Nine, Seven wield axe in cost-cutting
A NEW wave of cost-cutting has hit the media sector with Nine Entertainment announcing job cuts due to the advertising downturn, while its rival Seven has axed the game show The Price is Right and may also get rid of its current affairs show, Today Tonight.
Nine chief executive David Gyngell told staff on Wednesday that "the environment remains difficult and we have to toughen up and find ways to save costs and operate more efficiently".
It is believed that Nine is seeking cost cuts of up to 10 per cent.
No numbers were given on how many staff would be let go, but sources said it would be fewer than 100. Nine is expected to announce voluntary redundancies within weeks.
It employs 2000 people at Nine Network, Ticketek and Allphones Arena in Sydney.
The Ten Network held a highly public round of job cuts last year, which it blamed on difficult trading conditions, the one-off impact of the Olympics and its weak ratings performance that led to a $13 million loss for the year.
About 100 employees were let go, including prominent personalities from its news operations, which were cut extensively.
Due to the different operating environments of Nine's various businesses, Mr Gyngell said he had asked Nine Network chief Jeffrey Browne and Nine Events chief Geoff Jones to communicate to their staff the "specifics of the cost-cutting plans for their respective businesses".
He said the media sector continued to go through unprecedented change while facing financial challenges caused by the advertising downturn.
This is despite Prime Minister Julia Gillard announcing a date for the federal election on Wednesday. The election was seen by some as a potential pick-up for the advertising market.
Nine announced the cost-cutting ahead of the company being handed over to its lenders next week in return for them cancelling $3.4 billion of debt that threatened the media group with collapse.
The scheme of arrangement governing the restructure was approved by the courts this week. A new board - to include former federal treasurer Peter Costello - will be installed after the restructure.
Nine's financial accounts last year indicated just how badly the company has suffered under its immense debt load, as well as the media downturn. Nine made a $972 million loss for the financial year ended June 30, taking its accumulated losses to more than $2.5 billion.
This included a $783 million write-down on the value of its media assets. Most of the write-down related to the falling value of the network's broadcast licence.
The company was not generating enough cash to pay its way, with operating cash flows negative to the tune of more than $17 million last year.
This is despite it paying only $267.7 million of an interest bill that totalled $372.7 million last year.
Debt was not the only issue.
Nine Network was forced to record provisions of close to $60 million over the past two years, which relate to the difference between what it must pay for some of its programming and what it will receive in revenue against the programs.