Disney plans to cut 7,000 jobs, or 3% of its workforce, and expects to save $5.5 billion overall in costs. The axe is swinging now that Bob Iger is back in charge of Disney.
Highlights
During the company’s earnings call for the quarter ending December 31, 2022, Iger announced that Disney will downsize its employment by 7,000 workers to reduce costs. The statistic represents 3.2% of Disney’s estimated 220,000 global employees as of October 1, 2022.
When the board ousted Bob Chapek as CEO in November, CEO Bob Iger took over again and remarked, “While this is important to confront the difficulties we’re facing today, I do not make this choice lightly.” “I have the utmost regard and admiration for the abilities and commitment of all of our employees around the world, and I’m aware of the personal impact of these changes.”
While the company’s employees would suffer from the job-cut news, Iger also took action to reward stockholders.
Efforts at Restructuring
Throughout the pandemic, the corporation had stopped paying dividends. Iger stated that they anticipate it returning.
We expect to ask the board for permission to reintroduce a dividend by the end of the calendar year, he said, now that the pandemic’s effects on our business are mostly behind us.
The job cuts are a part of Disney’s efforts to save $5.5 billion in costs. Iger stated that $2.5 billion is made up of “non-content costs” (such as labor costs) and that $1 billion of those targeted cost reductions are already in progress. According to Disney CFO Christine McCarthy, the company is working towards a $3 billion annualized reduction in non-sports content expenditures, which should be realized over the next years.
According to McCarthy, about 50% of the $2.5 billion in non-content costs are related to marketing, 30% to labor costs, and 20% to technology, purchasing, and other costs. By the end of its fiscal year 2024, the company anticipates that these cost savings will “completely materialize.”
In terms of content, Iger stated, “We are going to a really hard look at everything we do [in general entertainment] because things in a more competitive market have simply gotten more expensive.”
Iger also disclosed the division of the business into three units:
- Disney Entertainment — including streaming platforms and its film studios, as well as other segments — will be led by Alan Bergman, who oversaw Disney studios, and Dana Walden, who oversaw original content and news for company’s streaming platforms and linear networks.
- ESPN will be led by James Pitaro, formerly chair of ESPN and Sports Content, and president of ESPN before that.
- Parks, Experiences, and Products will continue to be led by Josh D’Amaro.
Drop in Subscriber count!
Despite losing Disney+ streaming customers in the most recent quarter, the firm said it was still able to reduce its losses from the three months prior. To draw more lucrative subscribers, Disney reduced the costs associated with streaming marketing and modified pricing structures.
At the end of the quarter that concluded on October 1, subscribers dropped by just 1%, to 162 million from 164 million. However, its other streaming ventures, such as its investments in ESPN+ and Hulu, saw 2% subscriber growth.
Because of this, Disney was able to reduce its overall streaming sector losses to $1.1 billion in the quarter, from $1.5 billion in the quarter that ended on October 1—although this was still more than double the $593 million loss the company posted a year earlier.
The company’s streaming services, highlighted by its Disney+ offering, have reported subscriber gains and losses in recent quarters.
The business reiterated its forecast that Disney+ is still on track to earn a profit in the following fiscal year, which runs from October through September 2024, but it cautioned that this might be impacted by an economic downturn.
Importance of streaming to Disney
Consumers are cutting the cord on cable providers, making a profitable streaming service essential. Disney had benefited for years from the cash from cable subscription fees.
Iger said that the corporation is not abandoning streaming as a key to its future since more focus is being placed on increasing profitability in the sector.
He noted, referring to television or movie theatre programming, “The linear business provided for us over a few decades,” that “the streaming industry, which I believe is the future and has been increasing, is not generating the kind of profitability or bottom-line returns.”
Streaming, he declared, “remains our top priority.” It is, in many ways, our future, but we won’t give up on the linear or traditional platforms while they still have the potential to be advantageous to us and our stockholders.