s no new superstar product to help drive sales, but even the big sellers like Kanye and Taylor Swift are tapering off significantly. Could it be the time of year?  No matter which time of the year you pick, the sales numbers are consistently down from the previous year, and every one of the last 10!

It’s in this scenario that we’re about to get fourth quarter earnings from some of the major labels. Most notably Universal. And rumors are that the numbers are not going to be pretty. According to a report by Johnnie L. Roberts in The Wrap yesterday, new UMG CEO Lucien Grainge has begun his long rumored massive restructuring of the company. The fat will definitely be cut very close to the bone and some top execs got their pink slips yesterday. How long this downsizing process will take is anybody’s guess.

Let’s face it; sales are not going to get better. You can expect them to steadily decline until it bottoms out or somebody comes to the realization that the recording business can’t rely on the album sales model any longer. Ironically, technology has forced the industry back to the 50′s. It’s once again a singles business. The record business was its most vibrant when Elvis hit the scene. There were tons of small regional independent labels that laid the foundation for what would evolve into the modern music industry that we know today. In those days, we all saved up our nickels, dimes and quarters to rush out and buy the latest Elvis, Sam Cooke or  Little Richard 45′s for $.69 (and later $.99). Everyone used to rush home after school to watch American Bandstand. Albums were basically thrown together quickly  and rushed to market in an attempt to capitalize on a break through single. But it was the singles charts that counted and that’s where the big sales were.

Then the Beatles came along and, inspired by those early music legends, changed things in a big way. The public was so hungry for as much Beatle music as they could get their hands on that suddenly album sales took on a new meaning. By the time Sergeant Pepper was released not only had the album format become the new business model but it also became an art form unto itself. The 60′s gave birth to an explosion of creativity in pop music that hasn’t been seen since. From then on the industry concentrated on album sales, eventually eliminating the single format altogether. The business entered an era of contraction, with the small indie labels being gobbled up by the majors, and unprecedented growth. Sales (especially when advances in technology brought the compact disc) continued to swell until 2000. Then the internet, and Napster, came along.

A decade later record labels are back to selling $.99 singles again and they still haven’t figured out what to do about it. It’s like a bunch of blind guys in a room trying to find the light switch. Even if they did find it they still wouldn’t be able to see anything.

This is not going to sound like me at all, but I’m actually pulling for Grainge to succeed. These days the only way to survive is by slashing costs because the revenues sure aren’t going to increase anytime in the foreseeable future. Doug Morris so overspent for so many years that Lucien is now the guy with a broom at the end of the parade.

Universal is getting ready for the day that an album will enter the charts at number one with 10,000 copies sold . That day seems to be approaching sooner than later.

© 2011, Wayne Rosso. All rights reserved.

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