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Seagram fires 500, folds Geffen, A&M Records
by Robert Hillburn, Geoff Boucher
Boston Globe, Boston, MA
Jan 22nd, 1999

HOLLYWOOD - After 35 years of spinning out hits by such acts as Cat Stevens, the Police, and Sheryl Crow, A&M Records abruptly closed its doors yesterday - firing nearly 170 employees who were sent home and told "not to come back."

They were among nearly 500 employees cut in Los Angeles and New York by Seagram Co. as part of a massive restructuring that will eliminate thousands of music industry jobs around the world. About 110 Geffen employees were fired.

Signaling an end to an era in the Los Angeles music scene, the layoffs underscore the changing economics and direction of the music business as Seagram, which recent completed its $10.4 billion acquisition of PolyGram, combines two of the world's biggest record conglomerates.

At their peaks, A&M and Geffen represented the commercial and artistic potential of independent labels, which have been the proving ground for scores of musicians whose talents and vision did not fit into more mainstream labels. But both labels began losing autonomy as they were bought up during the 1980s by conglomerates PolyGram and MCA.

Some industry critics are alarmed at the changes. With power concentrated in fewer and fewer hands, the danger, they fear, is that there will be no room left for the independent spirit that helped build such independent labels as Atlantic, Motown, Island, A&M and Geffen. Among those launched by A&M and Geffen alone: Cat Stevens, the Police, Nirvana, the Carpenters, Joe Cocker, Beck, and Guns 'N Roses.

"This isn't about Universal or Seagram," said A&M chief Al Cafaro, who also was fired. "The record business is changing fundamentally. ... If the quake that devoured A&M and Geffen is a 6.0 on the Richter scale, there is a 7.0 coming in this industry. It's a Wall Street world now. Get ready."

Executives at Seagram's Universal Music Group say that A&M and Geffen will be folded into Interscope Records to form IGA - one of four large music groups made up of consolidated labels acquired in Seagram's purchase of PolyGram. About 200 employees were also laid of yesterday at the New York-based Motown, Mercury, and Island labels. About 250 artists will also be dropped over the next few months, sources said.

A&M, Geffen, Motown, Mercury and Island all have performed poorly in recent years, producing few hits and often operating in the red.

Seagram expects to produce $300 million in savings annually by the consolidation. Analysts suggest that the restructuring will provide Universal with unparalelled economies of scale guaranteed to boost operating margins and position the conglomerate for strong earnings growth over the next three years.