NBC Universal chief Jeff Zucker today told staffers in a memo (see below) that the company will be cutting spending by $500 million next year, or about 3% of the division’s budget, because of the “decline in consumer confidence and spending [that] will impact our operations”. Zucker’s news comes on the same day of his monthly conference call with division heads and just before next Wednesday’s NBC Uni board meeting with part-owner Vivendi. “While each business leader has flexibility in how to meet this goal, we have asked them to focus on three areas: reductions in promotion expenses; in discretionay spending, such as travel and entertainment and outside consultants; an in staffing costs. We have also asked them to find savings by going through our Sourcing department for all major purchases.”
Meanwhile, CBS isn’t making any dramatic pronouncements but is also making deep slashes in staffings and spending. For instance, there was a 30-person layoff at CBS’ syndication division, CBS Television Distribution, which of course is one of the few profitable divisions at CBS corporate, even though the ratings for daytime programming continue to plummet. (In a display of insensitivity, the laid off group was let go on the same day that division head John Nagowski scheduled a volleyball game for the department heads.) Many more layoffs across the company are promised. This comes at the same time that both Zucker and Moonves are speaking out of both sides of their mouths about how bullish they are about their companies while at the same time lowering expectations for advertising revenue in 2009’s First Quarter for everything except New Media. Both of Sumner Redstone’s CBS Inc and Viacom Inc have warned Wall Street that deteriorating ad sales will hurt their profits.
Meanwhile, Rupert Murdoch said shareholders at the company’s annual meeting in New York today that his media empire has a $5 billion cash war chest and extended debt repayment dates to see it through the global financial crisis. “It’s tempting, of course, to stand here and boast about next year’s success. I cannot do that,” the chairman and chief executive of News Corp said. The crisis “has left no sector untouched, ours included,” he said. “It has weakened the advertising markets and beaten down our share price. But I will tell you that we have prepared ourselves well for this day.”
Like NBC Universal’s parent company GE, CBS Inc, and Viacom Inc, News Corp shares have lost more than 50% of their value in the past 12 months. But Murdoch told investors that News Corp can weather a prolonged economic downturn. He says that, in addition to $5 billion in cash, News Corp has extended its average debt maturity to more than 22 years, and the Murdoch family trust is carrying no debt on its controlling stake in News Corp. Such debt can bring down companies during these perilous economic times. Look, for instance, what over-leveraged Sumner Redstone had to do last weekend to meet his debt obligations: he was forced to sell $233 million of already depressed CBS and Viacom shares which put massive downward pressure on those stocks.
Here is Zucker’s memo to staffers sent today:
We are living in a time of unprecedented economic challenges, and it is increasingly clear that the worldwide economic slowdown will continue well into next year.
As we have been working on our budgets and planning for 2009, it has become evident that the decline in consumer condience and spending will impact our operations. The leadership team of the company agrees that we must take steps now to prepare for these new economic realities. As a result, all of our business leaders are being asked to cut their spending projections for 2009. We are asking for a reduction of approximately $500 million across the company, which represents about 3% of our overall budget.
While each business leader has flexibility in how to meet this goal, we have asked them to focus on three areas: reductions in promotion expenses; in discretionary spending, such as traven and entertainment and outside consultants; and in staffing costs. We have also asked them to find savings by going through our Sourcing department for all major purchases.
This kind of message is never easy, but it is the right step to make, and the right time to make it. We have no choice but to respond quickly to the external economic forces that are affecting the entire world economy.
We have an incredible portfolio of strong, dynamic, world-class brands across the global media landscape. We ere as well positioned as any media company today; these moves will ensure that we continue to be so.
Thank you for your support.