Showtime lays off 70 staff

Channel makes cuts as cable operators merge

NEW YORK — Showtime has laid off 70 staffers — 10% of its workforce — to bring the network’s operation more in line with a new reality: Merger mania has shrunk to a small handful the number of cable operators that buy Showtime.

“With so few cable operators out there as a result of dramatic consolidation, Showtime has become overstaffed in areas like affiliate relations, marketing and creative services,” said Larry Gerbrandt, chief content officer of Kaganworld Media.

Showtime declined to go into detail about the cuts. A spokeswoman said only that they’re part of “a strategic review” that has turned up “opportunities to streamline our organization.”

The network’s programming division had to take a small hit because the license fees Showtime is now paying to program suppliers are more than double what they were a few years ago.

The collapse of the aggressive German TV program buyer Kirch in 2001 dried up revenues from Europe. As a result, program suppliers had to insist that Showtime make up the difference in the dollars they used to pocket from foreign broadcasters.

Gerbrandt also points to “the monomaniacal focus on increasing cash flow by Mel Karmazin,” the president of Showtime parent company Viacom.

Showtime’s cash flow has shot up by at least $20 million each year since 1996, almost tripling during that period from $86 million to $216 million. That’s an annual-growth-rate average of 16.6%, according to Kagan. Throughout the same period, Showtime’s subscriber count has almost doubled, from 13.3 million to 24.3 million (annual average: 10.5%).

By contrast, Showtime’s programming budget rose by an average of only 4.1%, from $366 million in 1996 to $466 million in 2002.

Michael J. Wolf, managing partner of the global entertainment and media practice for McKinsey & Co., said Showtime is on the right track with its emphasis on producing original series like “Queer as Folk” and “Soul Food,” which “provide value to subscribers above and beyond movies.”

Edgy original series offer exclusive programming that subscribers can’t get anywhere else, Wolf said, enhancing the subscription-video-on-demand biz that Showtime is pushing as a potentially strong revenue stream down the road.

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