Ailing music giant EMI will merge two of the music industry's best-known labels, Capitol Records and Virgin Records America, in a sweeping reorganization prompted by the company's financial troubles.
EMI on Thursday unveiled the new Capitol Music Group, retaining the name of its iconic label whose roster once included the Beatles and Frank Sinatra. Capitol President Andy Slater was forced out, six months into a five-year contract extension.
The news caused considerable concern at the landmark Capitol Records tower in Hollywood, where employees have feared for some time that EMI operations in America will move east to New York.
That could free the 13-story building, which resembles a stack of records, to be converted for residential space or other use. Slater, who took the reins of Capitol in 2001, had advocated keeping the tower and its storied studios in the record-making business. The building and adjacent properties were sold last year for $50 million to New York-based developer Argent Ventures and leased back to Capitol.
Capitol staffers who didn't want to be identified because of the sensitive situation said they feared major job cuts were coming, noting that some employees were being told that they would have to interview to keep their jobs.
Seeking to ease fears, EMI Chairman Eric Nicoli said the reorganization was a necessary retrenchment.
"The combined artist roster, talent and market share of this new label group establishes Capitol Music Group as one of the U.S. music industry's leading labels," Nicoli wrote in a memo. "We will maintain operations in both New York and Los Angeles."
But Art Alexakis, singer of the band Everclear, which has been on the Capitol roster since the 1990s, said he believed that the move signaled EMI would be on the sales block soon.
"I think really it's no secret that they're bringing in people to get the place in shape so that they can sell it," Alexakis said. "The only way to make it look profitable on paper is to downsize. The heyday of the entire music business looks to be long gone, and so I think now you see companies trying to figure out what's next."
Nicoli named Jason Flom, chairman of Virgin Records America, to head Capitol Music Group. He will report directly to Nicoli.
The Nicoli memo praised Flom for his ability to seek out opportunities in the still-unpredictable digital marketplace. The EMI chairman also signaled that uneasy days were ahead.
