HITS Daily Double
With the massive cost-cutting initiative at WMG underway—Warner Bros. Records was hit this week, while Atlantic and Elektra are up for trims next week—the new face of the company is starting to take shape.


Post-AOL WMG Will Be Leaner and Meaner
The party is over. Now it's time to clean up.

With the massive cost-cutting initiative at Warner Bros. Records underway—Atlantic and Elektra are up for trims next week—the new face of the company is starting to take shape.

Warner Music Group Chairman/CEO Roger Ames is doing what previous rulers Bob Morgado, Michael Fuchs, Bob Daly & Terry Semel, Mo Ostin and Russ Thyret couldn't or wouldn't—lower the Warner Bros. Records headcount.

The rest of the cuts at WMG will come through the integration of back-office duties for all three labels, early retirement packages and consolidation of its WEA distribution arm. There's even additional chatter that WMG may abandon physical distribution altogether.

Big-picture observers are quick to point to AOL's hard-nosed, bottom-line approach as something unique to the Warner culture and philosophy. You could be sure the late Steve Ross would never stand for it—but these are different times.

The moves take place against a backdrop of several different scenarios. There's talk about AOL possibly initiating a plan where it would pay an artist a whopping guarantee (at considerably more than a conventional deal) and gain exclusive rights to his/her music, which would be offered as part of the overall subscription fee to its 27-million-plus subscribers. For example, give someone like Kid Rock $20 million and have AOL be the only place to get his new album.

This plan would radically alter the music-industry business model at a time when it's coming increasingly under fire.

Speaking of AOL, Bob Pittman's plan to move into the video-music-channel space comes at the same time as Viacom launches its ambitious multimedia MTV360 convergence plan. That should be a battle royale, with a battery of huge assets and big-time leverage at their disposal, including radio stations, network TV, film studios, music assets, cable holdings, print publications and online subscribers.

Industry insiders point to the MTV360 initiative as a hopeful sign that the channel will concentrate more on music programming and breaking artists, though it's a song they've heard before.