Sanctuary's UK record label to close

LONDON, Sept 5 (Reuters) - The UK recorded music division of Sanctuary Music Group is to close, its new owner Universal Music said on Wednesday, as it looks to develop the British firm’s merchandising, catalogue and management businesses instead.

Universal, which bought the struggling music group for 44.5 million pounds ($89.4 million) in August, said the UK recorded division, which has artists such as the Charlatans and Brian Wilson, would no longer operate as a standalone front-line label.

It will start consultations to minimise redundancies and a source familiar with the situation said it would start discussions with the artists shortly.

Under its new owner, Sanctuary’s sizeable catalogue unit will operate alongside Universal’s UK’s catalogue division while the rest of the group will continue under its current management as standalone businesses in the merchandising, agency and artist services, the source said.

The Sanctuary Records U.S. unit will continue to operate as it is for now but this could be reviewed at a later date.

Universal announced its purchase of Sanctuary in June to develop new revenue streams such as merchandising and artist management as traditional income from the sale of CDs and digital music continues to wane.

Sanctuary currently manages James Blunt and Elton John and markets merchandise for over 30 big-name acts including Oasis and The Who.

It also handles live events for over 350 artists including The Red Hot Chili Peppers, Avril Lavigne, Amy Winehouse and Franz Ferdinand.

Sanctuary formed when Rod Smallwood met Andy Taylor at Cambridge University in the late 1970s and they started working together to manage up-and-coming heavy metal group Iron Maiden.

But it has struggled since mid-2005 due to problems at the UK record label and delays at the loss-making Urban Records which it bought in 2003 from Mathew Knowles, father of R&B singer Beyonce.

Universal is owned by Vivendi VIV.PA and is the world's largest music group by sales.