Disney announces layoffs, reorganization and cost cuts
Disney said on Wednesday it plans to reorganize into three segments, as well as cut thousands of jobs and cut costs.
The media and entertainment giant said it will now be made up of three divisions:
- Disney Entertainment, which includes most of its streaming and multimedia operations.
- A division of ESPN that includes the television network and streaming service ESPN+.
- Block of parks, experiences and products
The move marks the most significant action taken by Bob Iger since he returned to the company as CEO in November. Disney announced the changes minutes after it posted its latest quarterly earnings. The announcements also came as Disney enters a fiduciary battle with activist investor Nelson Peltz.
Wednesday during their quarterly profit In a phone call with investors, Disney also announced $5.5 billion in spending cuts, which will consist of $3 billion in non-sports content and the remaining $2.5 billion in non-content spending cuts. Disney executives said about $1 billion in spending cuts were already underway since last quarter.
Disney also said it would cut 7,000 jobs from its workforce. This will be about 3% of the approximately 220,000 people hired on October 1st. according to SEC filingapproximately 166,000 people in the US and about 54,000 people worldwide.
Disney shares rose more than 5% in aftermarket trading.
media companies such as Warner Bros. Discovery, reduce content costs and strive to make their streaming business profitable. Increasing competition has slowed subscriber growth, and companies are looking for new ways to increase revenue. Some, like Disney+ and Netflix, have added cheaper, ad-supported options.
“We’re going to look very closely at the value of everything we do in television and film,” Iger said during a phone call with investors on Wednesday.
The reorganization began when Iger returned to the helm of Disney, replacing his successor, Bob Chapek.
The entertainment group will be led by First Lieutenants Dana Walden and Alan Bergman, each considered a contender for Iger’s seat in less than two years. ESPN Chairman Jimmy Pitaro will lead the ESPN segment, while Josh D’Amaro, who already led the Disney Parks, Experiences and Products segment, will remain at the helm.
Iger responded to ESPN speculation
The future of Disney-owned ESPN has been an issue for investors for some time. Last year, activist investor Third Point urged the company to spin off ESPN. Disney and the third point later came to an agreement, changing the course of their thoughts about the future of ESPN.
Iger responded to rumors that the company may be trying to spin off ESPN due to the sports network being spun off into a separate division. He noted that while ESPN is struggling with cord cutting, the ESPN brand and programs remain healthy and in demand.
“We’re not in any conversation or considering spinning off ESPN,” Iger said Wednesday. He said the move was considered “in my absence” and concluded that it was not the right move for Disney.
Iger noted that he and Pitaro would be more selective about spending on sports rights, noting upcoming NBA rights talks.
Čapek’s dismissal came shortly after Disney reported its fiscal fourth quarter earnings, disappointing earnings and some key revenue segments. Chapek also warned that Disney’s high streaming performance will decline in the future. Shortly thereafter, he also told employees that Disney would cut costs through hiring freezes, layoffs, and other measures.
Shortly after his return, Iger sent out a memo to employees informing them that the business would be reorganized, specifically the Disney Media and Entertainment division. The reorganization immediately meant the departure of Karim Daniel, head of the company’s former media and entertainment division and Čapek’s right-hand man.
Iger said he would put more “decision making in the hands of our creative teams and rationalize costs” at that time. According to CNBC, the goal is to create a new structure in the coming months while retaining elements of DMED. He added during the town hall that he would not lift the moratorium on the company’s hiring because he overestimated Disney’s cost structure.
On Wednesday, Iger repeated the same comments again about taking control back to the creative minds at the company.
“Our company is fueled by storytelling and creativity, and virtually every dollar we earn, every transaction, every interaction with our consumers comes from something creative,” Iger said on Wednesday. “I have always believed that the best way to stimulate creativity is to make sure that the people who manage the creative processes feel empowered.”