21st Century Fox Looks to Save $250M in Voluntary Film, TV Staff Resignations
The entertainment conglomerate is looking to reduce costs and recalibrate the businesses.
21st Century Fox is offering voluntary buyouts to U.S. staff at its film and TV networks units to reduce $250 million in costs during its new fiscal year that starts in July.
Fox is led by CEO James Murdoch and executive co-chairmen Rupert Murdoch and Lachlan Murdoch.
Various entertainment conglomerates have in recent years cut costs amid changing industry dynamics, including Time Warner and Viacom. The cost-cutting goal at Fox is for $250 million via voluntary resignations. The buyout packages will offer enhanced benefit packages, with more cuts expected to come at the TV unit, which includes the Fox broadcast network, which has been hurt by weaker ratings. The company didn't disclose a target for the number of layoffs.
The idea is to recalibrate structures in the businesses amid revenue challenges and possibly free up money to put towards growth areas, sources said. Some buyout offers could be accepted as early as Monday, with staff expected to leave closer to mid-year. It is understood that if the company doesn't meet its cost savings target, that there will be layoffs.
The news affects the units overseen by Peter Rice, chairman and CEO of the Fox Networks Group, and Jim Gianopulos, chairman and CEO of Twentieth Century Fox Film.
"As we position 21st Century Fox for the future, we want to ensure our organization remains agile and structured to fully capture the many opportunities ahead of us," Fox said, with Rice and Gianopulos explaining the moves in more details in staff memos. "With this we are looking across our film and television businesses to transform certain functions and to reduce costs."
It added: "As part of this process, which is in its early stages, today some colleagues from Fox Networks Group and 20th Century Fox will be offered a generous benefit package if they opt to voluntarily leave the company."
"Our industry is changing rapidly, presenting new challenges and even more opportunities at every turn," said Rice in a staff memo. And Gianopulos wrote: "As we all know, the film industry is facing many significant changes, and we are no exception. While we continue to succeed on many fronts, such as garnering an extraordinary 30 Academy Awards nominations and; last year, setting an all-time industry box office record, we must be cognizant of the industry's transformation and position ourselves to continue our success in this new environment."
21st Century Fox CFO John Nallen is understood to have been working with Rice and Gianopulos on the buyout offers. Fox is set to report its latest quarterly earnings on Feb. 8. Some analysts have been wondering if the company may reduce its full fiscal-year earnings outlook when it reports earnings.
"Secular pressures could be a headwind," wrote FBR & Co. analyst Barton Crockett in a recent report. "Foreign exchange also probably continues to be a rising headwind."
And Guggenheim Securities analyst Michael Morris recently updated his Fox forecasts for the latest quarter and the full fiscal year "to reflect 1. weaker than previously forecast fiscal second-quarter film segment operating profit, 2. more significant drag from foreign exchange rates, and 3. a delayed release of Avatar 2 until fiscal year 2018." He concluded: "Our second-quarter and fiscal year 2016 earnings per share forecasts now stand at 42 cents and $1.73, respectively, compared to prior 46 cents and $1.79."
Read the full staff memos on the voluntary buyouts below.
Peter Rice's memo:
Our industry is changing rapidly, presenting new challenges and even more opportunities at every turn. For a company that has always embraced change and innovation, these are exciting times. To ensure we make the most of this new world, we need to adjust, adapt, and organize for the future. With this in mind, through the remainder of this fiscal year, we will be undertaking some structural changes, increasing investment in some parts of the company while making cost reductions in other areas.
During the past 18 months, we have aligned our company around our core consumer-facing brands: reorganizing Fox Sports; expanding FX Networks; bringing together Twentieth Century Fox Television and FBC; uniting our ad sales teams into a leaner and more agile operation; purchasing True X; creating the new National Geographic Partners; and, most recently, restructuring our international channels to capitalize on our expertise in major regions.
As the next step in this reorganization, colleagues who fit a specific set of criteria will be offered a generous benefit package if they decide to voluntarily resign from the company, effective May 23, 2016. Colleagues who are eligible for this offer will receive a confidential email in the next few hours with specific terms and benefits. Again, the program is completely voluntary.
This restructuring is coming at a time when all of our businesses are hitting new heights, which I know may be confusing. Last night’s Grease: Live on Fox was a groundbreaking and spectacular production. The premiere of the X-Files, made by Twentieth Century Fox Television for FBC, was watched by a global audience of more than 50 million people. Fox Sports is home to many of the world’s biggest sporting events including last week’s NFC Championship game, this month’s Daytona 500, the next World Cup and next year’s Super Bowl. American Crime Story, which is produced by Fox 21 Television Studios and FX Productions and premieres on FX tomorrow, is one of the year’s most anticipated new series. Our new partnership with National Geographic has made us the world leader in visual factual entertainment across all platforms. These are just a few of the highlights across our business that, when taken together, make this an incredibly exciting creative time at the company. It is important, however, that we organize ourselves for tomorrow rather than resting on the laurels of today, and the best time to do that is when we are in a position of strength.
I realize change is difficult, but we will be stronger if we take this opportunity to position our organization for the future. This is the right thing to do for our business because although technology is rapidly changing our world, the global hunger for our brands and content will continue unabated and making the right decisions now will provide our company with many exciting opportunities for continued growth and success. I thank you all in advance for your professionalism and support.
Jim Gianopulos' memo:
As we all know, the film industry is facing many significant changes, and we are no exception. While we continue to succeed on many fronts, such as garnering an extraordinary 30 Academy Awards nominations and; last year, setting an all-time industry box office record, we must be cognizant of the industry's transformation and position ourselves to continue our success in this new environment. To that end, we are reviewing our organizational structure and looking at potential cost reductions to position us for sustained future growth.
As we embark on this review, we are taking the opportunity to offer 20th Century Fox colleagues who have extended tenure an enhanced benefit package if they elect to voluntarily resign from the company effective at the end of May 2016. Colleagues who are eligible for this program will receive a confidential email with the details of the offer. The program is completely voluntary, and these offers are being made to recognize the significant contributions our colleagues have made during their time at the studio.
This comes at a time that is both exciting and challenging for the company. We are the best at what we do and will continue to excel, but we also have to be fearless about transforming, and embrace both change and opportunity. If we structure our organization for the media world ahead of us, we will continue to thrive and make 20th Century Fox a stronger and more agile company going forward.
Thank you for your continued contribution and dedication.