Paramount Vantage head Nick Meyer exits
Viacom said Wednesday that it is slashing 850 jobs — or 7% of its total workforce — in an ominous sign that massive cost cuts are in the works around the entertainment industry as it braces for a long and brutal recession.
MTV Networks will shoulder the brunt of the layoffs, with the staff trimmed by as many as 500. Insiders say the layoffs will be concentrated in the Music/Logo/Films Group headed by Van Toffler.
Paramount Pictures will endure another series of pinkslips — an event that has become a regular occurrence on the Melrose lot as the studio continues to become a leaner operation. In addition to a series of layoffs, Paramount has introduced a number of cost-cutting measures over the past year including reducing the target for its number of annual releases from 25 to 20 and folding Par Vantage marketing, distribution and physical production departments into the parent studio.
“Like all other divisions of the company, Paramount too is adapting to the changing conditions and, as a result, we will reduce our global workforce,” Par chairman-CEO Brad Grey wrote Thursday in a memo circulated to staff. “These reductions are across the studio: accounting, business/legal affairs, corporate and government affairs, home entertainment, human resources, information technology, production, studio lot operations and Vantage.”
Indeed, although the studio would offer no further details on the layoffs – believed to number 100 of the 3,000-employee worldwide staff – the Vantage label appeared most in jeopardy, with Nick Meyer ankling his post as president.
Meyer, who has three years remaining on his contract, took the label’s reins in January after John Lesher segued to the No. 2 creative post at the studio. Sources said Vantage – a label that produced a number of expensive Oscar contenders in recent years including “Babel,” “No Country for Old Men” and “There Will Be Blood” – is being almost entirely shuttered. Vantage exec VP Guy Stodel, who joined the studio in July, will take over day-to-day responsibilities for the label and will focus on acquisitions and international productions. The label’s foreign sales unit will continue, headed by Alex Walton. Vantage has 18 months remaining on its foreign output deal with Overture Films, which includes the upcoming Michael Moore documentary.
Viacom layoffs come on the heels of a number of corporate reductions within the entertainment industry. In October, NBC Universal disclosed plans — solidified Thursday — to cut $500 million from its budget in 2009; staff cuts of 500, about 3% of its workforce, are part of the package. Time Warner gutted its Time Inc. division earlier this fall. Industry players and investors alike are waiting for the shoes to drop at other media congloms. News Corp. hasn’t announced large-scale layoffs yet.
News of Viacom’s belt-tightening came on the same day AT&T laid off 12,000 workers, while CEOs of the bankrupt Big Three automakers groveled in Congress for a financial bailout. This week a handful of major book publishers chopped jobs. Even the Masters of the Universe at white glove Carlyle Group axed 100 positions, as Carlyle became the first big private equity firm to cut staff thus far. And digital media company RealNetworks, which runs the Rhapsody online music service with MTV and is also a major player in Web gaming, announced Thursday that it is laying off about 130 people, 7.5% of its staff.
“Unfortunately, our advantages and best efforts can’t completely protect Viacom from the very serious and broad-based challenges of this economic recession,” wrote CEO Philippe Dauman and senior exec VP Tom Dooley in a memo to staffers. “Viacom’s long-term health will depend on our shared commitment to adapt, to innovate and to make difficult choices. To compete and thrive, we need to create an organization and a cost structure that are in step with the evolving economic environment,” they added.
Viacom chairman Sumner Redstone declined to comment Wednesday. But he’s been battling on several fronts, trying to keep bankers at bay while he looks for ways to pay down some $1.6 billion in debt from his family holding company, National Amusements. He has already sold some $233 million worth of shares in Viacom and CBS, plus his entire 87% stake in Midway Games, to raise cash.
Most recently, he proposed to the banks a sale of some of National Amusements’ movie theaters. Redstone is hoping he won’t have to whittle down his media empire any further, but the prospect of a sale of more shares of Viacom or CBS continues to hover over the stocks like a dark cloud, as have jitters over the continued deterioration of ratings and revenue at MTV — something Wednesday’s hefty programming writedown did little to assuage.
As part of the cost cutting, Viacom will also freeze salary increases for senior management. The company predicted the cuts would save $200 million-$250 million in 2009.
It said it will record a hefty pre-tax charge of $400 million-$500 million in the current fourth quarter. That comes only in part from the layoffs: The bulk of the charge is from writedowns on programming costs — from acquired programming that’s run its course or no longer fits in with the network’s demographic.
The charge also included costs of canceling leases as the company downsized this year from six New York locations to three.
The cuts cross all divisions, and some international staffers will also be let go. Company wouldn’t break out the numbers but said they will be roughly proportional to the size of each business. Because MTV Networks has the largest staff within the Viacom universe, it took the hardest hit. However, the entertainment group — headed by Doug Herzog — has been largely unaffected.
“They’ve got 30 years of fat accumulated in that division,” said one MTV Networks insider.
Paramount has instituted a series of cost-cutting measures — big and small — in recent months, with travel budgets and overtime being reduced significantly. A source said studio employees have been told there will be only one printer per floor of each building. In October, the studio moved two fall films, “The Soloist” and “Defiance,” to 2009 in an effort to shift marketing costs to the new fiscal year.
Notification on the Viacom layoffs began Wednesday and is expected to be completed within three business days. For the majority, their last day will be today, although some will stay on for a transition period. Those affected will be paid through year’s end with severance after that and some outplacement help. All contractual employees will be paid out through the end of their contracts.
Viacom shares, which have plunged more than 60% over the past year, were trading lower Wednesday, a down day for the broader market.
(Dan Frankel, Anne Thompson, Dade Hayes and Dave McNary contributed to this report.)