Belying the popular notion that entertainment is recession-proof, popular Hollywood studio Warner Brothers Entertainment said Tuesday it will cut about 800 jobs, representing about 10 per cent of its workforce.
However, this is not the first instance of the industry resorting to layoffs to prune costs. NBC Universal and Viacom have already cut jobs, and industry watchers expect more job cuts to be announced by Walt Disney and Sony Pictures.
Time Warner Inc. unit Warner Brothers Entertainment, citing the worldwide financial downturn and the current forecasts, will lay off about 600 employees, with half of those cuts to be made in the coming weeks. Another 200 jobs currently open at the studio will not be filled, a Warner Brothers spokeswoman said. Warner Brothers will outsource another 155 jobs over the next several months to CapGemini, which handles a number of studio functions.
Warner Brothers, the top studio in box-office sales last year, also will hire contractors to run parts of its US management information systems and accounts payable, the Burbank, California-based company said today in an e-mailed statement.
According to a memo sent to Warner Brothers employees from chairman Barry Meyer and president Alan Horn, the cuts must be made because of "the changing entertainment business landscape, shifting consumer demand and the overall state of the economy."
The film and TV studio, which employs 8,000 people, asked department heads to come up with ways to cut budgets 10 per cent last month. Parent Time Warner said on 7 January it would report its first annual loss in six years, after writing down cable television, publishing and Internet assets by $25 billion. CEO Jeffrey Bewkes is splitting off the cable systems.
With a parade of hits like The Dark Knight, Sex and the City, Get Smart and Four Christmases, Warner recorded global ticket sales of $1.77 billion in 2008, up 25 per cent from a year earlier. But DVD sales plummeted in the fourth quarter and orders of scripted television programs - a huge Warner business - are expected to decline as networks cope with tumbling advertising sales.
The struggles of Warner's parent company, Time Warner, in the publishing arena have also put pressure on the studio to increase profitability.
Studios including Paramount and Warner Bros. are reducing the number of films they release each year and consolidating the operations of smaller, niche divisions to counter falling sales of DVDs, which dropped for a second-straight year in 2008. Movie attendance slid 5.2 per cent, according to Media By Numbers LLC.
Time Warner, the world's biggest media company, fell 67 cents to $8.94 at 4:01 p.m. in New York Stock Exchange composite trading. Shares of the New York-based company had fallen 39 per cent last year.