Warner Bros. Entertainment chairman and CEO Kevin Tsujihara has told Warner Bros. employees that layoffs are coming at every level across the studio.
The cuts are coming in the wake of a failed bid by Rupert Murdoch’s News Corp. to buy parent Time Warner and amid disappointing box office performance.
Tsujihara did not disclose how many cuts will take place or which of the three divisions — films, TV and home entertainment — would be most impacted. He sent the memo out late Thursday afternoon, just as the studio’s “The Judge” was opening the Toronto Film Festival, following media reports this week of possible employee reductions.
Tsujihara did not disclose how soon the layoffs would come at the Burbank studio, which has about 8,000 employees and has been the most consistently successful among the Big Six studios in recent years. It’s been at or near the top of box office and set a record last year with $5.03 billion in worldwide grosses.
Warner Bros. is also regarded as the biggest studio in Hollywood in terms of number of releases, spending on films and first-look deals.
Studio parent Time Warner is under pressure from Wall Street to reduce costs in the wake of spurning Murdoch’s $80 billion takeover bid. The stock, which had jumped above $87 a share after the offer was unveiled on July 16, plummeted to $72 a share following the Aug. 5 withdrawal by Murdoch.
The stock closed Thursday at $77.23 and is up 16% for the year.
Time Warner’s Turner division, which includes CNN and TBS, began offering buyouts to between 500 and 600 of its U.S. employees last month. But Tsujihara’s memo made no mention of buyouts being offered to the studio employees and added that he wanted to “set the record straight” — apparently refuting recent reports that buyouts had started.
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In Time Warner’s most recent earnings report, Warner Bros. operating profit gained 29% to $234 million in the second quarter due to increases in home entertainment and TV (which includes “The Big Bang Theory,” “Shameless” and “Two and a Half Men”). Revenue declined 2.4% to $2.87 billion due to a decline in movie performance.
Warner Bros.’ current share of the domestic box office for 2014 is $1.08 billion, with about 15% of the market and in third place behind Fox and Disney. That’s far short of the pace of 2013, when it led the U.S. box office with $1.86 billion.
Warner Bros. saw impressive returns this year from “The Lego Movie” and “Godzilla,” shared with now-departed Legendary Entertainment.
But “300: Rise of an Empire” and “Edge of Tomorrow” performed only moderately and Johnny Depp’s “Transcendence,” financed by Alcon, was a major disappointment. Additonally, the Wachowskis’ costly “Jupiter Ascending” was yanked out of its July slot less than two months before its opening in order to spend more time on special effects.
Here’s the memo:
I wanted you to hear directly from me about our plans for the Studio. In recent days, we have started to hear rumors here at the company and to read misinformation in the press, so I’d like to set the record straight. I know that the hard work and dedication of every employee around the world is the key to Warner Bros.’ success, and I am sorry for the distraction this situation brings to the workplace.
At Warner Bros., we work with the world’s most extraordinary storytellers, and our focus has always been to provide the creative environment and financial resources they need to realize their vision. Our commitment to that won’t change. In fact, we’re investing more than ever in our film and television productions.
Since I became CEO, I’ve been working with the Studio’s senior management team to create a plan to position Warner Bros. for future growth, maintaining our position as the industry’s leader in quality and scale—all while safeguarding our traditions and legacy. This will require us to reduce costs and reallocate resources to our high-growth businesses.
Here at Warner Bros., we are currently in a position of unparalleled strength. To maintain this position, we are constantly reviewing our global businesses to make sure we’re operating as efficiently and effectively as possible. We are doing our best to minimize staff reductions. However, and it pains me to say this, positions will be eliminated—at every level—across the Studio. In making these decisions, we will follow all applicable protocols. Your divisional and departmental leadership will share more information with you about these changes in the months ahead.
Despite the challenges we face, we need to focus on the tasks at hand, maintain the sense of excellence that has defined our company for more than 90 years, and move forward knowing that, regardless of any organizational changes, we will remain the industry’s gold standard.
Thank you, again, for your support and dedication to this company.