Parties and Pink-Slips: How Hollywood Spends Money Reveals Its Priorities

Parties and Pink-Slips: How Hollywood Spends
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Many in the TV industry, including those of us who cover it, have spent plenty of time bellying up to the bar at HBO shindigs, admiring the generous spreads of food. Small wonder people compare the network’s annual Emmy or Golden Globes bashes to Rick’s Cafe in “Casablanca”: the place where everyone winds up sooner or later.

So it came as a particular jolt to read about layoffs at the pay service, a money machine for Time Warner whose profits regularly climb into 10-figure territory.

In Hollywood, the juxtaposition of parties and premieres with pink slips should spur contemplation of another “P” word: priorities. Specifically, how these corporations value their human capital, with the combination of lavish spending on what’s deemed important, and belt-tightening concerning what evidently isn’t, sending a bitter message, sometimes inadvertently, to the community at large.

To be fair, any such discussion requires a few disclaimers. Corporate layoffs and largess are hardly limited to the entertainment industry. In addition, Wall Street has a nasty habit of rewarding companies for reducing their payrolls, fostering euphemisms like “right-sizing” or “seeking efficiencies.”

And to be sure, the media industry is experiencing a period of epic changes, which has made the notion of job security as quaint as it is obsolete.

For all that, few businesses are more ostentatious in displaying their wealth than entertainment, where the relationship with award shows and red carpets is virtually unique. Indeed, the very existence of those events represents a strategy stamped into Hollywood’s promotional DNA, as studios and networks trot out glamorous stars to garner free publicity, fueling several cottage industries as a byproduct.

It’s also hard to escape a sense that even in the toughest times, there’s plenty of money available for what (and who) really matters. There was perhaps no better recent demonstration of that than at Turner Broadcasting, which agreed to pay more than double its massive rights fee to televise NBA basketball — on the very same day it was reported the Time Warner division would reduce its workforce by 10%.

The intent here isn’t to pick on Time Warner, but its response to media titan Rupert Murdoch’s unsolicited bid for the company has been illuminating. Having rebuffed the 21st Century Fox offer, Time Warner has faced pressure from investors to boost stock price, which of course slumped once the prospect of an imminent deal vanished. Inevitably, that has meant painful cuts, with a target of reducing overhead by $200 million annually.

Yet Warner Bros. also is eager to boost profits, so talk of fiscal responsibility was accompanied by grandiose plans to expand its DC Comics-inspired movies roster to rival that of Marvel. The company thus unveiled roughly a dozen superhero titles — most of which will carry a pricetag roughly equivalent to a year’s worth of targeted cuts.

Obviously, there’s a “spend money to make money” logic at work here. But that’s hardly consolation to those being let go, whose annual salaries probably don’t amount to much more than the craft-services budget for a gargantuan undertaking like the upcoming “Batman v Superman” movie.

Even broaching this issue risks smacking of a certain naivete, but that seems preferable to becoming callous about the ground-level toll exacted by such decisions — especially in the face of an anticipated wave of big-money media mergers, many of which will seek to offset acquisition costs by seeking, yes, greater “efficiencies.”

So at the risk of being a spoilsport, it might be appropriate at that next Hollywood gala to pause to consider what it might say about priorities. At that point, feel free to decide whether you’re more comfortable drinking to remember, or to forget.