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Sony to Layoff 450 Workers as DVD Sales Fall

Sony Pictures Entertainment is feeling the pinch of online piracy and the decline of DVD sales. The movie studio announced on Monday that it will lay off 450 employees, or 6.5 percent of its workforce, and also plans to close 100 open positions. It will start handing out pink slips in March.

Sony Building
Shizuo Kambayashi
Sony Building

The layoffs are in addition to an earlier round of cuts last year of 250 people and 100 open spots, bringing the studio's workforce down to about 6300 from about 7000 before the financial crisis.

These job cuts are not attributed to the economic downturn, but to the movie's new economic model -- a less profitable one. Sony did quite well last year, finishing 2009 with a 13.7 percent domestic market share, just a hair behind the number two market share leader, Paramount.

But it's no longer about the top line numbers. Sony Pictures Entertainment CEO Michael Lynton and Co-Chairman Amy Pascal sent a lengthy e-mail to employees explaining the layoffs, explaining that the studio is not immune to "the shifting landscape of entertainment and its impact on the economic model at the heart of this industry."

"The need is clear: from the growth of online piracy, to the social media effect on the performance of films, to the way people have changed how they watch television and acquire DVDs. The business is going through a rough period of trial and transition, and we have an obligation to take the steps necessary to get through it," the statement read.

What does it all mean? Sony is suffering from the same issue which has pressured the entire movie industry: piracy. DVD sales, which gave the movie industry an unprecedented boost over the past decade, are suffering double-digit declines. Marketing costs are soaring. Social media is powerful, which means word travels incredibly fast, and even the best advertising campaign can yield a flop.

Sony is hardly the only studio to do layoffs.

About three and a half years ago, Disney consolidated its home entertainment and theatrical divisions, resulting in 650 employee layoffs. This fall the studio eliminated jobs when it folded Miramax into the parent studio and last month made a handful more layoffs. In December 2008, Viacom slashed 850 jobs, or about 7 percent of the firm's work force. NBC Universal also announced layoffs in December 2008, cutting 500 employees across the company.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.