NBC Universal calls for major budget cuts; Sony profits drop 59 percent
Oct 27, 2008 2:18 PM
NBC Universal will eliminate $500 million in expenditures — about 3 percent of next year’s budget, said Jeff Zucker, CEO of the company.
The move comes despite NBCU’s 10 percent increase in operating profit in the third quarter and a 35 percent surge in revenue thanks to the Beijing Summer Olympics and the feature film “Mamma Mia!”
However, General Electric, NBCU’s parent company, has had recent money troubles as it deals with losses from its financial services divisions. And NBCU’s local affiliate stations are facing a serious advertising slump as the economy continues to sour. Analysts have been revising ad forecasts downward, and normally upbeat media execs are openly speculating about a down year on the ad front in 2009.
Sony has drastically lowered profit and sales forecasts for the fiscal year, blaming deteriorating sales of flat-panel TVs and other electronic equipment battered by a global slowdown. Sony’s profit for the fiscal year ending March 2009 is set to plunge 59 percent from the previous year.
In July, Sony had expected to post a $2.4 billion in profit for the fiscal year. The financial credit crisis and accompanying global economic slowdown is expected to weigh hard on companies like Sony, which makes more than half its sales in North America and Europe.
“We are living in a time of unprecedented economic challenges, and it is increasingly clear that the worldwide economic slowdown will continue into next year,” NBCU’s Zucker wrote in a statement. “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.”
Division heads will be given discretion to decide how to make their 3 percent cut. Zucker, however, suggested a variety of ways, focused on three areas: discretionary spending, such as travel and entertainment; promotion expenses; and staffing. He also emphasized the need for managers to go through NBC’s sourcing department before making major purchases.
Although Zucker did not specify employee layoffs, it was unclear how many people might eventually be affected as cuts take hold. However, Zucker’s memo came a day after NBC’s Spanish-language Telemundo division announced that it was cutting 5 percent of its workforce.
NBC’s action follows last week’s sale by Sumner Redstone of $233 million in nonvoting shares in CBS and Viacom. Stock prices have hit all-time lows, some down as much as 70 percent in the past year, “Daily Variety” reported.
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