???Warner Bros. announces Burbank studio layoffs as parent company posts $10.5-billion third quarter revenues.MEDIA DISTRICT WEST -- Despite high profits from its hit films and DVD sales, Warner Bros. Studios laid off 250 employees at its Burbank studio this week, foreshadowing what observers anticipate as sagging sales in the home entertainment market.
Warner Bros., a division of Time Warner Inc, the largest media company in the world, let go full-time employees in various departments and no seasonal production-related jobs were included, said Senior Vice President of Studio and Production Affairs Lisa Rawlins.
“We acknowledge that these decisions have affected people’s livelihoods and to that end, we examined every aspect of our business in order to cut costs responsibly and to keep staff reductions to a minimum,” Rawlins said.
Warner Bros. employs 4,500 people at its Burbank facilities -- the main studio lot on Olive Avenue and the Warner Ranch at Oak Street and Hollywood Way. Worldwide, the entertainment division has 8,000 employees.
Assistant City Manager Mike Flad said the city was notified by Warner that the layoffs were coming.
“They are a belt-tightening efficiency experiment to make sure they are as lean as possible,” Flad explained. “You don’t want to see a reduction in jobs in your community but this is not a red flag from an industry standpoint.”
The city has offered to provide assistance, such as resources for finding a new job, to the employees who were let go, Flad said.
While Warner Home Video has ranked No. 1 in DVD sales so far for the year, a reason for the layoffs could be found in an anticipated slump in home entertainment profits for large media conglomerates, observers said.
In a report released Oct. 27, financial analysts with Goldman Sachs forecasted zero growth in the home video market in 2006, and that Time Warner will see a 1% drop in home video profits in the coming year.
Time Warner had a 12% growth in home video profits in 2005 and a 10% growth in 2004, the report said.
A drop off in revenues is not a surprise to Michael Hoggan, of the department of cinema and television arts at Cal State Northridge.
When Hoggan goes to the movies, he often sits in half-filled theaters and does not see big crowds, Hoggan said.
Disposable income for entertainment and travel in general seems to have dropped off, Hoggan said.
“They are being very conscientious,” Hoggan said. “People are now thinking about how they are spending their money.”
The company’s overall financial picture remains rosy in light of its posting third quarter revenues of $10.5 billion.
The strength of Warner Bros. releases “Batman Begins” and “Charlie and the Chocolate Factory,” both of which netted more than $200 million each, helped put Time Warner at No. 1 for box office receipts and contributed to the $2.7 billion the company earned from filmed entertainment for the third quarter.
Warner Bros. next anticipated big hit is the Nov. 18 release of “Harry Potter and the Goblet of Fire,” the fourth in the series of popular films about the boy wizard.
But the company also faces a challenge from billionaire investor Carl Icahn on what the company should do to boost returns.
In a letter to fellow shareholders from early October, Icahn -- who owns 2.8% of Time Warner shares -- suggested that Time Warner dump its cable television division.
Gigi Johnson, a lecturer at the entertainment and media management institute at UCLA’s Anderson School of Management, said that based on what Icahn has been saying she is not surprised by moves Time Warner makes.
“I see [the layoffs] as a signal to the marketplace they are taking Icahn’s challenge very seriously and the business needs to be heading in new directions,” Johnson said. “You can’t live on Harry Potter forever.”
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