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Why Warner Bros is cutting jobs: Call it the 'Murdoch defense'



In July, Rupert Murdoch made a generous bid to buy Time Warner for $80 billion dollars. The stock shot up when he made the announcement, plummeted after he withdraw his offer in August, and hasn’t recovered.
In July, Rupert Murdoch made a generous bid to buy Time Warner for $80 billion dollars. The stock shot up when he made the announcement, plummeted after he withdraw his offer in August, and hasn’t recovered.
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Time Warner is planning to eliminate jobs at Burbank’s Warner Bros. Entertainment.

"It pains me to say this, positions will be eliminated—at every level—across the Studio," Warner Bros. Chairman and Chief Executive Officer Kevin Tsujihara wrote in an internal memo sent yesterday that was obtained by KPCC. (You can read the full memo below) 

Tsujihara cited the need to operate as efficiently and effectively as possible, which could be translated as: "We need to protect ourselves against Rupert Murdoch."

“Management is trying to prove that they are the right people to take these properties forward, not Fox, not Murdoch,” said Neil Macker, an equity analyst at Morningstar.

In July, Murdoch made a generous bid to buy Time Warner for $80 billion dollars. The stock shot up when he made the announcement, plummeted after he withdraw his offer in August, and hasn’t recovered.

All movie studios have been in a slump this summer, but it’s been especially bad for Warner Bros, according to The Hollywood Reporter:

During a downbeat season that saw total domestic box office decline by 15 percent for the industry as a whole, Warners faced a particularly sharp revenue drop. As of Aug. 1, its revenues was down 39.5 percent from 2013. Godzilla, the studio's top earner, grossed $507.9 million globally, while Tom Cruise's big-budget Edge of Tomorrow finished with $364 million. Disappointments included Adam Sandler's Blended and Clint Eastwood's Jersey Boys. "Our summer did not live up to our expectations," Warners distribution chief Dan Fellman told The Hollywood Reporter.

Job cuts have been in the works for some time at Warner Bros., but Macker says Murdoch forced Time Warner execs to pick up the pace.

“So that the next time Fox comes back around – which we expect won't happen in the near future of 12 months, but down the road – they can point to the fact that they beat that old price and that people should stay with them and they deserve a higher valuation,” said Macker.

Warner Bros. employs about 8,000 people in Burbank. It’s not clear how many will be impacted by the cutbacks. On Tuesday night, Bloomberg first reported executives were planning buyouts.  

The studio declined a request to comment Friday.

Here's the full memo from Tsujihara:

Dear Colleagues:

I wanted you to hear directly from me about our plans for the Studio. In recent days, we have started to hear rumors here at the company and to read misinformation in the press, so I’d like to set the record straight. I know that the hard work and dedication of every employee around the world is the key to Warner Bros.’ success, and I am sorry for the distraction this situation brings to the workplace.

At Warner Bros., we work with the world’s most extraordinary storytellers, and our focus has always been to provide the creative environment and financial resources they need to realize their vision.  Our commitment to that won’t change. In fact, we’re investing more than ever in our film and television productions.

Since I became CEO, I’ve been working with the Studio’s senior management team to create a plan to position Warner Bros. for future growth, maintaining our position as the industry’s leader in quality and scale—all while safeguarding our traditions and legacy. This will require us to reduce costs and reallocate resources to our high-growth businesses.

Here at Warner Bros., we are currently in a position of unparalleled strength. To maintain this position, we are constantly reviewing our global businesses to make sure we’re operating as efficiently and effectively as possible. 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. In making these decisions, we will follow all applicable protocols.  Your divisional and departmental leadership will share more information with you about these changes in the months ahead.

Despite the challenges we face, we need to focus on the tasks at hand, maintain the sense of excellence that has defined our company for more than 90 years, and move forward knowing that, regardless of any organizational changes, we will remain the industry’s gold standard.

Thank you, again, for your support and dedication to this company.