CBS Inc., facing a slump in advertising and astronomical costs from sports contracts, said yesterday that it expected to lose money in the fourth quarter and must drastically change the way it conducts business.
The announcement is the strongest statement to date of the slowdown in advertising revenues and the effect it is having on the television business.
All three networks, burdened by enormous fixed programming costs, are bracing themselves for another round of layoffs and cutbacks in operating expenses.
CBS said it projects 1991 earnings will be below those of 1990 "as the consequence of both the worsening economic climate" and rising costs for entertainment and sports programs.
Even more ominously, CBS revealed that the CBS Television Network is currently expected to lose money in 1991.
CBS Inc. also owns radio and TV stations, which are still expected to be profitable next year.
Although in some recent years profits at the network have dipped into the low tens of millions of dollars, next year would be the first time in decades that the network actually lost money.
A senior CBS executive said the network would "break even" in 1990. But that is a considerable setback because analysts earlier had estimated that the network would earn a $75 million to $100 million profit.
Revenues at the network are expected to top $2.3 billion for the year.
The bleak financial outlook has forced CBS to reduce the amount of money it pays to more than 200 affiliates to carry network programming.
CBS pays about $160 million annually in affiliate compensation, compared to about $130 million for NBC and $110 million for ABC.
CBS officials said the amount to be cut from affiliate compensation has yet to be determined.
But one knowledgeable executive said CBS Inc. Chief Executive Laurence A. Tisch was seeking to bring CBS at least in parity with NBC, which would mean about a $30 million reduction.