Costing Cutting In Vogue At Studios: Time Warner And Disney
The New York Times ran an article recently on “unease” at big studios. Unease is a euphemism for being scared to death that everyone will be fired as margins drop. Well, the “unease” is well placed. Disney has set the bar by firing 450 people and cutting the number of films it will release, almost by half. The NYTs points out that this puts pressure on the balance of the industry to show that it can tighten belts as well.
The odd factor about the Disney move is that its studio did well in the last quarter. For the June 30 period, Disney’s film entertainment business brought in $1.7 billion in revenue and $240 million in operating profit. While these numbers move from quarter-to-quarter based on how well individual films do, the return was still impressive. And, that was before the cuts.
In the June period, Time Warner’s film unit brought in $141 million in operating income on $2.363 billion in revenue. Granted, it was not a spectacular quarter at the box office. But, Time Warner is under increasing pressure to show investors that the current $16.50 stock price is much less than the company is really worth.
Revenue is fleeting. Cost cuts live forever. If Time Warner wants the kind of efficiency that Disney has at its studios, it would have to cut $200 million a quarter in costs. And that is before Disney makes its studios more efficient with its lay-off and lower number of films per year.
Time Warner has some catching up to do.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies that he writes about.
The odd factor about the Disney move is that its studio did well in the last quarter. For the June 30 period, Disney’s film entertainment business brought in $1.7 billion in revenue and $240 million in operating profit. While these numbers move from quarter-to-quarter based on how well individual films do, the return was still impressive. And, that was before the cuts.
In the June period, Time Warner’s film unit brought in $141 million in operating income on $2.363 billion in revenue. Granted, it was not a spectacular quarter at the box office. But, Time Warner is under increasing pressure to show investors that the current $16.50 stock price is much less than the company is really worth.
Revenue is fleeting. Cost cuts live forever. If Time Warner wants the kind of efficiency that Disney has at its studios, it would have to cut $200 million a quarter in costs. And that is before Disney makes its studios more efficient with its lay-off and lower number of films per year.
Time Warner has some catching up to do.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies that he writes about.
posted by douglas mcintyre at 5:25 AM
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