Viacom to Cut Workforce by 7 Percent

Viacom on Thursday said Thursday it will cut its workforce by about 7 percent, or 850 positions, underscoring the advertising slump afflicting most major media companies.

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The owner of MTV Networks and Paramount movie studio also plans to suspend salary increases for senior level U.S. management in 2009 and will write down the value of certain programming and other assets.

The restructuring and write-down will result in pre-tax charges of $400 million to $450 million, or 42 cents to 48 cents a share, in the fourth quarter, Viacom said.

The cuts will result in pre-tax savings of $200 million to $250 million in 2009.

The company reported a 37-percent drop in third-quarter earnings earlier this month, when CEO Philippe Dauman had cautioned the advertising market remained under pressure in the early weeks of the fourth quarter as marketers responded to lower consumer spending.

Viacom's advertising troubles were compounded by poor ratings of two of its cable TV networks, MTV and VH1.

The U.S. media industry, fresh off a bruising 2008, is preparing for an even more brutal 2009 as the slump in advertising, the decline in consumer spending and the financial crisis show no signs of easing.

Global advertising could fall 3.9 percent in 2009, led by an 8.7 percent decline in the United States, according to a UBS report released earlier this month.

In addition to the advertising slump, Viacom's controlling shareholder and executive chairman Sumner Redstone faces a deadline to repay $800 million in debt associated with his main investment vehicle, National Amusements, by the end of the year.

In recent weeks, Redstone has been forced to sell about $230 million of his stock in Viacom and CBS , the other key component of his media empire, to meet debt payments.

Since those sales, Redstone has pledged he will not divest any more shares of Viacom or CBS.

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