Media Companies Brace for Slowdown

Canceled Parties, Slashed Budgets and Layoffs Spreading

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NEW YORK (AdAge.com) -- If you needed any proof that cost controls are on everybody's mind, consider this: Conde Nast, of all places, ordered a hiring freeze last week -- a somewhat jarring move for a company that usually errs on the side of spending. And it is not alone. Media companies ranging from NBC Universal to Gawker Media are all taking steps to reduce spending before the end of the year.

Media executives are all anticipating a brutal 2009 first quarter, and so are trying to be prudent in their planning by making whatever cuts they can now. It's reflective of how nervous executives are, and how little comfort they found in a poll at the recent gathering of the Association of National Advertisers that found that half of marketers don't plan major changes in their spending for next year (33% of the major marketers surveyed said they intend to maintain their level of marketing spending next year, and 27% said they would spend more). Another 33% said they would decrease spending, while the rest were unsure of their plans. That group that is unsure is no doubt influencing media sellers' decisions.

Gawker cuts staff
Gawker Media seems to have been a leading indicator, announcing on Oct. 3 it was cutting 19 of its 133 editorial staffers as of Jan. 1 and suspending bonuses for blog posts that hit certain traffic levels in order to be better positioned for a soft 2009.

Conde Nast, in addition to the hiring freeze, is relocating its annual publishers' meeting to New York from the Ocean Reef Club in Key Largo, Fla., Women's Wear Daily reported yesterday. A spokeswoman confirmed the steps but declined to elaborate.

Hearst has also canceled its usual holiday party, as New York magazine's website reported, news that followed soon after it announced it was closing Cosmo Girl! magazine.

Zucker warns of more trouble
In a memo to employees sent last week, NBC Universal CEO Jeff Zucker indicated that the company expects economic challenges to last well into 2009. "As we have been working on our budgets and planning for 2009, it has become evident that the decline in consumer confidence 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," the memo said. The company has asked for "a reduction of approximately $500 million across the company, which represents about 3% of our overall budget," Mr. Zucker said. To get there, business leaders have been told to focus on "reductions in promotion expenses; in discretionary spending, such as travel and entertainment and outside consultants; and in staffing costs," according to Mr. Zucker's memo.

In the cable industry, Viacom has been the most public about preparing investors for the immediate effects of the recession on its revenues. CEO Philippe Dauman issued a statement last week in advance of the company's third-quarter earnings call to give investors a heads-up about its underperformance. "Given the rapid softening of the economy and the uncertainty this creates in forecasting advertising growth, we are taking the prudent step of moderating our near-term targets," Mr. Dauman said. "At the same time, we are moving quickly to adapt to the changing environment and will take appropriate steps to secure new efficiencies that will enhance our long-term earnings growth prospects."

Viacom's "efficiency-seeking" strategy has prompted the blogosphere to run rampant with rumors of its next round of layoffs. Gawker.com first reported last week that Viacom was hosting a company-wide meeting at 4 p.m. Oct. 14, which an MTV Networks spokesman denied was related to layoffs when contacted by Ad Age that afternoon. The next day, a new Gawker report surfaced with tipsters hinting that Viacom was embarking on a more stealthy layoff strategy of dismissing three employees at a time over several months. The MTV Networks spokesman denied that report as well, saying there are no official plans to address the recession at this time beyond Mr. Dauman's statement.

Time Inc. stands still
Time Inc. has been studying and cutting its costs for years -- but particularly so since this summer. "We're always looking at our costs, and given the current state of the economy and the downturn in advertising, we're going through everything very closely," a spokeswoman said. "We are not hiring at the moment except in very rare occasions for very specific positions. We've had this policy in place since this summer."

Newspapers have been slashing costs almost frantically for some time now, for reasons more to do with the demise of their local monopolies and the decline of their core product. Now, however, some newspapers are dropping their membership in the Associated Press to eliminate the associated costs. That idea gained real momentum last Thursday, when Sam Zell's Tribune Co., publisher of papers including the Los Angeles Times and the Chicago Tribune, said it is abandoning the AP.

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Contributing: Andrew Hammp
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