Disney to cut 7,000 jobs as Bob Iger seeks $5.5 billion in savings
Walt Disney Co. Chief Executive Officer Bob Iger announced plans for a dramatic restructuring of the world’s largest entertainment company, including 7,000 job cuts and $5.5 billion in cost savings.
The cuts include plans to cut the budget by $3 billion in films and TV shows and the rest in non-content areas. About $1 billion of the savings are already underway, Iger said on a conference call with investors on Wednesday.
As part of the change, Disney’s CEO also announced that the company would be reorganized into three divisions: an entertainment unit, which includes the main TV, film and streaming businesses; the ESPN sports networks; and the theme park unit, which includes cruise lines and consumer goods.
The reorganization is designed to improve profit margins, Iger said, and represents his third major transformation of the company after seeking to strengthen its film franchises through acquisitions and developing its online business.
Iger, who returned to the helm of the company in November after his successor, Bob Chapek, was fired, was under pressure to improve results. Activist investor Nelson Peltz is seeking a board seat at the April 3 annual meeting, arguing in part that Disney stock is underperforming and the company needs better cost controls.
Disney’s shares rose in extended trading after the company’s announcement and report of better-than-expected quarterly sales and earnings, led by its theme park division.
In a conference call with analysts, Disney said it had no plans to spin off ESPN, a possibility Iger said was being explored but dismissed in his absence. In entertainment, Disney will seek to cut costs for films and TV shows, which Iger said have become “extraordinarily expensive” in recent years due to competition.
Ultimately, Iger said, Disney will offer the ESPN network online as an a la carte option, but there are no immediate plans to do so.
He also said that Disney’s eagerness to increase streaming subscriptions at a time when Wall Street rewarded user growth more than profitability has resulted in unsustainable price promotions that the company won’t be pursuing as often. In recent months, investors have focused more on the potential return on the media industry’s huge investments in online movies and TV shows.
“We will continue to look for substitutions, but we will be more sensible about how we do it,” said Iger.
Outsized streaming losses contributed to the fall of Chapek late last year and the return of Iger, who ran the company from 2005 to 2020. which holds a stake worth approximately $1 billion.
Iger indirectly addressed some of Peltz’s concerns: In addition to cutting spending, he said the board would consider restoring the company’s dividend later this year, something the activist investor also hinted at.
“Iger is the right person for this, and Peltz is barking up the wrong tree,” Ross Gerber, CEO of wealth management firm Gerber Kawasaki, said in an interview with Bloomberg TV.
Peltz’s company, Trian Partners, welcomed the company’s moves, calling them a result of the investor’s recent campaigns. “We’re pleased Disney is listening,” a spokesman said in an emailed statement.
Iger also said Disney has an opportunity to generate revenue from creating programming for competitors, and confirmed a Bloomberg report earlier this month that the company was considering licensing more films and TV series after years of selling the vast majority of titles kept exclusively for his own services.
Earlier Wednesday, Disney announced upbeat financial results, led by gains at its theme parks.
Earnings for the period ended Dec. 31 were 99 cents a share, Disney said, ahead of analysts’ average estimate of 74 cents. Revenue rose 7.8 percent to $23.5 billion, slightly ahead of forecasts.
Subscribers to Disney+’s streaming business fell 1 percent to 161.8 million in the quarter, the first such drop since the Hotstar service was canceled in India after Disney lost streaming rights to cricket there.
Losses in the streaming business more than doubled from a year earlier to $1.05 billion, but that was better than management had forecast three months ago.
“The work we are doing to reshape our business around creativity while reducing costs will result in sustained growth and profitability for our streaming business, better positioned to weather future disruptions and global economic challenges , and create value for our shareholders,” Iger said in a statement.
Disney’s parks continued to shine, with revenue up 21 percent to $8.74 billion and profits up 25 percent to $3.05 billion. Results included little change in consumer staples sales and earnings.
The company plans to add an avatar experience to its Disneyland Resort in Southern California.
Revenue from Disney’s traditional broadcast and cable businesses, such as ESPN, fell 5 percent to $7.29 billion, while operating income fell 16 percent to $1.26 billion on weakness outside of the US USA was affected.
https://www.independent.ie/business/world/disney-to-cut-7000-jobs-as-bob-iger-seeks-55bn-in-savings-42334170.html Disney to cut 7,000 jobs as Bob Iger seeks $5.5 billion in savings