Walt Disney on Wednesday announced a major restructuring under recently reinstated CEO Bob Iger that will see 7,000 job cuts to save $5.5 billion (around Rs. 45,000 billion) in costs and make its streaming business profitable make.
The layoffs account for an estimated 3.6 percent of Disney’s global workforce.
Disney shares rose 4.7 percent in after-hours trading to $117.22 (about Rs. 10,000).
The moves, including a promise to reinstate a dividend for shareholders, addressed some of activist investor Nelson Peltz’s criticism that the mouse house is spending too much money on streaming.
“We’re pleased Disney is listening,” a spokesman for Peltz’s Trian group said in a statement late Wednesday.
As part of a plan to cut costs and return power to creative leaders, the company is being reorganized into three segments: an entertainment unit that includes film, television and streaming; a sports oriented one ESPN Unit; And Disney Parks, experiences and products.
“This reorganization will result in a more cost-effective, coordinated approach to our operations,” Iger told analysts on a conference call. “We strive to work efficiently, especially in a challenging environment.”
Iger said streaming remains Disney’s top priority.
He said the company will “focus even more on our core brands and franchises” and “aggressively curate our general entertainment content.”
Iger also said he will ask the company’s board to restore the shareholder dividend by the end of the year. Chief Financial Officer Christine McCarthy said the initial dividend will likely be a “small fraction” of pre-COVID levels, with plans to increase it over time.
Peltz, who is seeking a seat on the Disney board, had advocated restoring the dividend by fiscal 2025.
“My sense is that Disney is already doing many of the things Nelson Peltz is asking for, although not necessarily in response to pressure from him,” said Paul Verna, senior analyst at Insider Intelligence.
Iger said the company is not in talks to spin off ESPN, which Jimmy Pitaro will continue to run.
TV executive Dana Walden and film executive Alan Bergman will head up the entertainment department.
Third restructuring in five years
Disney is the latest media company to announce job cuts in response to slowing subscriber growth and increasing competition for streaming viewers. Disney previously reported its first quarterly decline in subscriptions for its Disney+ Streaming media unit that lost more than US$1 billion (around Rs. 8,300 crore).
Warner Bros Discovery Inc and Netflix previously had to be fired.
Disney said it plans to cut $2.5 billion (about Rs. 21,000 crore) in SG&A and other operating expenses, an effort already underway. A further US$3 billion (around Rs.25,000 billion) in savings would come from reducing non-sports content, including layoffs.
For the fiscal first quarter ended Dec. 31, Disney reported adjusted earnings per share of 99 cents, up from the median analyst estimate of 78 cents, according to Refinitiv data.
Net profit came in at US$1.279 billion (about Rs.10.6 billion), below analysts’ estimates. Sales reached $23.512 billion (about 1.94 lakh crore), beating Wall Street’s estimate of $23.4 billion (about 1.93 lakh crore).
The reorganization marks a new chapter in the leadership of Iger, whose first tenure as CEO began in 2005. He then bolstered Disney with a list of powerful entertainment brands and took over pixar, Marvel entertainmentAnd Lucasfilm. Iger also repositioned the company to capitalize on the streaming revolution, acquiring 21st Century Fox’s film and television assets in 2019 and launching the Disney+ streaming service in the fall.
Iger stepped down as CEO in 2020 but returned to the role in November 2022.
Now, Iger will try to put Disney’s streaming business on a path to growth and profitability. The new structure also delivers on Iger’s promise to return decision-making to the company’s creative leaders, who determine which films and series will be produced and how the content will be distributed and marketed.
This is Disney’s third restructuring in five years. It reorganized its business in 2018 to accelerate the growth of its streaming business and again in 2020 to further fuel streaming growth.
The last time Disney made cuts was during the height of the pandemic, when it announced in November 2020 it would lay off 32,000 employees, mostly at its theme parks. The cuts came in the first half of fiscal 2021.
© Thomson Reuters 2023
