FACING THE MUSIC; $10.4 BILLION NEW RECORD CONGLOMERATE MEANS PARED ARTIST ROSTERS, LEANER LABELS.

Byline: Fred Shuster Daily News Music Writer

``What's going on?''

Marvin Gaye's famous '70s refrain is being sung all over again throughout the music industry as artists, managers and label employees try to figure out what Seagram's $10.4 billion takeover of Polygram means to them.

For the fan on the street, the New World Order - which puts the new Universal Music Group (UMG) at No. 1 as the largest and most powerful record conglomerate in the industry - means artist rosters will be pared down and familiar labels such as Island, Mercury, Motown, Geffen, London and A&M cut back to mere skeleton crews in order to save millions in worldwide costs.

It's possible those famous imprints - embossed on albums by artists ranging from Billie Holiday to Bob Marley & the Wailers to Nirvana - eventually may disappear entirely, replaced by a single company logo: the spinning globe of Universal.

The roster of the new conglomerate embraces acts in virtually every genre. They include global sellers Cecilia Bartoli, Beck, Andrea Bocelli, Counting Crows, the Cranberries, Jay-Z, Sheryl Crow, DMX (who has the first No. 1 album debut of the new year), Elton John, Hole, No Doubt, Shania Twain, U2, the Wallflowers, Sting, Hanson, George Strait, Stevie Wonder and Luciano Pavarotti.

But lesser-known artists with moderate sales are in a holding pattern. Acts such as rockers Girls Against Boys and former 'Til Tuesday singer Aimee Mann are said to be cutting new records financed by Geffen. If acts such as these end up getting dropped - and it's expected two-thirds of the rosters at each label will be cut outright - the parent company owns the master tapes, but probably would offer most artists the option of buying back their work.

Meanwhile, well-known acts such as Melissa Etheridge and the Cranberries have been forced to delay release of their latest albums as the dust clears. And superstars Sting and U2 reportedly are exploring options at other labels.

Even as the new superpower decides what to do about its new acquisitions, it was announced that 1998 musical sales were up almost 10 percent over the previous year. Leading the breakdown in genres was r&b, followed by alternative rock, rap, country and soundtracks.

Seagram is placing enormous stock in its latest entry into the entertainment field. In fact, the day before the announcement of the Polygram purchase last month, the liquor giant announced that Universal Studios had a loss of $65 million for the fiscal second quarter.

UMG - which shrinks the number of major record companies from six to five - may not be the only new conglomerate of the new year. Insiders predict that BMG is looking into the purchase of EMI Group, thus further shrinking the field to four.

To find out how the merger will affect the music we hear, who gets signed and how it's marketed, we asked a range of music professionals. To see what it could mean to the consumer, we hit the streets.

The view from the band room - and the record store

Speculation is rampant that acts will be dropped in the next few weeks if it's found that they sold less than 200,000 copies of their most recent album.

Not true, UMG officials say.

Labels constantly re-evaluate their roster, a company spokesman said, adding that there are numerous factors that must be considered before letting an act go, including how much was spent in terms of recording, promotion and tour support.

However, UMG officials confirmed that many acts will be given pink slips, even while ironically insisting that artist development still would be a priority.

``I'm not as concerned as many others,'' said the manager of a well-known band signed to a label expected to be among the hardest hit. ``It's younger artists just starting a career or who've made a record that's not out yet who are the most worried. Chances are they won't have a record label anymore.''

Singer-songwriter Robbie Fulks has said he used to talk to executives at Geffen every day. These days, he told The New York Times, it's gone silent, with ``secretaries over there giving me the impression that it's like Dresden after the war.''

With the loss of label support, Fulks and other acts caught in a holding pattern because of the merger have been promoting their records themselves.

``I'm not doing as many shows as I'd like to now, just what I can afford,'' Fulks said. ``There are some places where I can make money, other places where if I play without a band I can make some money. It's not nearly as much as I'd like to be performing, but I'm not going to just wait around and see.''

The shake-up has allowed some acts to sit back and re-evaluate their careers at a time when the Internet and other means of distribution could mean much higher royalty rates, even as high as $5 per album compared to $1.50 per record at the major labels.

``A band with a name and a reputation will have a place,'' the manager said. ``But the question is, do those kind of bands want to remain with the majors or are they now looking for alternative ways to get their records out? There are a lot of options out there for proven acts. If a major label isn't going to help a band increase their sales base, then this is a good time to completely reassess.''

While competing labels large and small almost certainly will cherry pick some of the discarded acts, not every label plans to go fishing.

``I don't think we'll be going after the major label acts unless we already have a relationship with that band,'' said Scott Giampino of Touch and Go, a 20-year-old Chicago indie that worked alternative acts such as Girls Against Boys, the Jesus Lizard and the B.H. Surfers years before they signed with major labels.

``That's just how we are,'' he said. ``But it's like free agency in basketball - it's going to be a huge free market. It won't affect us because we try and work acts from the ground up.''

At the retail counter, at least, the song remains the same, although the number of new releases has dwindled since last year.

``At this point nothing's changed in terms of how we deal with the company,'' said Bob Say, vice president of the Valley-based Moby Disc chain. ``They say it'll be six months before they're able to consolidate warehousing. So, at this point anyway, the product keeps arriving the same way. I don't see any effect at all for at least six months. The first effect will be people getting laid off.''

The view from the executive suite

The new music group will be led by a mixture of industry veterans and new executives.

At the top is longtime record man Doug Morris, chairman and CEO of Universal Music Group. Morris started in the industry in the early '60s at indie Laurie Records, eventually becoming chairman of the Atlantic and Warner Bros. labels before moving to the executive suite at MCA.

Morris describes the new organization as ``lean, flexible'' with a ``strong entrepreneurial spirit.''

Two label groups will be based in Los Angeles - Interscope Music Group, consisting of Interscope, Geffen and A&M, and MCA Records Group, which includes MCA Nashville.

UMG expects to purchase the half of Interscope it doesn't presently own, a company spokesman said.

In New York, Island and Mercury will be merged to form the Island/Mercury Group, while Universal Records will include Motown, Polydor and Def Jam.

Verve, GRP and Impulse! also in New York, will cover jazz.

The company also leads the classical music business with control of Deutsche Grammophon, Decca and Philips.

According to the plan, labels specializing in urban and country music, including Motown, red hot Def Jam and Mercury Nashville will not undergo major changes, illustrating the strength of the rap, r&b and country genres in the marketplace.

Losses at other rock-based labels were said to be largely the fault of a glut of unproven alternative rock signings that received little radio play and sold few copies.

The view from the front lines

Each of the four main record groups is expected to be pared down to around 100 acts and less than 200 employees.

The integration of the label operations means warehouses and plants will be closed and jobs in all departments shed, some beginning in the next few weeks, it's predicted.

Analyst Scott Davis of the Schroder & Co. investment firm told Bloomberg News as many as 20 percent of the labels' 15,500 employees could be fired in a restructuring process that will last until summer.

The date mentioned most frequently as D-Day for label employees is Friday, but in fact that's supposedly when the heads of Interscope and Island/Mercury will meet with Seagram president Edgar Bronfman Jr. to present plans.

Rank and file UMG employees are under strict orders not to comment on the downsizing, but some said under condition of anonymity that waiting was the hardest part.

``We're trying to pretend there's nothing going on because there's nothing we can do about it,'' said a staffer at a label expected to be among the hardest hit. ``We just wish they'd get on with it.''

Added another: ``There's nothing to do around here except wait.''

Insiders reported Friday that Interscope now officially was working all A&M and Geffen records, leaving many staffers at the latter two companies essentially free to search for new employment.

Some have been lobbying artist management companies and competing labels for jobs since before Christmas even as longtime acts drop by the offices for goodbyes. Influential industry weekly HITS magazine recently joined music trade groups in compiling lists of music pros who've been displaced in the ongoing consolidation.

``I get the feeling if we'd been selling as many records today as we were in the '80s, none of this would be happening, at least at Geffen,'' Guns N' Roses bassist Duff McKagan said at Geffen offices that soon will be put on the block. ``I've known a lot of these people for years, and pretty soon they're going to be looking for new jobs.''

McKagan said he wasn't even sure if and when his new album, delivered to the label late last year, would be issued.

The view from the radio dial - and the street

Some fear a music biz monopoly as a result of the Polygram purchase.

``It's not good for the music scene,'' said Los Angeles radio personality Jim Ladd. ``Some of the best music we had came out of start-ups that had a vision, like A&M and Island. They saw a band that inspired them, that wouldn't have been signed to a major, and took a chance. I'm a real old-time capitalist, meaning the more freedom in the marketplace, the better. But these entertainment monoliths ... it's dangerous.''

According to Universal's plan, Geffen and A&M - two labels sold by their previous owners during the past decade - will be folded into Interscope, one of the world's most successful recording companies thanks to hits from controversial acts such as Tupac Shakur, Nine Inch Nails and Marilyn Manson.

``If UMG controls the industry, it control the prices,'' said longtime rock fan Simon Romero, a West Los Angeles resident who says he buys hundreds of CDs each year. ``Money has to go to the artist, but a lot of money is probably going places it shouldn't go.''

Romero, who recalls as a teen seeing blues great Muddy Waters at the Troubadour more than 30 years ago, fears the disappearance of beloved label imprints - like the familiar palm tree that adorned releases from the Island label.

``I like the idea of buying a CD and seeing the band's original label on there,'' he said. ``But I know how it works - the big fish eat the little fish. Bands use indies as a springboard to the majors or else the majors just buy the indies.''

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Photo: (1--Cover--Color) Gobbled up

Seagrams buyout of Polygram has set the record industry spinning. Bands and executives wonder who will get the ax.

Cover design by Lori Valesko

(2) no caption (Music CDs)

David Sprague/Daily News