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More Layoffs to Follow? - Broadcasting & Cable

More Layoffs to Follow?

CBS casualties likely just the beginning
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Those who were rocked by last week's announcement that the CBS Television Stations group was axing more than 100 staffers might have to get used to the feeling.

With the economy ailing, political advertising largely failing to materialize in many markets and dismal first-quarter earnings now in the books, station veterans say CBS is but the first in a long line of broadcasters who will take a hard look at staffing, and act accordingly.

“When we look at how the first quarter developed—or didn't develop—maybe we shouldn't be surprised [by what happened with CBS],” says Meredith Broadcasting Group president Paul Karpowicz. “All public companies are under tremendous strain to meet the expectations of their board and their shareholders in tough times. What CBS went through is what a lot of broadcasters will look at this year.”

Hardest hit among CBS' 29 O&Os were WBZ Boston with a reported 30 staffers dismissed, WBBM Chicago with 17, KPIX San Francisco with 14 and KCBS Los Angeles with 12. CBS declined to comment on the layoffs, but one insider said the moves reflected both the nation's dim economic climate and the group's determination to reallocate resources to firm up digital infrastructure. Weekly sports shows in New York and Sacramento were the only newscasts to be whacked.

What was particularly surprising was the amount of on-air talent that was let go. Los Angeles news stalwarts Harold Greene and Ann Martin leave KCBS in May, KPIX dismissed five on-air personalities, and WBBM sacked star anchor Diann Burns, whom the station was paying $2 million a year. (One Chicago station-business insider said WBBM, which moves into a new facility in the coming months, did not want Burns to be part of a new promotional campaign, as her contract was not to be renewed in the fall.)

Suddenly, high-priced talent finds itself very vulnerable. “A lot of stations see anchors as a silver bullet,” says Frank N. Magid Senior VP Bill Hague, “but we believe there is no silver bullet in the news business.”

While rival general managers acknowledge that the CBS O&Os in their markets were staffer-rich prior to last week—and that several have been slipping in the local news races—the bloodletting nonetheless came as a surprise to many. Just a few weeks before the March 31 layoffs, CBS Corp. president/CEO Leslie Moonves boasted about the company's “pristine” balance sheet at a media summit in New York, and said CBS was “in a very good position financially to do some things.” Moonves is also bullish about his broadcast division's ability to secure cash from retransmission consent.

But CBS reported a 15% drop in fourth-quarter profits in 2007, and revenues from its television business were down 4% in the quarter. CBS reports first-quarter 2008 earnings April 29.

CBS certainly wasn't alone in reporting weak fourth-quarter 2007 numbers; Hearst Argyle, for one, saw revenue drop 8% in that quarter, while Tribune reported a loss from continuing operations at $78 million. Several broadcasters have preferred to speak about a rosy 2008, but many say that is not panning out.

“This was supposed to be the good year, with the election and the Olympics, but of everybody I've spoken with, not a single one is making budget,” says station consultant Mike Sechrist, who adds that everybody thought 2009, not this year, would be tougher for broadcasters.

Station executives speak of a confluence of negative trends: a hangover from the writers' strike; a political windfall that, except for a few key markets, has failed to live up to forecasts; the nation's crawl toward a recession; and, of course, the woeful automotive category, which spent 8.3% less on television last year, according to TNS Media Intelligence.

Many believe local television feels it more than the networks. “The networks have better-capitalized marketers who can weather some turmoil,” says RBC Capital Markets analyst David Bank, “and they're much more focused on maintaining brand awareness and mind share” than local advertisers, who may be more keen to boost short-term sales.

Amidst such disarray, broadcasters large and small are studying the CBS O&O model and pondering their own downsizing plans. Young Broadcasting, for one, outlined a strategy in February to eliminate 11% of its work force and save $15 million. NBC Universal, meanwhile, set out to eliminate 5% of its overall head count by the end of 2008 as part of the “NBC 2.0” initiative revealed in October 2006.

It all makes for numerous panic attacks in the newsroom, where new technology already makes it possible for news departments to cut behind-the-scenes staff.

“I can't guarantee my staffers that they'll have their jobs in six months, but we'll try everything else [to cut costs],” says a general manager who competes against a CBS-owned station. “But if you run a public company and you see CBS laying off over a hundred people, your shareholders are going to say, 'What are you guys doing?'”

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