Home Entertainment, Marketing, Distribution Focus of Planned Warner Bros. Cuts

18 Sep, 2014 By: Erik Gruenwedel

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The home entertainment, marketing, distribution and administration departments at Warner Bros. are reportedly the focus of pending job cuts that could come as early as next month.

Warner is expected to cut 10% of its global workforce of 9,000 people following a lackluster box office and pressure from Wall Street after parent Time Warner rejected an $80 billion acquisition offer from 21st Century Fox, parent of 20th Century Fox Studios and 20th Century Fox Home Entertainment.

“There is no head count target or percentage reduction target,” Dee Dee Myers, EVP of worldwide corporate communications and public affairs at Warner, said in a statement. “This is a budget issue, not a head count issue.”

Myers, who assumed the position this month, served as White House Press Secretary during President Bill Clinton’s first term and was the first woman to hold the position.

TV and movie production units are anticipated to take fewer cuts in the studiowide layoffs, which were first disclosed Sept. 4 in an internal memo from studio boss Kevin Tsujihara, according to Variety, which cited sources familiar with the situation.

“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,” Tsujihara said in the memo.

Tsujihara is a home entertainment veteran who previously led Warner Bros. Home Entertainment Group, which includes Warner Bros. Worldwide Home Entertainment Distribution headed by Ron Sanders.

Home entertainment has become a whipping boy of sorts recently as sales of packaged-media releases decline and licensing of movies and TV shows to pay-TV, foreign markets and subscription streaming services grows. With retail sales of movies — a key profit driver to the studios — waning, and production of episodic TV programming booming, home entertainment is in the crosshairs.

Indeed, at a Sept. 17 investor event in Los Angeles, Time Warner CFO Howard Averill touched upon TV production's growing clout. He said demand from SVOD services looking for content continues to mushroom, adding that TV production, in general, is a higher-margin business than movies. Warner Bros. Television is one of the largest creators of network and cable programming with 31 shows in production.

"At Warner Bros., we see a really strong TV studio, a really strong business that is being surrounded by really strong secular dynamics and production. So we think we have a real opportunity there," Averill said.

The CFO said the home entertainment business is beginning to stabilize due in part to higher-margin digital sales of movies and TV shows, while declines in packaged-media sales have slowed.

"We think we can improve in that area," Averill said.

In fact, home entertainment reported a 27% increase in Warner’s most-recent fiscal period to $563 million. Through June 30, home entertainment generated $945 million in revenue selling movies, which was up 5% from a year ago.

But when including theatrical, revenue declined 2% ($71 million) to $2.9 billion, mainly due to softer box office performances compared with the prior year’s slate, which included Man of Steel, The Hangover Part III and The Great Gatsby.

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