Thursday, August 18, 2011

Sony Music Reveals New Path to Profits…Firings

This article was originally posted by Wayne Rosso on The Music Void:

"Yesterday Sony Music Entertainment fired 25 people. According to one unnamed Sony employee, “It’s really a small cut”. It’s not so small if you’re the one who’s being cut. To rub a little salt in the wound, some of the people let go had been with the company for nearly 20 years. As I told one of the latest victims, “If you were a cop you’d at least been given a gold watch”. Of course, there was no gold watch.
I feel bad for some of these people who were shown the door. The ones that I know personally had been good, loyal employees. Needless to say, this was quite a shock to the system. Of course this is a cheap way for management to show a little more profit. They can’t raise revenues so they cut overheads. Fair enough. But the whole idea of record labels is to make money by signing, developing and breaking new artists and Sony, or at least the Columbia side (RCA has been much more successful), hasn’t done much of that in the last 5 years or so.
What’s worse is that the morale at the company is getting lower by the hour. One veteran SME staffer told me that everyone at 550 Madison is walking around in a daze. “Everyone is convinced that they’re going to lose their jobs and so nobody does any work. They just figure that if they’re going to get fired, why put out any effort? Nobody knows what’s going on around here, and that includes the artists. I get calls from artists all the time asking what’s going on and I have absolutely nothing to tell them because I don’t know either.”
Hiring new high profile expensive executives sure doesn’t help morale either. Each new pricey exec usually comes along with his “guys” and that means more bodies flying out the windows. At least the company won’t be saddled with the Rick Rubin overheads very soon, as I hear that they intend for his contract to quietly expire. I’m sure that septuagenarian CEO Doug Morris will quickly fill that budgetary void by replacing Rubin with another high-ticket guy. Don’t forget, Doug’s not known for being very parsimonious.
It’s interesting to note that these guys are willing to spend millions on the same old recycled executives and won’t spend a dime any more on artist development, something we haven’t seen at any record label in the last several years. Have they ever thought of trying to bring in a younger generation to eventually take over the business? As one industry exec told me, “They never want to hire anybody under 40 in a senior position. It’s ridiculous”. When you start looking at guys in their 70’s and 80’s to run a youth oriented business, you know something has gone terribly wrong. Let’s face it—these guys should be in Florida eating early bird specials.
The latest round of cuts will do nothing to ease Sony Music staffers’ fears as it will probably only lead to more firings. The top management probably cynically thinks that a few “small cuts” at a time instead of one big massacre will play better in the press. Unless Sony get’s its act together, this may turn out to be a regular event and as usual the wrong people will ultimately get the ax."

How The Google Motorola Acquisition Helps the Music Industry

Billboard posted an article about Google's acquisition of Motorola's Mobile Division and what it could mean for the music industry.

"With the acquisition, Google now has the same kind of software and hardware integration that Apple (as well as the struggling RIM) enjoys with all its products. And if Google wanted to plant a flag in the mobile space, it could hardly find a better brand that Motorola to do so. Motorola once dominated the market share for U.S. mobile phones. It actually made the first portable mobile phone ever. The brand name will forever be wedded to the mobile phone market, despite losing its footing several times over the years (first when mobile phone technology went from analog to digital, and again when the market shifted to smartphones)."

"So what's all this mean for the music industry? A few thoughts:

-    Integration: Google can now finally make a smartphone that fully integrates hardware and software design from the ground up… like Apple does. It will certainly take some time for Google to do this effectively, but once accomplished should lead to some very interesting possibilities in terms of user interfaces and features-including content.

-    Distribution: Google stumbled the first time it attempted to build its own phone (the Nexus, which relied on a third-party partner to make the device) primarily because it had no way to sell it other than online. Motorola products are available globally directly from multiple wireless operators.

-    Music: Google Music is a cloud-based music service. It's still in a beta mode as Google works out its licensing issues. But it's not hard to see a roadmap that leads to a fully streamed music service in the relatively near future. Embedding a streaming music service into a mobile phone built from the ground up for that purpose could be a compelling offer, IF Google/Motorola can also get the wireless operators on board.

-    Tablets and Set-Top Boxes: Any cloud or other type of streaming music service is made more valuable the more places it can be accessed. By controlling the creation of not only mobile phones, but also tablet computers and (perhaps more importantly) set-top boxes, Google now has the chance to embed whatever Google Music eventually becomes into the living rooms of millions of homes."

Read the entire article here.