A wide range of cost cuts and reorganizations were detailed in the House of Mouse.
As a result of the recent layoffs at Disney, a few high-profile companies have done the same.
Recently reinstated CEO Bob Iger announced plans Wednesday afternoon to reduce Disney’s staff by 7,000 as part of the company’s quarterly financial report. Approximately 3.6% of its global workforce is based in this country.
In Iger’s words, the move is part of a broad-based, company-wide reorganization designed to address the challenges Disney faces today.
The company is only the latest among many companies to cut staff to cope with economic turmoil. Netflix and Warner Bros. Discovery are among the biggest players in the media industry.
For the House of Mouse to get back on track, the move is just one part of a multifaceted strategy.
A Dream That Became Nightmare
As part of Iger’s organizational restructuring, creativity will be the center of the company, along with a renewed focus on growth and profitability. In a press release, Iger said that “We believe the work we are doing to reshape our company around creativity, as well as reduce expenses, will lead to sustained growth for our streaming business, better position us to weather future disruptions and global economic challenges, and create value for our shareholders.”
The newly created Disney Entertainment banner will include television and cable networks, streaming video, and movie studios. ESPN will be joined by the existing parks, experiences, and products segment. By year-end, the company will start reporting under the updated organizational structure.
Creative executives will be empowered through the reorganization, as they will be given more responsibility and control over the company. Among the decisions to be made are those regarding content, marketing, and distribution.
Aside from reducing expenses, Disney has other goals, including reaching profitability for its streaming service.
Over the next couple of years, the company plans to cut sales, general and administrative (SG&A) expenses, and other operating costs by roughly $2.5 billion. Marketing would generate 50% of revenues, labor 30%, and technology 20%, according to CEO Christine McCarthy.
Several Disney executives provided few specifics on how their plans to slash spending on non-sports-related content will affect the company’s bottom line by another $3 billion (annualized). To reduce content costs, outside parties may be able to license programming and movies.
As a result of the cuts, Disney will be able to boost profitability by roughly $5.5 billion.
In the short time since Iger returned to Disney in late November, the CEO has already made his mark. A year-over-year increase of 8% was reported by Disney for its fiscal first quarter (ended Dec. 31). With certain items excluded, diluted adjusted earnings per share (EPS) fell 7% to $0.99. Revenue and EPS exceeded analysts’ expectations, which were $23.4 billion and $0.78, respectively.
A 21% increase in operating income to $8.7 billion was driven by Disney’s parks, experiences, and products segment. A 1% increase in revenues was reported in the media and entertainment distribution segment.
In the first report since Iger’s return, it appears that Disney will focus on profitability rather than chasing subscribers to its detriment. The number of Disney+ subscribers increased by 25% from last quarter to this quarter, down from 39%.
A loss of roughly $1 billion was posted by Disney’s direct-to-consumer (DTC) segment, down from a loss of $1.68 billion reported previously.
By the end of the calendar year, Iger said Disney would reinstate its dividend. In the beginning, the dividend is expected to be “modest” but will grow over time, according to Iger. When the pandemic was at its peak, the company suspended its dividend to conserve cash.
In addition, Disney+ will become profitable by 2024, the company reiterated.
Anything Else?
Nearly 100 years of experience navigating challenges have made Disney an unrivaled treasure trove of intellectual property.
Furthermore, Iger spearheaded the company’s first transformation starting in 2005; he’s widely credited with reviving Disney animation, boosting theme park attendance, and purchasing Pixar, Marvel, and Lucasfilm.
Moreover, Iger engineered the company’s second successful transition, which included Fox and MLB’s streaming technology acquisitions, as well as the acquisition of Hulu, all ahead of Disney’s+ debut.
Iger has made sweeping changes in a short period of time since returning to the helm. It is expected that these changes will increase profits in months and years to come as Disney puts creativity at the forefront of all it does. Disney’s stock has risen in response to these broad first steps and Iger’s track record of success.