Viacom Inc.'s movie studio, Paramount Pictures, is cutting 110 positions worldwide in a reorganization that the company says will help it adapt to increasing competition.
Paramount Chief Operating Officer Frederick Huntsberry announced the move in a memo to staff on Tuesday.
The job reductions amount to about 5 percent of Paramount's workforce of 2,200 and are being made across several departments including finance, international home media distribution and marketing.
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Shares in New York-based Viacom rose 75 cents, or almost 1 percent, to $84.33 in regular-session trading. It tacked on another 3 cents after hours,
according to The Associated Press.
Despite much-ballyhooed box-office figures,
the traditional movie business model is facing a grim prognosis in terms of its ability to generate future revenues.
After sinking in 2011 to the lowest movie audience tally seen since the mid-1990s (1.3 billion), the industry shifted into panic mode. Then last year’s box office numbers managed to provide Hollywood studios with some relief, thanks to a number of blockbuster hits including “The Avengers.” Audiences grew to 1.36 billion and gross revenues hit $10.8 billion.
The simple truth, though, is that in business profit truly matters, and despite the penchant that film studios have for making highly visible “tentpole” pictures, the growth rate of profits has been taking a pounding.
The profits of the six biggest Hollywood studios (Disney, Universal, Warner Bros, Paramount, Twentieth Century Fox and Sony) have been slowing, particularly when compared to their sibling television and cable divisions.
According to Morgan Stanley, the movie studios currently bring in less than 10 percent of the parent companies’ profits and will account for only 5 percent by 2020.
While independent filmmakers embraced new technology as a means of lowering costs, the budgets of the big studio franchise films have ballooned. Celebrities have experienced a decline in salaries, but there has been simultaneously a lavish use of state-of-the-art digital effects and mounting marketing costs, which in many cases have pushed the expenditures of a big release beyond the $200 million mark.
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Additionally, executives have been living through a horror tale when it comes to the falling sales of DVDs. Since 2004 the sales of film videotapes, DVDs, and Blu-ray discs decreased by more than a third, according to IHS Screen Digest. Streaming services such as Netflix and rental booths including Redbox have altered forever the distribution model and lowered overall studio revenues.
Hollywood’s angst is becoming more manifest as a fewer number of movies are being made, and industry executives are tending to favor the perceived safe bets of sequels, prequels, reboots, and comic book adaptations.
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