Music giant sings the blues as internet file swapping plunders sales

In a sharp indication of the perilous state of the music industry, Universal Music, the world's largest record company, today announced it was cutting 1,350 jobs or 11 per cent of its workforce.

The job cuts at the company, which controls about 30 per cent of the US music market, are part of a restructuring exercise aimed at saving $200 million a year.

Universal's problems spell more trouble for Vivendi, the beleaguered French media giant. Vivendi recently off-loaded the majority of its US entertainment business to General Electric's NBC.

The group has retained Universal, banking on a reversal in fortunes for the music industry.

Over the past three years illegal online peer-to-peer file sharing and the increased use of home CD-burning has bitten sharply into music sales.

Universal, which made an operating loss of $488m in the first half of 2003 after sales fell by 25 per cent to $2.2 billion, said that today's cost cuts would leave the company in a better position to benefit from an upturn in the sector.