May 1, 2023

Disney to cut 7,000 jobs and slash US$5.5 billion in spending

Disney's restructuring comes in response to slowing subscriber growth and increased competition for streaming viewers, as well as criticism from investor.

Walt Disney is cutting 7,000 jobs as part of an effort to save US$5.5 billion in costs and make its streaming business profitable. Following the announcement, shares of Disney rose 4.7% to US$117.22 in the after-hours trading. The layoffs represent an estimated 3.6% of Disney's global workforce.

The steps include a promise to reinstate the dividend for shareholders, addressed some of the criticism from activist investor Nelson Peltz that the Mouse House was overspending on streaming.

Disney also announced it would be cutting $5.5 billion in costs, which will be made up of $3 billion from content, excluding sports, and the remaining $2.5 billion from non-content cuts. Disney executives said about $1 billion in cost cutting was already underway since last quarter.

 

 

The Impact

Disney also said it would be eliminating 7,000 jobs from its workforce globally. That would be about 3% of the roughly 220,000 people it employed as of last October. The layoff with roughly include 166,000 in the U.S. and about 54,000 internationally.

Some others such as Warner Bros. Discovery, have been pulling back on content spending and looking to make their streaming businesses profitable. Heightened competition has led to slowing subscriber growth, and companies have been looking to find new avenues of revenue growth. Some, like Disney+ and Netflix, have added cheaper, ad-supported options.

Shortly after his return, CEO Bob Iger sent a memo to employees announcing the business would be reorganised, particularly the Disney Media and Entertainment unit.

Under a plan to cut costs and return power to creative executives, the company will restructure into three segments: an entertainment unit that encompasses film, television and streaming; a sports-focused ESPN unit; and Disney parks, experiences and products.

Disney's third restructuring

"This reorganisation will result in a more cost-effective, coordinated approach to our operations," Iger told analysts on a conference call. "We are committed to running efficiently, especially in a challenging environment.

Our company is fueled by storytelling and creativity, and virtually every dollar we earn, every transaction, every interaction with our consumers, emanates from something creative. I have always believed that the best way to spur great creativity is to make sure the people who are managing the creative processes feel empowered,” he added.

According to a report by Reuters, this marks Disney's third restructuring in five years and marks a new chapter in the leadership of Iger, who first became CEO in 2005. Iger, who returned to the role in November 2022, will now seek to put Disney's streaming business on a path to growth and profitability, while restoring decision-making to the company's creative leaders.

The layoffs come amidst a barrage of job cuts in the technology and media sector. The year started with some of the biggest companies in the world conducting unprecedented mass layoffs. Google laid off 12,000 employees and Amazon decided to let go of 18,000 employees globally.

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