The move could be the first step towards the closure of one or more of Sky's music channels, which are indie service The Amp, rock offering Scuzz and pop channel Flaunt.
These three channels were launched in April last year as part of Tony Ball's plans to stop the growth of Emap's channels and put pressure on MTV's service. Sky is officially saying that it is "business as usual" at the moment.
Wallace was brought in at Sky in October as head of music channels from Channel 4, where she looked after music and youth programming, replacing former VH1 executive Lester Mordue who resigned in August 2003 after just six months.
She will become director of original programming for Sky One as the channel bids to take the channel more upmarket with its original commissions and will report in to Sky One controller James Baker.
Former head of commercial and interactive, Sky Music Chiara Cipriani is promoted to head of music channels, reporting in to Sky's Networks managing director Dawn Airey.
As part of the moves Sky One controller has also promoted Ian Lewis to director of broadcasting for Sky One and he will oversee scheduling, on-air branding and compliance.