Disney Layoff 7,000 As Embattled House Of Mouse Announces Restructure
- Disney revealed it would be laying off 7000 workers amidst another busy week for tech job cuts
- The losses were announced on the latest earnings call, which also revealed a restructuring and billions of cost-saving tactics
- Disney’s streaming services are the main reason for the changes, with high costs driving down profits and activist investor battles threatening the board
Disney has announced it’s cutting 7,000 jobs globally. In a busy earnings call, the company also declared major restructuring and cost-cutting measures totalling $5.5bn.
The drastic measures come just three months after Bob Iger returned as CEO amid a maelstrom of streaming losses and a proxy battle for the board. But will they be enough to turn the ship around? Let’s get into it.
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What job cuts is Disney making?
Disney is cutting 7,000 roles from its global workforce, totalling 3% of the company. Disney CEO Bob Iger said the move was “necessary to address the challenges we’re facing today”. There was no word on which departments would be most affected.
In a somewhat ruthless move, Iger also announced in the same call that he had asked the Disney board to reinstate the shareholder dividend. Not the best of looks, but Disney had a lot of ground to cover.
The layoffs announcement came minutes after its quarterly earnings were posted, which revealed strong growth in the Disney theme parks but a sluggish period for its TV and direct-to-consumer (streaming) services.
In the streaming industry, Warner Bros and Netflix have both made job cuts in the last 12 months as they struggled to remain profitable amidst a hardening economic climate.
Have there been other company layoffs?
It’s been yet another heavy week of layoffs. Dell announced it has cut 5% of its global workforce, or 6,650 employees, bringing the computing giant’s headcount to its lowest since 2017. Computer sales have slowed, prompting Dell to “stay ahead of downturn impacts”, according to CEO Jeff Clarke.
A couple of days later, Zoom confirmed it was cutting a hefty 15% of its employee base. 1300 workers are affected by the news. The video chat software company, which boomed during the pandemic, cited the economic headwinds and “[we] didn’t take as much time as we should have to thoroughly analyze our teams or assess if we were growing sustainably”.
eBay has also parted ways with 500 employees, totalling 4% of workers. “This shift gives us additional space to invest and create new roles in high-potential areas – new technologies, customer innovations and key markets,” CEO Jamie Iannone said.
US layoffs hit a two-year high in January, with no signs of slowing. Layoffs.fyi, which is tracking all announced cuts, is currently at 98,100 employees fired.
While layoffs are sadly the norm with the economic uncertainty at the moment, Disney is going through an interesting time in the company’s history.
What else has Disney announced?
The conglomerate also said it would be switching up its structure on the earnings call, with three new divisions confirmed: Disney Entertainment, ESPN and Parks, Experiences and Products. The third time’s the charm for the company, which has undergone two restructures in five years already.
Finally, Disney announced it would make a whopping $5.5bn in cost-saving measures, including $3bn from content alone. $1bn of the measures have already been implemented. “We will take a very hard look at the cost of everything we make across television and film,” Iger told investors earlier this week.
After a difficult couple of years and an old-but-new CEO in charge, some big changes are clearly afoot at Disney.
What were Disney’s quarterly earnings?
While Disney’s streaming services, which include ESPN+ and Hulu, had a 13% increase in revenue, they’re operating at a loss of $1.1bn. Last quarter, it was $1.5bn.
One of the headlines was a 2.4m subscriber loss after Disney increased the prices of its streaming platform, Disney+. It was the first time Disney+ had lost subscribers since its launch in 2019. This still beat analyst estimates, who were touting the expected loss at over 3m.
Disney stock was up 6% in pre-trading, with many Wall Street analysts upgrading the stock in light of Iger’s many announcements.
What’s the Disney drama?
Media darling Disney has been under siege as of late. Former CEO Bob Iger returned to the helm after two years away in retirement; Iger replaced Bob Chapek, whom he’d previously appointed as his successor.
Nelson Peltz, whose firm Trian Partners has a $900m stake in the company, had argued Disney is spending too much on its streaming services in recent years. He even released a white paper criticizing Disney’s $71bn Fox acquisition, which closed in 2019, which he said gave Disney the “balance sheet from hell”.
The board declined the activist investor’s nomination for director in January, appointing former Nike CEO Mark Parker as chairman to ready for the epic battle.
But the latest earnings call has taken the sting out of Peltz’s bid for the board. A spokesperson for Trian Group said: “We are pleased that Disney is listening.” Soon after, Peltz confirmed he would withdraw his campaign against the board.
Could Disney come out on top in the streaming wars?
After six months of operating losses, there’s no denying Disney’s big bet on streaming services hasn’t paid off yet. Breaking even alone is a still way off. Iger said, “Our current forecasts indicate Disney Plus will hit profitability by the end of fiscal 2024, and achieving that remains our goal.”
Both Netflix and Disney have introduced ad-supported channels in the last few months to entice new and returning customers, but the full impact of these won’t be realized until later in 2023.
In the last few weeks Netflix has also had some flack around its plans to stop password sharing, which has drawn heavy criticism from users. CEO Gregory Peters warned investors the move would not be “universally popular”. Disney+ hasn’t announced whether it plans the same move.
At the end of the day, streaming services are a ‘nice to have’ for many people. They’ll be the first to cut when tough times arrive, as we’ve seen from recent subscriber numbers.
The bottom line
From the AI wars to the streaming wars, the tussle in tech is more ferocious and competitive than it’s been in years. For investors, it’s a major shakeup that could see fortunes made or lost over the coming years.
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Well, enlisting the services of AI could be a step in the right direction. Our Emerging Tech Kit uses AI to predict the performance and volatility of a range of tech assets, including ETFs, large cap stocks, growth stocks and cryptocurrencies via public trusts.
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