Handleman Narrows Focus To Music; 1,000 Jobs Lost

Handleman, one of the largest rackjobbers of music to mass merchants in the U.S., has announced that it is exiting the low-margin, declining home video distribution business to focus on music operations. As part of its restructuring, the Troy, Mich.-based distributor says it is dropping the number of music accounts it services from more than 100 to fewer than 12. However, the company says the remaining accounts represent 95% of its music revenue and two chains, Kmart and Wal-Mart, account for about 60% of the business. The restructuring will mean a loss of about 1,000 jobs.

Handleman, which is also getting out of the book and computer software businesses, says it will keep most of its North Coast Entertainment unit, which owns such properties as music label Madacy and video label Anchor Bay, but will sell computer software firm Soft Source and realize about a $12 million gain. The company also plans to beef up its rackjobbing business through investments in inventory management systems. Sales representatives will be present in music departments every Tuesday, when new titles are put on sale, to insure product flow.

The restructuring will result in pretax charges in the current first fiscal quarter of $90 million-$110 million, according to the company. For the fiscal year that ended May 2, Handleman reports a net profit of $312,000 on $1.1 billion in revenue, compared with a profit of $5.35 million on $1.18 billion in revenue the year before. Music revenue rose 15% in the year to $684.1 million.

--Don Jeffrey, N.Y.


Camelot Seals Deal For Spec's Music

Camelot Music has signed a definitive agreement to buy Spec's Music in a deal valued at $28 million, sources say. Of that, Spec's shareholders will be paid $3.30 a share, or a total of about $16.5 million, and Camelot will assume about $11.5 million of Spec's debt.

The deal is expected to close by the end of July, giving Camelot, which in February acquired the 150-unit the Wall chain, a total of about 500 stores and annual revenues of about $600 million. The deal has to be approved by Spec's shareholders. Spec's stock closed yesterday at 2.62.

--Ed Christman, N.Y.


Sources: Changes Due At Sony's Crave

Sources say discussions are being held regarding a restructuring at Mariah Carey's Sony Music Entertainment label, Crave Records. A Sony spokesperson had no comment.


Rick Stone Goes Indie Promo Route

Promotion veteran Rick Stone, who left A&M Records last year after 20 years with the label (Bulletin, Oct. 21, 1997), has been named senior VP/GM/West Coast for indie marketing and promotion company Jeff McClusky & Associates Inc. Stone will head the Chicago-based company's soon-to-open Los Angeles office.

--Michael Amicone, L.A.


U.K. Gov't Official To Address BPI

The U.K. government's culture secretary, Chris Smith, will be guest speaker July 8 at the British Phonographic Industry's annual general meeting. His attendance extends the list of high-profile politicians who have addressed the BPI. Last year's meeting included a speech by education secretary David Blunkett; prime minister Tony Blair addressed the labels' body when he was opposition leader.

--Mark Solomons, London


PGD Raises Prices

PolyGram Group Distribution has implemented a round of price increases that average about 35 cents for frontline CDs, according to a company policy letter dated May 22. While the increase drew criticism from accounts, it was muted by the acknowledgement that for the last 30 months, PGD has had the lowest prices among the majors. The pricing increase takes effect for orders placed on or after June 25.

--Ed Christman, N.Y.


Show Biz Vet Sandy Gallin Sees Future With Mirage

Veteran artist manager/TV and film producer Sandy Gallin is giving up his position as chairman of the board of Gallin-Morey Associates to become chairman/CEO of Mirage Entertainment & Sports Inc., a division of Mirage Resorts Inc. Gallin's role, he says, is to "bring the greatest entertainment from around the world" to the resort's properties in Las Vegas, Mississippi, and Atlantic City, N.J. Gallin, who will be based primarily in Las Vegas but will keep offices in New York and Los Angeles, will report to Steve Wynn, chairman of Mirage Resorts Inc. Gallin will continue to co-manage with longtime partner Jim Morey top Gallin-Morey clients Mariah Carey, Neil Diamond, and Dolly Parton. Morey has taken over as the firm's chairman of the board.

--Carolyn Horwitz, N.Y.


CDnow Pulls Stock Offer Amid High-Tech Downturn

Online music retailer CDnow yesterday terminated its proposed secondary public offering, which was filed May 11. In a statement, president/CEO Jason Olim blamed "the recent decline in the market for Internet-related stocks." CDnow's share price has dropped more than 40% since early May, reflecting the overall downturn in tech stocks; it closed yesterday at 173/4.

The downturn has also hit CDnow's online competitors. N2K has dropped about 20% since May 1, closing yesterday at 193/4. K-tel, which soared last month upon announcing its online retail plans, closed yesterday at 141/2, down about 40% since May 1. (The stock split two for one on May 8.)

The drops outdistance those of the market as a whole, says one New York-based analyst, who says the Nasdaq--where all three stocks are listed--has fallen about 10% since April. "The entire Nasdaq Composite is in the midst of a correctional period, and these high-tech companies are suffering," she says.

"It's quite unsurprising that performance in this area is uneven," says San Francisco-based entertainment/software analyst Dean Frost. "Given the past enthusiasm for anything Internet-related, the darn thing was set up to fall." However, he says, "They're in an exciting area that's probably going to grow in leaps and bounds."

--Carolyn Horwitz, N.Y.


RIAA May Add To CD Piracy Suit

The RIAA is threatening to add more piracy charges to its suit against leading CD maker Americ Disc. The new charges would turn the dispute into "what may end up being one of the largest copyright infringement cases ever filed," said RIAA president/CEO Hilary Rosen during a keynote speech this week at the REPLItech North America Conference in San Francisco.
In a statement released Tuesday at the conference, Americ Disc said it will "vigorously defend" itself against the RIAA charges and may file a response to the RIAA complaint.

--Paul Verna, San Francisco


You Am I Make History In Australia

Sydney-based trio You Am I has become the first Australian act to have three consecutive albums debut at No. 1. The act's BMG Australia title "You Am I's #4 Record" debuts this week at the top spot on the Australian Record Industry Assn. and Australian Music Report charts. The album was recorded in L.A. with producer George Doukakis.

Three other local acts--INXS, Split Enz, and Cold Chisel--have had three consecutive albums hit No. 1, but none debuted at the top.

You Am I is without a U.S. deal after parting ways with Warner Bros. last month.

--Christie Eliezer, Melbourne


Piracy Blitz In Hong Kong

More than 100 outlets on Hong Kong island have been hit with criminal sanctions since the start Sunday of a government blitz against the sale of pirated audio, video, and computer software. Around twice that number are said to have been hit in Kowloon, where the problem is concentrated.

The Hong Kong government has mobilized up to 500 police and customs officers in a crackdown on illegal vending to coincide with the World Intellectual Property Organization conference in Hong Kong, which ended yesterday. Sources say it will continue through next week's visit from a U.S. bilateral trade delegation, which will include President Clinton. "If you look around town you can see a big difference," says J.C. Giouw, IFPI regional director, southeast Asia. "There are not more than two or three stores left on Hong Kong island selling illegal CDs."

In related news, close to 250,000 pirated CDs worth about $1 million were seized Tuesday after a raid in Hong Kong on a cargo boat bound for Shantou, China.

--Geoff Burpee, Hong Kong


Temps Keep Time For Stabbing Westward

Stabbing Westward's U.S. tour will continue with a little help from the band's friends, in the wake of drummer Andy Kubiszewski's broken collarbone (Bulletin, May 26). Former Nine Inch Nails drummer Chris Vrenna will fill in on the Stabbing Westward tour from June 7-13, while Killing Joke's Geoff Dugmore takes over June 20-July 17.

--Ray Waddell, Amusement Business