Can Doug Morris Lead Sony Past Universal Music Group to Be the No. 1 Label?

Doug Morris - Hollywood Walk Of Fame - 2010
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With the new Sony Music CEO scheduled to step in July 1, how will the rest of the major label world shake out?

As Doug Morris moves on from his 15-year tenure at the helm of No. 1 U.S. music company, Universal Music Group, to his new job as CEO of Sony Music Entertainment, will he be able to drive the No. 2 major into the top spot?

The industry will know soon enough. Morris is scheduled to report to work July 1 (THR hears his first day in the office will be July 15), and, at 72, is seen by many as a transitional leader due to his age and two-year contract. However, he is expected to make decisive moves to reshape Sony.

Morris already has tapped former Island Def Jam Music Group chairman/CEO Antonio "L.A." Reid to head up a soon-to-be-revitalized Epic Records, multiple sources say, although Sony has yet to confirm it.

Under its new boss, Sony will also split up the RCA/Jive Label Group, with key staffers like Jive executive VP/GM Tom Carrabba and Jive executive VP Peter Thea -- plus part of the Jive artist roster-moving to Epic. Others will shift to RCA.

In making these moves, Morris is restructuring Sony around three full-service labels: Columbia, Epic and RCA. RCA will be headed by Peter Edge, president of A&R at J/RCA Records, and RCA executive VP/GM Tom Corson.

With Reid, Sony is getting a proven hitmaker, albeit one with a reputation for spending a lot of money. And by merging key Jive staffers into Epic, Morris is killing two birds with one stone: finding a possible means of reining in Reid's spending and resolving lingering staff integration issues that have persisted since the Sony-BMG merger in 2004. Jive has always been known for operating under a policy of selling as much product as quickly as possible, while limiting spending on marketing.

Reid will report directly to Morris, effectively marking the end of the Columbia/Epic Label Group and sparking speculation about the future of Columbia/Epic chairman Rob Stringer, Columbia co-chairmen Steve Barnett and Rick Rubin, and Columbia president Ashley Newton. Still, it's unlikely that Morris will revamp Columbia, which grew U.S. market share in each of the last three years, according to Nielsen SoundScan.

While Stringer's title may change, the Columbia leadership should remain stable, with the possible exception of Rubin, whose 2007 hiring is now widely viewed as a costly mistake. Sources at Sony say Rubin hasn't been involved in running Columbia for more than a year and that he will be out when his contract expires in February.

Morris will likely encourage Columbia, Epic and RCA to create even more A&R centers, with an emphasis on growing Sony's R&B album market share, which stands at 29.4%, year to date. But Sony is likely to meet stiff competition for talent from the Lucian Grainge-helmed Universal, the urban powerhouse with 38.8% album market share. On June 21, renowned artist manager Gee Roberson (Kanye West) was named chairman of Geffen Records.

Roberson's hiring comes after Universal's recent reconfiguration of its East Coast labels, under which Island Def Jam and Universal Motown Republic Group are centralizing back-office functions. Heading up the East Coast labels is former RCA/Jive Label Group chairman/CEO Barry Weiss.

Powered by hit releases by acts like Adele, Britney Spears and Foo Fighters, Sony is already within striking distance of supplanting Universal as the top U.S. distributor, based on their respective share of sales of albums and track-equivalent albums (TEA) where 10 tracks equal an album. Year to date, Universal's market share is 29.6%, versus Sony's 29.4%, according to SoundScan.

The other wild card in the Universal/Sony rivalry is Citigroup's pending auction of EMI, now that EMI's board has confirmed it is reviewing strategic alternatives. The two largest U.S. majors are expected to be among the bidders for EMI, as is Len Blavatnik's Access Industries, which won the recent auction for Warner Music Group.

Although EMI Group CEO Roger Faxon said in a June 20 memo to EMI employees  that "the greatest value is in keeping the business together," Citigroup isn't likely to rule out considering separate bids on the company's label and music publishing operations.

If Universal enters the bidding, it is expected to bid only on the label side of the business, as it did in the Warner auction. Sony, too, could return to its approach as a Warner bidder, forming a consortium with other bidders as a means of averting potential antitrust challenges.