Layoffs pile up at media firms
Viacom axes 850 staffers, will take write-downs; NBC Uni to let go 500The ax continues to swing across the media and entertainment industry as the year closes, with Viacom and NBC Universal on Thursday becoming the latest to unveil layoffs totaling about 1,350 positions.
Viacom's 850 staff cuts amount to a 7% reduction of its work force. The company also said it will suspend senior-level management salary increases for 2009 and take write-downs on programming and other assets whose value has declined.
Viacom's restructuring and write-downs will result in a pretax charge against earnings of $400 million-$450 million, or 42 cents-48 cents per share, in the current fourth quarter. They will lead to pretax savings of $200 million-$250 million in 2009, the company said.
It didn't provide a breakout of the size of cuts in its film and TV operations or the size of the write-downs. But sources said the layoffs came across functions and countries and that a majority came at the TV division.
NBC Uni is letting go of 500 people, or 3% of its staff. Beyond pink slips, some of the departing employees opted for buyouts or early retirements.
The cuts affected all parts of the company, including 70 at Universal Pictures, at least 30 at NBC News and as many as 50 at the local media group. Theme parks and distribution also were hit. Nearly 80 positions were cut at CNBC, and "The Big Idea With Donny Deutsch" was idled.
CNBC sources said that given the economic climate, a show like "The Big Idea" about success isn't the right topic to be discussing. Deutsch will remain with the network to do monthly specials and longform programming such as "The Entrepreneur" and "Collaboration" as well as appear periodically on NBC's "Today."
The cuts were said to be minimal at the NBC broadcast network and at the cable unit, which has driven growth in recent quarters.
Among the correspondents who have been let go are Don Teague and Mark Mullen, sources said.
Mark Fratrik, vp of BIA Financial Network, said that the Viacom and NBC Universal cuts were indicative of the problems with the media economy as it hobbles into 2009.
"There's a contraction of the economy and advertising dollars, and the outlook for 2009 is not promising," Fratrik said. He said that one of the major factors that has hurt TV operations is the loss of automotive advertising.
"Whether the automotive companies get the bailout money or they don't, one would suspect that there would be less advertising dollars going that way. It's planning for a dismal 2009," he said.
The news comes after U.S. corporate layoffs for November hit 181,671 — nearly a seven-year high, according to global outplacement consultancy Challenger, Gray & Christmas. Year-to-date cuts have passed 1 million for the first time since 2005.
As of the end of November, media industry layoffs — driven by newspaper cuts but also including pink slips in TV, film, music and other businesses — already had come to 25,500 for the year, according to Challenger data. That is the most since the 43,420 recorded in 2001.
The moves were part of NBC Uni CEO Jeff Zucker's plan, announced in October, to cut $500 million in costs. The announcement came after it had emerged Wednesday that 30 people had been laid off in the advertising department at NBC.
In staff memos, top executives at both conglomerates cited the recession as the key reason behind the cost reductions.
Viacom president and CEO Philippe Dauman and CFO Tom Dooley highlighted "the very serious and broad-based challenges of this economic recession." Dauman promised "sizable efficiencies that will help us to drive our business as the marketplace stabilizes and conditions improve."
Universal Pictures chairmen Marc Shmuger and David Linde in their memo also cited "the struggling economy," underscoring cost cuts beyond the staff reductions in such areas as travel, overtime, premieres, conferences and newspaper marketing.
Sanford C. Bernstein analyst Michael Nathanson already had forecast $75 million in cost reductions in Viacom's cable network unit for next year. The additional savings provide "a cushion to Viacom's bottom line against potential shortfalls in advertising relative to our current estimate of a 5.5% decline." The firm's ad revenue could fall by as much as 10.5% next year and still allow it to hit his profit estimate for 2009, he explained.
But Nathanson also raised questions about the success of Viacom's content strategy. "The sizable programming write-down raises questions about the current management's ability to effectively program their cable networks to drive ratings," he said. (partialdiff)