In an anticipated move that reflects its commitment to reduce its primetime production volume and augment its broadcasting division, Alliance Atlantis has laid off 80 employees and consolidated its content production and distribution activities, creating the new Entertainment Group, headed up by Peter Sussman. The layoffs are expected to reduce annual operating costs by $7 million.

Calling the cutbacks ‘a stand-alone action,’ Michael MacMillan, AAC chairman and CEO, says, ‘This isn’t anything to do with Sept. 11 or the economic situation.’

In addition to reducing the company’s roughly $700-million debt over the next two years, the reorganization is part of a plan to reduce the output of high-cost primetime drama – what MacMillan calls ‘in-between programs,’ produced mainly for the syndication market (like Total Recall).

Going forward, he says, the company plans to focus on two categories of drama production: clearly Canadian programming aimed at the Canadian market (like This Hour Has 22 Minutes and The Associates) and overtly international, high-ticket shows (like CSI and Nuremberg).

As previously announced, AAC plans to cut its 176 hours of drama to 100 a year, and reduce its production of MOWs and miniseries from 24 hours to 10 a year.

‘There’s a decrease in demand for imported drama in Europe, and with the rise of UPN and the WB, broadcasters are trying out alternative genres like reality and doc, reducing the demand for drama worldwide,’ says MacMillan, as he makes the case for reducing drama production and aggressively building up the company’s factual division, AAC Fact.

‘And in a fragmented world of lots channels, the good news is the pie has actually grown,’ he maintains. ‘Fewer people are watching any one channel. More money is being put into the system by subscribers and TV has become a more fertile medium, attracting new advertisers who couldn’t afford to use it as a vehicle in the past.’

At the end of the day, says MacMillan, ‘returns are better, but take much longer….Waiting out the period puts a pricing and value pressure on drama.’

Entertainment Group

The Entertainment Group merges the company’s television production and distribution activities with its in-house motion picture and related distribution operations.

Peter Sussman, the L.A.-based executive producer behind the company’s highest-end and Emmy Award-winning television properties, who was formerly president of TV production, has been named CEO of the new operating group.

Seaton McLean, formerly president of motion picture production, has been assigned the new role of president of production, Entertainment Group; Ted Riley, formerly president of TV distribution, has been made president of distribution; and Steve Ord, formerly exec VP, TV production, is the new division’s exec VP in charge of financial, legal and business affairs.

In their new roles, McLean and Riley will report to Sussman. But MacMillan maintains this realignment of senior management is not a demotion for either of the company principals, despite the fact they are now answering to Sussman. Under the new banner, the two execs expand their responsibilities, with McLean adding TV production (his original mainstay) to his bailiwick and Riley adding motion picture distribution.

80 layoffs

The restructuring, which has meant a 9% reduction of the company’s entire workforce, has had the most impact on legal, finance, sales, marketing and administration services across the board, with a small handful of key development personnel let go as well.

The Motion Picture Distribution Group, helmed by Victor Loewy, and the Broadcast Group, run by CEO Phyllis Yaffe and president/COO Mark Rubinstein, remain intact.

And while the company has not quantified its projected cost savings of $7 million annually beginning in 2003, MacMillan says, ‘Our flexibility of investing in broadcasting is not limited. We’re in a very liquid position with several hundreds of millions of dollars in our credit facility.’

Likewise, AAC’s ability to launch a new local Southern Ontario conventional TV station, which it is expecting a licence decision on by the end of March, is not dependent on the cost savings, says MacMillan.

Existing and new digital channels are more likely to reap the benefits of the newly generated money.

The company incurred an estimated $20 million of start-up operating losses from its developing channels in fiscal 2001.

A view to the future

MacMillan confirms that while the company’s priorities right now are to reduce production volumes, pay down debt and increase broadcast activities (particularly the digital channels and the launch of the new Southern Ontario station), AAC is not out of the ‘aggressive acquisition business.’

It is not, however, pursuing Cinar for its interest in Teletoon. And it is not, says MacMillan, a takeover target.

MacMillan is vehemently opposed to a relaxation of foreign ownership policy as it relates to Canadian media companies. ‘The system has worked well for us,’ he says.

As it stands, foreign investors can pick up unlimited non-voting shares, allowing for almost unlimited foreign capital investment in the company.

‘It’s only access to strategic shareholders that’s limited, and I don’t see a reason to change those rules, particularly on the content side,’ he says.

-www.allianceatlantis.com