Warner Bros. CEO Outlines $200 Million in Annual Cost Cuts

Getty Images

Time Warner staffers have been enduring layoffs for several weeks, with more to come

After months of speculation about what cost-cutting measures at Time Warner would mean for Warner Bros., the unit's CEO, Kevin Tsujihara, laid out his vision at the company's investor day on Wednesday, including an effort to cut $200 million from the TV and film studio's annual budget, twice as much as had been speculated.

Read more Time Warner Layoffs Underway With More Yet to Come

Tsujihara didn't say, though, what percentage of the staff at Warner Bros. would be cut as the company that he has run since March 2013 seeks profit growth more in line with that of its parent company. Last year, Warner Bros. posted a 7 percent increase in operating income, while Time Warner posted a 12 percent gain. Hundreds of Warner Bros. staffers are expected get pink slips beginning next month amid layoffs in various Time Warner units.

Tsujihara spoke of creating a "leaner" organization and of cutting marketing costs, and he acknowledged some box-office duds without naming them. "We had a tough summer," Tsujihara said. "Domestic box office was down substantially, not just for Warner Bros. but across the industry."

He reminded attendees at the investor day gathering, though, that Warner Bros. has been the No. 1 or No. 2 movie studio for nine of the past 10 years, and the No. 1 TV studio for 11 of the past 12 years. Warner Bros. has 80,000 hours of movie and TV content in its library, and it has grown its operating income to $1.3 billion last year, up from $800 million in 2008, Tsujihara said, even though hit TV shows and movie franchises have come and gone. So investors need not worry about the eventual cancellation of The Big Bang Theory, which he joked would hopefully be sometime around 2050.

While continuing and looming layoffs at the whole of Time Warner are a major topic of concern for employees, the topic wasn't directly addressed in too much detail at the investor day. Time Warner will take a $400 million restructuring charge, CFO Howard Averill said, with the company saving $450 million annually due to the restructuring.

Time Warner is in huge cost-cutting mode in part because of its decision to forgo an $85-a-share buyout offer three months ago from Rupert Murdoch's 21st Century Fox. Since then, CEO Jeff Bewkes has been making the case that the stock — trading around $72 a share on Wednesday — is a stronger investment if Time Warner is allowed to remain independent than if it were to be folded into Murdoch's company.

Read more Time Warner Execs Expected to Continue Making Their Case for Independence

That, in fact, was a theme at Wednesday's investor day in New York. In addition to Tsujihara rather vaguely outlining his plans for cost-cutting, Bewkes made a presentation, as did Turner Broadcasting System CEO John Martin.

Martin has confirmed that Turner, which houses channels like TNT, Cartoon Network, TCM, TBS and CNN, intends to lay off about 1,500 people, or 10 percent of its staff. Some of those layoffs already occurred but more are set for this week and next, insiders told The Hollywood Reporter on Tuesday.

At CNN, CEO Jeff Zucker is laying off 170 staffers and 130 more have accepted early buyout packages. CNN chief international correspondent Christiane Amanpour, who operates from London, lost her New York staff, and CNN insiders said this week that entertainment-news divisions in Los Angeles, Atlanta and New York were shuttered. Layoffs have also hit CNN's Washington bureau.

Read more CNN Parent Turner Broadcasting Slashes 10 Percent of Staff

During Wednesday's presentation, though, Tsujihara was completely upbeat as he laid out the massive slate of DC movies expected through 2020, including Batman v. Superman: Dawn of Justice, Suicide Squad, Wonder Woman, The Flash, Aquaman, Shazam, two Justice League films, Cyborg and Green Lantern. Tsujihara also announced that Warner Bros. Television has licensed all 236 episodes of Friends to Netflix in the U.S. and Canada and Person of Interest to Netflix in the U.S.

Bewkes, meanwhile, told attendees that Time Warner "will more than double our earnings over the next several years." The company earned $3.51 per share last year, and Bewkes predicted $8 per share by 2018.

Much of that will come courtesy of HBO, whose CEO, Richard Plepler, was at the investor day to tout the premium cable channel, which he said boasts 136 million global subscribers. Plepler said HBO will launch an online service in the U.S. similar in some ways to Netflix.

"In 2015, we will go beyond the wall and launch a stand-alone over-the-top service with the potential to produce hundreds of millions of dollars of additional revenue," Plepler said. "And the international possibilities could be just as large, if not larger."

He also said that while original programming might get the most attention at HBO, 40 percent of its subscribers only watch the theatrical movies on the channel. We're the Millers attracted 26 million viewers, more than Games of Thrones, which is the most popular original HBO show in history. For these reasons, Plepler said HBO has struck long-term deals with outside film studios, such as Universal and 20th Century Fox, until the next decade and Summit Entertainment until 2017, for example.

Email: Paul.Bond@THR.com

comments powered by Disqus