Weeks after the conglom went public with job cuts at its Warner Bros. and Turner Broadcasting divisions, the HBO unit is expected to trim its own staff as well, according to sources. Approximately 7% of its 2,400 employees face pink slips as early as this week.
A rep for HBO declined comment.
An internal email from HBO CEO Richard Plepler that was leaked to Variety made clear his division would not emerge unscathed. The message, which was circulated last week to HBO employees the day of the Time Warner presentation, discloses that a small layoff was in the offing before the start of November.
“We reviewed 2015 budgets and staffing plans with this in mind and reduced cost and redundancy wherever possible to preserve our ability to invest in our future,” Plepler wrote (full memo below). “This will unfortunately include the elimination of some positions.”
While Time Warner made clear at a presentation to investors last week that its studio and basic cable units would lose as much as 10% of their ranks this year as a cost-cutting measure, no mention was made of HBO staff on the chopping block.
It’s unclear what areas of operation within HBO will be impacted by the layoff but the reductions will be contained entirely to the company’s domestic personnel.
HBO made headlines that day by announcing a long-anticipated standalone streaming service would launch sometime next year. Plepler also laid out plans to glean more in affiliate fees from subscribers who weren’t yielding revenue for the company.
Time Warner had indicated that “cost reduction programs” were going to affect every part of the company. But what’s unclear is whether conglom management deferred to the CEOs at each division as to whether they could decide how to achieve their respective cost cuts. Sources dispute whether HBO, for instance, could have conceivably opted to reduce its expenses in lieu of losing jobs, or whether Time Warner specifically ordered layoffs that HBO chiefs didn’t want to make.
The premium cabler has long been regarded the crown jewel of Time Warner, bringing in nearly $5 billion in revenue last year, as well as $1.7 billion in operating profit. With 127 million subscribers around the world, HBO was said to be a big part of why Rupert Murdoch made a bold play earlier this year to acquire Time Warner for 21st Century Fox. The bid was ultimately rejected, which in turn has put the company’s CEO, Jeff Bewkes, under pressure to boost earnings.
HBO in particular has come under scrutiny as being undervalued, which has kicked up speculation that Time Warner could move to spin off the division or convert it to a tracking stock. While the HBO channel itself added a record 2 million subscribers in the first half of 2014 according to SNL Kagan, an over-the-top digital extension was greeted with excitement by investors because of the prospect the company could open a new revenue stream.
Given the success of HBO over the lifetime of the organization, job cuts have been a rarity in its 42-year history. Last recorded reductions came just over a decade ago in its affiliate sales division, which shed about 20 employees in a restructuring of its operations.
Warner Bros. already indicated its intent to make $200 million worth of cuts to its annual overhead, which could amount to as many as 1,000 jobs, as Variety first reported.
Turner is expected to make even steeper cuts, removing 1,475 of the 14,000 positions across its organization worldwide.
Here’s Plepler’s memo in its entirety:
Given the recent press coverage regarding cost containment efforts across Time Warner, I wanted to let you know how this affects HBO.
We have a long history of tightly managing our overhead so that we’re able to maximize investment in the creation, distribution and marketing of content. We also shift resources when necessary toward areas with the greatest potential to drive revenue growth and to enhance our brand. We reviewed 2015 budgets and staffing plans with this in mind and reduced cost and redundancy wherever possible to preserve our ability to invest in our future. This will unfortunately include the elimination of some positions. Where relevant, your department head will share details with you in the weeks ahead.
I understand that the news of staff reductions is unsettling. Rest assured that we will manage this difficult process with the fairness and respect you would expect from our company.
A hallmark of our long-sustained success has been the commitment to making very difficult decisions even during times of growth and optimism. As I said at today’s event, this is the most exciting inflection point, domestically and internationally, in the modern history of HBO. It’s fair to say that by any metric: subscriber growth, content deals, the ever-extending reach of our brand or industry buzz; we are at the top of our game – and as I also made clear, we are just getting started. All of this is possible for one simple reason, the talented people that make up this company.
All best, Richard
Correction: An earlier draft of this article incorrectly characterized the subscriber levels of the domestic HBO pay-TV channel as having “plateaued.” The channel actually registered its biggest growth surge in 20 years, adding 2 million subs in the first half of the year, according to SNL Kagan.