Layoffs, budget cuts affecting studios, networks

The downbeat mood of business in the U.S. is pervasive, penetrating even Hollywood’s cloistered community.

The entertainment biz seems to be battling the psychological effects of the worsening downturn almost as much as it is facing the knife of budget cuts, staff layoffs and general austerity initiatives. Hollywood’s output is measured largely in creativity; dour moods do not stimulate creative juices.

For sure, Hollywood is not immune to the pain and suffering other industries are experiencing. In the past few weeks, Lionsgate announced plans to lay off 8% of its staff, Disney’s TV production division confirmed a 2% cut in the budgets of its TV series, NBC Universal said it would hack $500 million out of its 2009 spending plan and CBS Corp. has quietly been laying off staffers at its TV and radio stations.

These are deep cuts that will be tough for companies to absorb and hard on morale. So too are the nibble-you-to-death effects of belt-tightening initiatives that have suddenly limited travel options, dining and entertainment expenses, subscriptions to newspapers and magazines.

Taking away perqs is tough in showbiz, because so many of them are mandated by contracts and guild agreements. But whether in writing or not, there are whole lot of execs and talent who will be flying coach in the months ahead. Smaller companies may have more flexibility to keep up the A-list lifestyle — if they’re successful enough — because the major congloms are under pressure to prove to shareholders that they are not profligate in the face of hard times.

Sony Pictures Entertainment, for one, has cracked down on company-paid subscriptions to nonpro publications, after top execs noticed too many copies of House and Garden and Architectural Digest and the like sitting in the offices of veeps and senior veepees.

Producers grouse that the time-honored tradition of sending an assistant out to gas up their car, on the studio’s dime, has been nixed of late by a number of the majors.

Even mundane things like cuts in office supplies and the bottled water that used to be piled high in the company fridge have an impact on the collective corporate psyche. And in a town addicted to swag and gifting suites, it didn’t go unnoticed that there was — heavy sigh — no gift bag at a number of recent early awards-season events, including BAFTA/LA’s Britannia Awards ceremony.

More noticeably, big spending on premieres and awards-season largess by the major congloms is fast becoming a thing of the past, biz insiders say. More and more studios are forgoing the six-figure premiere afterparty for all but the most high-profile pics, and focusing on getting all the media they can to show up for the red carpet.

The trend of staging separate premiere events for a pic in Gotham and L.A. is sure to be history, at least in the short term. One city will get the premiere hoopla; the other will get an industry screening with maybe some drinks and hors d’oeuvres. Sponsorship deals will become even more in-your-face as studios seek outsiders to pick up their party tabs.

And there will undoubtedly be cutbacks in spending on film festivals.

Beyond bruised egos and the angst of unrequited entitlement, the bigger demon that companies in the entertainment sector face is the mood-killing effect of the steady drumbeat of really horrendous news coming from other parts of the economy: mass layoffs, bankruptcies, government bailouts for private businesses.

What’s bad for General Motors is bad for the optimism of business. (Seeing GM stock hit $3, as it did last week, is bad. Really bad.) Another ominous sign that got a lot of attention in a latte-swilling town: Starbucks’ profit plunged 97% in its fiscal fourth quarter. If consumers are forgoing their daily $3 cup of fancy joe, how long will it be before they give up that $8 movie ticket, or $20 DVD?

“It’s just been relentless out there,” said a mid-level executive at ABC. “You have to wonder, is it going to happen to us?”

Oddly enough, the broader economic downturn is hitting Hollywood at a time when the biz has already been in downsizing and downscaling-of-ambition mode — a good deal of which was prompted by the writers strike that began this time last year.

Earlier this year, Time Warner streamlined its pic plans by folded its Warner Independent and Picturehouse units and downsizing New Line Cinema. Paramount Pictures did the same with its Paramount Vantage unit, shedding 60 jobs as it turned the specialty wing into a label within the mothership rather than a stand-alone operation.

Warner Bros. got the jump on its competish in 2005 by axing 400 studio jobs. The Walt Disney Co. cut 650 jobs worldwide — half of them at home at the studio — in 2006.

On the TV side, the congloms responded to the jolt of the 100-day writers strike by dramatically cutting costs — mostly by slashing more than 70 overall producer deals from TV studio rosters and cutting spending on pilots.

Episodic budgets on many shows airing on the Big Four networks have been significantly tightened, to the chagrin of showrunners. That big action sequence you were planning to shoot in Monument Valley? Rewrite it for a standing set, please.

Hollywood’s largest talent agencies — which are famous for laying out the largess in good times — have been tightening the screws on spending for more than a year as they girded for the blow of lost revenue before, during and after the scribes’ revolt.

The ripple effect of all the bad news for the nonpro businesses is already taking a big toll on entertainment companies’ ambition. Just like the automakers, some congloms are starting to reconsider some of their bigger long-term projects, particularly on the international front.

There’s also going to be a big opportunity cost as showbizzers are forced to do more with less. At NBC U, insiders say the mood is grim as staffers await the verdict from top management on next year’s budget slashing.

“You can’t cut $500 million in paper clips,” says a Peacock veteran who’s been through several GE-mandated rounds of downsizing at the network.

(Timothy M. Gray, Brian Lowry, Pamela McClintock and Shali Dore contributed to this story.)

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