"There's only one thing that's bothering me about the whole merger, because I think the whole thing's been well thought out and I think it's going to be done in a way that will create a very artistic and profitable company. The only downside for me is the fact that we are going to have to lay off a lot of people," Doug Morris, chairman and chief executive officer of Universal Music Group, told Reuters in an interview.

Universal Music Group, which will be fortified with a battalion of famous artists, said its structure would be lean and flexible, benefiting from economies of scale.

Morris said the restructuring of operations will shave $300 million in annual costs, but he would not elaborate on the amount of job cuts. Sources close to Seagram have said there will be a loss of about 20 per cent, or 3,000 of Universal's and PolyGram's combined workforce of 15,500.

Morris said the company would begin announcing the layoffs in January and that the cuts were likely to be announced "piecemeal" rather than in one lump sum.

There will be more job cuts in North America than overseas because of overlaps in the companies' distribution operations, Morris said.

Thursday's restructuring marked the latest step by Seagram chief executive Edgar Bronfman Jr. in his bumpy foray into show business that began in 1995 when he bet the family fortune on Hollywood with the $5.7 billion purchase of 80 per cent of MCA/Universal from Matsushita Electric.

Recently, Bronfman has been under pressure after weeks of turmoil in the company's executive suites and several box office flops. On Wednesday, Seagram forecast a $65 million second-quarter operating loss for its troubled film division.

In announcing the new global structure of Seagram's music business, which boasts artists ranging from Elton John to Herbie Hancock to U2, the company said it will merge such well-known labels as Island Records and Mercury Records.

Seagram named Zach Horowitz as president and chief operating officer of the combined music group. Horowitz was president at the old Universal Music Group.

Universal Music Group also said it expected to buy the half of the successful Interscope Records it does not already own.

Seagram also said it would integrate the film studio division of Polygram into its own Universal Studios movie unit. That came after Seagram failed to find a buyer for all of Polygram Filmed Entertainment at the $1 billion price it had been seeking, according to many published reports, and was forced to sell it in parts.

"Although there are redundancies and certain assets may be more valuable to third parties, we believe that a portion of (Polygram Filmed Entertainment) is complementary to Universal's filmed entertainment operations and globalization strategy," Universal Studios President Ron Meyer said in a statement.

Seagram has agreed to sell Polygram's film library to Metro-Goldwyn-Mayer Inc. for $250 million, and is reportedly nearing a deal to unload its television show library to UK-based Crlton Communications Plc for $100 million.

A spokeswoman was not immediately available to say whether or how many jobs may be cut at Polygram Filmed Entertainment, but Meyer said several key members of its executive staff will be involved in integrating the two operations.

Wednesday's forecast of an operating loss at the film division follows poor box office showings for the films "Meet Joe Black" and "Babe: Pig in the City" and the recent ouster of Universal Studios chairman Frank Biondi and Universal Pictures chairman Casey Silver.

Universal Pictures is the movie wing of Universal Studios, the film, television and theme park division of Seagram.

Seagram said the film division would show a modest loss for all of fiscal 1999 compared with earnings of $219 million last year, analysts said.

The entertainment and spirits giant also said the new estimates did not include any charges that might be taken related to the $10.2 billion acquisition of PolyGram.