Both new and old media heavyweights are in the throes of transforming their companies and slashing their workforces as they confront an adapt-or-die moment.
In the past week alone, 21st Century Fox and Yahoo each announced severe cutbacks in their ranks.
Disney, Time Warner, Viacom, Sony Corp. and NBCUniversal have all handed out mass-scale pink slips over the past two years. So has the Weinstein Co. and mighty ESPN, which shed 300 positions last year as the powerhouse cabler adjusts to TV’s new business landscape.
Even a once-sparkling young enterprise like Twitter has had to address its bloat, with CEO Jack Dorsey initiating an 8% layoff shortly after taking the helm in October. The social media dynamo acknowledged it had grown too fast in the go-go run up to its November 2013 initial public offering.
| “The 30-year expansion in cable networks has pretty much ended. You can’t just keep growing.” |
| Hal Vogel, analyst |
And Yahoo is shedding 15% of its ranks, or about 1,600 jobs, and has officially put itself on the block by announcing it is exploring “strategic alternatives.”
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Some analysts believe that more cuts could be coming to the media/entertainment sector.
In each case, the staff reductions are described as necessary to better position these companies for the future. Media giants aren’t sure exactly what kind of employee skill sets they need to be competitive going forward, as digital disruption reshapes the economic foundations of Hollywood’s core film and TV production business. But it has become clear to CEOs what they don’t need: bloat.
At Fox, the new generation of Murdochs — led by CEO James and co-chairman Lachlan — acted swiftly last week to install a new order. Few people on the Century City lot saw it coming Feb. 1 when 21st Century Fox unveiled a plan for massive staff cuts in the coming fiscal year at its TV networks and 20th Century Fox film studio, as well as other belt-tightening measures to achieve $250 million in savings. (Employees have until May 26 to accept the buyout).
While Fox had already been viewed as lean compared with many of its competitors, the slashing of hundreds of jobs is viewed as an effort by James Murdoch and his top TV lieutenant, Peter Rice, to re-engineer business operations built decades ago for a different era. Insiders said Rice and his team have been studying the composition of the company’s many network, production and distribution divisions for some time, primed to root out inefficiencies and to push innovation.
Not surprisingly, the buyout program is aimed at staffers with long tenure, meaning those with higher salaries and those more likely to be working in sectors that are becoming outmoded or reshaped by technology. An insider said staffers with 15 years or more will receive up to a month of pay for each year of service, while those who have been at the company for 26 years or more will earn a buyout maximum equal to two years’ salary. The total number of employees who will leave remains unknown, but two people with knowledge of the plan said it would effect at least several hundred jobs.
| Steep Cuts | |||
| The workforces at media companies have been thinning and transforming | |||
| 1600 | Layoffs planned at Yahoo | ||
| 336 | Jobs cut at Twitter (October 2015) | ||
| 300 | Jobs cut at ESPN (October 2015) | ||
| 1000 | Jobs cut at Warner Bros. (November 2014) | ||
| 1,475 | Jobs cut at Turner Broadcasting (Octobert 2014) | ||
| 150 | Jobs cut at Disney (April 2013) | ||
The TV business has expanded dramatically in the past five years as multiplatform distribution has become the norm. But more networks and more shows in the ecosystem — FX Networks has become the industry’s scorekeeper, tallying an eye-popping 412 scripted series airing across all networks in the U.S. last year — only makes it that much harder to get any one of them to yield big profits.
From that lofty perch, it is only natural that a downsizing would follow, said veteran media analyst Hal Vogel. “The cable businesses are up against cord-cutting, and there are a la carte viewing options,” he noted. “And the 30-year expansion in cable networks has pretty much ended. You can’t just keep growing.”
The disruptive factors, combined with a deflationary economic cycle, necessitate cuts. “It’s a natural evolution,” said Vogel, “but that doesn’t mean it’s a pleasant thing to go through.”
Fox’s television networks — the mothership Fox Broadcasting Co. and the cable group that spans the FX, Fox Sports and National Geographic-branded channels — are expected to be hit the hardest.
Broadcast and cable networks are 24/7 operations that require a legion of support staff. Distribution and affiliate administrative concerns are labor-intensive areas, but will be less so as the major MVPDs undergo rapid consolidation. Those units are expected to be impacted more by the layoffs than will the programming and marketing departments.
Wall Street generally applauds layoffs as a sign that companies are in belt-tightening mode. Some speculation even floated that Fox might be slimming down to make another run at a takeover of Time Warner, after the rejection of a similar overture last year.
Such a development would normally be occasion for shares to spike upward, but 21st Century Fox’s stock closed down Feb. 1 in the immediate aftermath of the job-reduction news, amid another weak day for the markets overall.
