Special Report: PolyGram-Universal Merger Bad News For Artists?

Fusion of two giants is expected to cost thousands of jobs and dozens of record deals.

With the multibillion-dollar merger of label giants PolyGram NV and Universal Music looming, it's shaping up to be an unusually cold and bleak winter for some recording artists.

"There will probably be a lot of artists ... dropped," predicted ghoulish rocker Rob Zombie, one of Geffen Records' current stars.

Musicians and numerous industry insiders expressed dire speculation as to what the pending deal means. They predicted that dozens of mid-level and lesser-known acts, such as God Lives Underwater, Local H and, possibly, even once-quite-popular Weezer would be let go.

The coming together of these powerhouses has created an atmosphere of fear at the affected labels, and uncertainty industry-wide.

At A&M, home to such big names as singer/songwriter Sheryl Crow and blues-rock band Blues Traveler, a staffer describes nearly all of the label's upcoming-release schedule as "on hold."

Bassist Mike Watt of the supergroup the Wylde Ratttz said he doesn't even know when his own band's album, on London Records, a subsidiary of PolyGram, is coming out.

The deal, which will create the world's largest music company -- from two of the world's "Big Six" music corporations -- is expected to jettison dozens of bands from the rosters of Mercury, Def Jam, Geffen, Island, Interscope and other labels owned by the two companies.

After the merger, there will be five major music corporations: Universal, Sony, Time Warner, EMI and Bertelsmann.

By the time the smoke clears in early 1999, thousands of employees could be holding pink slips, and many artists could be looking for a new label.

"I've talked to people at Geffen, people in A&R [artists & repertoire], and nobody knows what to think," said Zombie, the former White Zombie leader who recently issued his solo debut, Hellbilly Deluxe.

"I'm not worried," Zombie said. "They will keep the things that do well. I won't get dropped. Beck, Hole and others won't get dropped."

Although many in the industry have kept quiet about who may be dropped, an article in the current issue of the music-industry weekly Hits magazine speculates about some of the bands that soon could be shopping for new deals.

Christian punks MxPx and electronic rockers God Lives Underwater may be up for grabs, while Irish rockers the Cranberries and ska's Mighty Mighty Bosstones are likely to hang onto their deals, according to Hits. It's unclear where such Geffen acts as the arty Girls Against Boys, retro-rockers Southern Culture On The Skids and Weezer will end up, according to the article.

Many bands without platinum resumes are thought to be facing the chopping block, according to industry insiders who spoke to SonicNet Music News of the World.

At PolyGram-owned A&M, highly anticipated releases, such as ex-Soundgarden singer Chris Cornell's solo debut, aren't likely to be affected, according to a source who requested anonymity. "[But] everything else is pretty much on hold," the source said.

Perhaps not wanting to jinx anyone, both employees and artists at one label aren't even discussing what bands may be turned loose, according to a staffer who described his office as "glum." "Nobody's talking about it. They're all just waiting to see," he said.

Other labels have put records in limbo. Among them is the debut by the Wylde Ratttz, the supergroup that includes members of Sonic Youth, the Stooges and Mudhoney, according to Ratttz bassist Mike Watt. The album originally was scheduled for February; London Records did not return calls about its release.

Watt, who records as a solo artist for Sony's Columbia label, said he sees the reorganization as an effort to make Universal lean enough to compete with mega-labels Warner Bros., and Sony in the U.S. "They want the company to be sleek and efficient," he speculated.

The $10.4 billion merger, scheduled for completion in mid-December, will fuse Universal, parent company of Interscope, Geffen, MCA, DreamWorks and several other labels, with PolyGram, the labels of which include A&M, Mercury, Motown, Def Jam and Island. The Canada-based beverage-giant Seagram Company Ltd., which owns Universal, is buying PolyGram and folding it into an expanded Universal Music Group.

Already, the ripple effects of such a merger are being felt throughout the industry.

"It's scary," said veteran rapper Ice-T (born Tracy Marrow), whose new Coroner Records imprint has a distribution agreement with PolyGram's Motown label. Ice-T said it's unclear how the merger will affect his business, adding, "[In] this business you never know who's going to be where. That's why it's not a good business to kiss ass in, because you never know who's going to be in charge."

Independent-label owners, such as Kill Rock Stars' Slim Moon, said they believe many of the bands that lose their deals will regain their footing at smaller labels. But while indie labels stand to gain some artists, Moon worries that the consolidation of the majors will push records by his own bands, which include Sleater-Kinney and Unwound, off store shelves.

"I don't care whether it's six companies or five companies coming out with whatever this year's 11 million seller is," Moon said. "What I care about is that that gives them the power to consolidate distribution to chain stores and retailers, who might see those [companies] as the only options. ... That conglomeration can really squeeze out independent distribution."

In London, Mo Wax Recordings, whose artists include acclaimed DJ Shadow, and which recently released the critically well-received UNKLE (featuring The Verve's Richard Ashcroft, Radiohead's Thom Yorke and DJ Shadow) project, had an option to renew its licensing and production deal with PolyGram after its deal with A&M U.K. -- a division that was being phased out anyway -- expired in August. Several factors played into Mo Wax's decision not to renew, said a Mo Wax representative who preferred anonymity, but the merger with Universal "pushed us to decide not to carry on there."

Dark clouds are hovering over Universal's and PolyGram's own labels. A source at one label, who preferred to remain nameless, called the atmosphere "depressing." He said word from high up seems to change daily.

"There are two mindsets: the people who are trying to impress the new regime, and the people who have just given up," the source said. Employees in his office were told this week that layoffs would come in January.

Wayne Kramer, former guitarist for 1960s left-wing radical band MC5 and now a solo artist for the independent punk label Epitaph, said he doesn't believe that the merger will have a huge impact on day-to-day working musicians, although he does have friends in label offices who are worried about their jobs.

"It's 'Meet the new boss, same as the old boss,' " Kramer said, quoting a line from the Who's '70s anthem, "Won't Get Fooled Again." "The dilemmas of the music industry are systemic -- it doesn't matter whether it's controlled by a few less people."

Like Ice-T, Kramer looks to the Internet and its possibility for direct download to fans as the place where real change is coming for the music industry.

While details of the reorganization have yet to be officially announced, Los Angeles Times writer Chuck Philips previewed the structure of the new Universal Music Group in a story last month, later confirmed by Reuters.

The company reportedly will be anchored by four U.S. units, each with 100 acts. On the West Coast, Interscope (home of Marilyn Manson, Nine Inch Nails and No Doubt), Geffen and A&M will be rolled into the Interscope Music Group. The MCA Records Group (Semisonic) will remain, untouched, as its own unit. In the East, Def Jam (Method Man) and Motown (Queen Latifah) will be woven together as Universal Records, while Island (U2) and Mercury (Kiss) will be soldered into the Island/Mercury Group. It has been reported that U2 will record for Interscope.

Staff cuts at the companies reportedly will be brutal. About 20 percent of the workforce -- 3,000 people -- are expected to be fired.

The deal could close any time after Friday (Dec. 4), when Seagram's tender offer to PolyGram shareholders expires, said Ray Boyce, head of corporate communications for Seagram. Seagram executives, including CEO Edgar Bronfman Jr., and current Universal Music Group chairman Doug Morris, declined requests for interviews, citing Securities and Exchange Commission rules that prevent them from talking until the deal closes.

Executives at other labels are prepared to hear from dropped artists and axed staffers.

"There's no waiting-in-the-wings scenario over here," said Bob Merlis, head of publicity at Warner Bros. Records. "But any time an artist goes on the market that has some viability, we'd want to be involved."

Reprise Records, a Time Warner company, has already signed former Mercury group Shootyz Groove. Reprise president Howie Klein said he would not be surprised if he acquires more acts as a result of Universal's restructuring, and he would welcome the chance. "We picked up a band [Shootyz Groove] that had two albums out on Mercury and one on [independent label] Roadrunner, and the set up on them is done as far as street cred," he said.

Many bands are simply knocking on wood and hoping for the best, said Thom Panunzio, a producer who has worked with Interscope ska-sensations No Doubt and Mercury roots-rocker Mary Cutrufello.

Unproven groups, particularly those with recent albums, are in a holding pattern, according to Panunzio. He said labels don't want to throw their support behind an act that could be cut in a few weeks.

"The effect is like putting a record out, then pulling back, then having to put it out again," he said. "A band could be on the tip of everyone's tongue now, but by the end of January they might not be."

Tool manager Ted Gardner said that no one knows what to expect.

"With managers and bands that I've spoken to, everyone is waiting ... to see what's left, if people still have deals ... and who will work their records if they're still on their labels," he said.

An attorney who represents affected artists and labels was less concerned about short-term repercussions for his clients than the long-range impact of having just five global music companies. "It's dangerous," said the attorney, who asked not to be named. "It's worse for competition, worse for the market, and maybe even for the industry."

One high-level executive at an unaffiliated label, who also asked not to be named, was blunt in his assessment of the deal: "This is a bad thing for someone who likes the music business, and it will probably get worse. ... They don't care if what they're trading in is Tropicana juice or Boyz II Men."

(Senior Writer Gil Kaufman and Contributing Editor Teri vanHorn contributed to this report.)