Valley Media had about 2,400 employees at the end of last year and plans to reduce its work force to about 1,700, mostly through attrition. The measures are aimed at slashing expenses after the company in March reported a sharp drop in earnings.
Valley Media chief executive Barney Cohen said in a statement that he has a "responsibility to our remaining employees and to our shareholders to ensure that we are profitable again."
"We've explored every possible alternative, but the company simply does not have the income to support these staffing levels," Cohen said.
Following Robert Cain's resignation last month, Cohen stepped in as Valley Media's president and chief executive.
The turnaround effort comes as the company is making a push in online distribution. With more than 200 retail partners, Valley Media is a leading music and video distributors in the United States. In February, the company agreed to merge its Internet operations with online music supplier Amplified.com to hasten the adoption of digital downloading as a means of commercial distribution.
Valley Media's staff cuts come at a time when numerous online companies are experiencing financial difficulties that are forcing layoffs.
The company's Woodland, Calif., headquarters laid off 100 administrative employees, and 60 open positions will be eliminated June 30.
Valley Media's operations work force in California and Kentucky will be reduced by 70 employees, following an almost 30 percent cut of overall staff that has occurred since last December.
Net income dropped from a gain of $4.4 million in fiscal 1999 to a loss of $4.6 million in fiscal 2000, and earnings per share decreased from a gain of 77 cents in fiscal 1999 to a loss 54 cents in fiscal 2000.
Bloomberg News contributed to this report.