Executive compensation will drop until movie theaters operate at full capacity, theme parks reopen and ad sales rebound
Beyond widespread mask-wearing and frequent use of hand sanitizer, there’s a “new normal” emerging due to the coronavirus: Top media executives are taking a pay cut.
It may seem like an obvious move, considering millions of people are suddenly out of a job and the overall economy is absorbing a gut punch. (JP Morgan recently projected U.S. gross domestic product to decline 40% during the second quarter.) But nonetheless, CEO salary drops stand out as a striking sign of the times, especially as executive compensation figures from last year continue to roll in. A year from now, expect the 2020 paydays for leading Hollywood and media execs to be dwarfed by their 2019 compensation.
“What you see across the board is that executives in the media and entertainment business have knocked down — or will knock down — their salaries,” one consultant familiar with executive compensation arrangements said. “A lot of these executives recognize (the coronavirus) is an unprecedented event and they’re going to feel the pain themselves, personally. Everybody is impacted.”
Several executives have already shared they’ll be taking a haircut this year: Disney’s executive chairman Bob Iger is forgoing his entire 2020 salary; Disney CEO Bob Chapek is taking a 50% cut; and Lachlan and Rupert Murdoch, the two men at the top of Fox’s food chain, said they’re forfeiting salaries until at least September.
Still, salaries are usually a small piece of the overall compensation package that bigwigs receive. For example, Apple chief Tim Cook took home more than $110 million in stock compensation in 2019, and Netflix CEO Reed Hastings earned more than $37 million in stock options last year. Bonuses tied to revenue and performance benchmarks will also be impacted this year, and executives who planned on exercising stock options in 2020 may decide to wait for their companies — and their share price — to rebound.
“If your stock is drastically down, you’re certainly not going to exercise options — they’re not worth exercising, especially if you have time on your side” to exercise them, former ABC Daytime chief Brian Frons said.
Who could be looking at reduced paydays this year? Looking around, it seems like most could be in for a relatively tough 2020.
Disney’s leadership taking a cut makes sense, with both theme parks and box office revenue dried up and TV ad revenue grumbling. AMC Networks chief Josh Sapan, ViacomCBS CEO Bob Bakish and Discovery chief David Zaslav could take a hit, considering the coronavirus has wiped out $10 billion in TV ad sales. And Comcast boss Brian Roberts — who already said he’ll be donating his 2020 salary to COVID-19 relief charities — looks like a candidate, too, since Universal’s parks and theatrical business are slumping due to the pandemic. (He took home $3.29 million in salary last year.)
On the other hand, there’s an argument to be made that Netflix execs are best positioned to avoid a steep pay cut in 2020, as more people gravitate toward streaming while being compelled to stay home.
Here’s the bigger question: Is this year a one-year one-off or a sign of shrinking compensation to come for top media executives? That’s harder to answer because it depends largely on how (and for how long) the virus will continue to impact the global economy — something most industry insiders are wary to project.
The prevailing sentiment is that it will take some time to return to “business as usual.” Even with some sectors, like movie theaters, starting to reopen in certain regions as early as this month, those gains are being offset by the huge number of major movies being pushed back until later this year or 2021.
“It’s not ‘business as usual’ when movie theaters open with reduced capacity or production starts to ramp up,” Frons added. “It’s business as usual when movie theaters can operate at regular capacity and broadcasters and cable channels can offer their normal full slate of original productions.”
That’s why media pay packages likely won’t bounce back until at least 2021. Most people won’t be shedding a tear for a handful of multimillionaires who need to trim their compensation this year, but the early returns are clear: Even Hollywood’s top movers and shakers won’t be able to avoid a coronavirus-induced dent to their wallets.