Responding to the economic downturn and weaker revenue at its businesses, Viacom Inc. is slashing more than 850 jobs, or about 7% of its workforce, and freezing salary increases next year for senior managers.
The deepest cuts came at Viacom's largest division -- MTV Networks, which includes cable channels MTV, Nickelodeon, VH1 and Comedy Central. Viacom's Hollywood movie studio, Paramount Pictures, let go 140 employees -- 100 in the U.S. and the remainder in its international operations. Cable channel BET is cutting about 50 jobs.
Viacom is the latest media company to get battered by the economic crisis and fall victim to steep declines in advertising and consumer spending.
NBC Universal is also joining the layoffs bandwagon -- it said Thursday that it was cutting about 500 jobs, or 3% of its workforce, including 70 from Universal Pictures and its specialty film division, Focus Features. This is part of NBC Universal's previously announced plan to cut $500 million from its $16.7-billion annual budget.
As for Viacom, the company also said it would write down certain programming and other assets, which would result in a pretax charge of $400 million to $450 million in the fourth quarter. The staff cuts and compensation reductions are expected to result in pretax savings of $200 million to $250 million in 2009, the company said.
"The changes we are making in our organization and processes will better position Viacom to navigate the economic slowdown and generate sizable efficiencies that will help us drive our business as the marketplace stabilizes and conditions improve," Viacom Chief Executive Philippe Dauman said in a statement. The company said the layoffs would be worldwide and cut across all divisions.
Viacom reported last month that its third-quarter net income fell 37%, largely because of lower advertising revenue at its cable TV networks and an operating loss in its filmed entertainment division as a result of its movies not performing as well as the year-earlier period.
Analysts predict that Viacom's and the industry's advertising woes are far from over.
Credit Suisse analyst Spencer Wang said in a report this week that Viacom's U.S. advertising sales would decline 4% in the fourth quarter as audiences for MTV and Nickelodeon continued to shrink. MTV's fourth-quarter viewer ratings are down 22% from a year earlier, the worst decline among the company's channels, Wang wrote.
In Viacom's restructuring, MTV by far suffered the steepest cutbacks, losing hundreds of employees. In a memo to employees, MTV Networks chief Judy McGrath said: "In these tough times, we are responsible for sustaining and reinventing our company as thoughtfully as we can. The changes we're making today are necessary, difficult and the responsible way for us to move forward."
Viacom's Paramount unit is shedding about 4% of its workforce of more than 3,000. The reductions were across the board, including production, home entertainment, business and legal affairs, and studio lot operations. Paramount's specialty label, Paramount Vantage, which this year lost 60 employees after its marketing functions were consolidated into the bigger studio, suffered further cutbacks.
"Without question, the changes we implement today required us to make difficult choices," Paramount Chairman Brad Grey wrote in an e-mail to employees. "We take these steps after a careful analysis of our overall business and as part of a broader strategy to overcome the challenges of this unusual time in the market."
Other entertainment companies to fall victim to the economic crisis include NBC Universal's Spanish-language TV unit, Telemundo, which reduced its workforce 5%. Lionsgate, Hollywood's biggest independent movie and TV studio, last month cut 8% of its workforce. Walt Disney Co., which reported a 13% drop in fiscal fourth-quarter net income, is considering major belt-tightening moves across all divisions, including its Burbank studio, ABC network, cable channels and theme parks.
Analysts believe the cutbacks are far from over: Other media giants, including Time Warner Inc., whose assets include the Warner Bros. movie and TV studio and cable giant HBO, and smaller entertainment outfits are continuing to look for ways to reduce overhead and other costs.
"There will be more to come," said media analyst Harold Vogel. "I don't think there will be a massive wave of more layoffs, but this period of malaise is going to last quite a while. How to save costs is going to be on the front burner for a long time."