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NBC to cut spending amid downturn

October 18, 2008|Dawn C. Chmielewski | Times Staff Writer

NBC Universal is planning to slash spending across the board next year as it braces for a sharp drop in consumer spending on entertainment.

In a memo, NBC Universal President Jeff Zucker said the cuts would amount to $500 million, or 3% of what would be a $16.7-billion annual budget. He called on division heads to make cuts in staffing, promotional expenses and discretionary spending on travel, entertainment and outside consultants.

"As we have been working on our budgets and planning for 2009, it has become evident that the decline in consumer confidence and spending will impact our operations," Zucker said in the memo. "The leadership team of the company agrees that we must take steps now to prepare for these new economic realities."

NBC Universal is a division of Fairfield, Conn.-based General Electric Co. Shares of the parent company closed Friday at $19.63, down 26 cents.

Word of the pending budget cuts came just one week after NBC Universal reported a 10% jump in quarterly operating profit on the strength of advertising for the Beijing Olympics; the popularity of Universal Pictures' summer movies, including "Mama Mia!"; and solid results at its cable properties.

NBC Universal's Spanish-language television division, Telemundo, said this week that it would cut its workforce by 5% as it anticipates a slowdown in advertising.

Local television stations have been hard hit by reductions in spending as their largest advertisers -- car dealerships and retailers -- struggle through the economic downturn.

Television companies had been hoping for a windfall in political spending, but so far the presidential nominees have concentrated their purchases in battleground states such as Florida and Ohio.

Other media giants face similar challenges. News Corp. Chief Executive Rupert Murdoch told shareholders attending the company's annual meeting Friday in New York that the global financial crisis has weakened ad markets and beaten down the company's share price.

News Corp.'s shares have lost 60% of their value in the last 12 months, closing Friday at $9.27, down 9 cents.

"It's tempting, of course, to stand here and boast about next year's success. I cannot do that," Murdoch said. The crisis "has left no sector untouched, ours included."

Other media companies have signaled troubles ahead, as analysts predict that the ongoing economic slowdown and the worsening credit crisis are likely to translate to cuts in large-scale ad spending. Network television companies may fare better, at least in the near term, because they receive the greater proportion of national advertising. Local TV stations are more vulnerable.

Just last week, Viacom Inc. and CBS Corp. warned that deteriorating advertising sales would hit their profits, and Merrill Lynch downgraded Walt Disney Co.'s stock, citing concerns about the vulnerabilities in its advertising, theme park and consumer products businesses.

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dawn.chmielewski@latimes.com

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