A memo shows that Disney will cut jobs and freeze hiring
Disney CEO Chapek writes: “We’re hiring a freeze, but we’re looking to save some small staff reductions”
Chief Executive Bob Chapek sent the memo to Disney’s leaders, saying the company is instituting a targeted hiring freeze and anticipates “some small staff reductions” as it looks to manage costs.
While certain macroeconomic factors are out of our control, meeting these goals requires all of us to keep doing our part to manage the things we have control over.
Disney reported a miss on Wall Street estimates for its quarterly earnings on Tuesday as the entertainment giant racked up more losses from its push into streaming video. The company’s shares fell on Wednesday.
Disney’s earnings are expected to fall from a year ago because of strong theme park sales and higher revenue, but it is still expected to earn more than last year.
The streaming service is known for original series including the “Star Wars” entries “The Mandalorian,” “Andor” and “Obi-Wan Kenobi,” the Marvel entries “WandaVision,” “Hawkeye” and “She-Hulk: Attorney at Law,” and content hubs for Disney, Pixar, Marvel and “Star Wars” films.
Corporate America plans to cut its employee base because of the economic downturn. Meta said this week it would cut more than 11,000 jobs, or 13% of its workforce to rein in costs.
One of Disney’s studio peers, Warner Bros Discovery, has undergone dramatic cost-cutting efforts, including layoffs, as the recently merged company restructures its content operations.
Disney has created a task force to help him make key decisions, which include the CFO and general counsel.
Quality will not be sacrificed despite the company already looking at content and marketing spending. Hiring will be limited to a small subset of critical positions, and some staff reductions are anticipated as the company looks to make itself more cost-efficient, Chapek wrote.
Disney’s Reorganized Media and Entertainment Division: A Turnaround in the Decline of the Reedy Creek Streaming Entity with the $1 billion in Debt
So this week the Florida legislature is in special session to pass a new Disney-related law that makes clear that the entity will remain on the hook for the $1 billion in debt. The entity, formerly called Reedy Creek, will now be called the Central Florida Tourism Oversight District, but won’t be controlled by Disney.
The exact structure of the reorganized Media and Entertainment Division is not yet known but the expectation is that Iger will roll back the reorganization.
“We do not believe that one person can single-handedly rescue the company, but CEO Iger’s return will force Disney to have an honest and courageous self-examination on what is working and what needs to be fixed,” said a note from Wall Street research firm MoffettNathanson.
Iger had his first report since coming back as CEO. He had previously announced changes, and many investors wanted to know how Disney would change going forward.
The quarter’s losses were greater than expected and the year’s were larger than expected. The streaming business was still on track to make a profit in the next fiscal year, assuming there isn’t a meaningful shift in the economic climate.
With consumers cutting the cord on cable services, the need for a money-making streaming offering is critical. Disney had profited for years from cable subscriber fee revenue.
Doug Creutz, analyst for Cowen wrote, “most streaming services have moved into a price-raising mode because of a shift of attention from subscriber growth to profitability.”
At the end of the quarter that ended on October 1, the number of subscribers was 161 million, unchanged from the previous quarter. But its other streaming businesses, including ESPN+ and Hulu, in which it has a stake, both had subscriber numbers rise 2%.
The Disney World Rank-and-Field Negotiation: Sensitivity to Loeb’s Wage Proposal, and Implications for Compensation
But Loeb soon backed off on that proposal and reached a truce with the Disney board. Nelson Peltz, another activist investor, is attempting to wrest a spot on the Disney board in order to cut costs, while he is not saying anything about his proposal to change the company.
Rief Ehlrich doesn’t think Iger will be interested in the proposal if it’s dismissed out of hand.
The Disney World rank-and-file voted against a contract that would have given them raises of at least $1 a year over the next five years.
A group of unions representing 32,000 union member are due to return to the bargaining table, and there is no strike deadline. The unions want an immediate raise of $3 an hour for members, and at least $1 an hour raises in subsequent years.
The unions say that the wages of about $15 an hour are not enough to live on in the area when you work full time. The company called the rejected wage proposal a “very strong offer.”
The revenue and profits were up from the previous year. The company had a 12% rise in revenue and a 10% increase in earnings for the fiscal year that ended in March.
The Disney Dividend Plan: Cost-Centric Measurements and the Story of Gender, Sexuality, and Parental Rights in Education
The Parental Rights in Education law put restrictions on classroom instruction of sexual orientation and gender identity. Opponents dubbed the bill the “Don’t Say Gay” law and a group of Disney employees urged the company to use its clout as the state’s largest employer to oppose the legislation. The calls were joined in by Iger, months from his return to the CEO office.
Gov. Desantis and the Republicans passed a new bill to dismantle Disney’s Reedy Creek Improvement District, which it had been in charge of. That will take effect in June.
That legislation had its own problems, too, as towns and counties were afraid they could be left with about $1 billion in debt for which Reedy Creek had sold bonds to provide government services.
Disney had about 220,000 workers as of October 1, of which approximately 166,000 were employed in the United States. A cut of 7,000 jobs represents about 3% of its global workforce.
“Now that the pandemic impacts to our business are largely behind us, we intend to ask the board to approve the reinstatement of a dividend by the end of the calendar year,” he said. “Our cost-cutting initiatives will make this possible. And while initially, it will be a modest dividend, we hope to build upon it over time.”
The job cuts come as part of a cost-cutting effort also announced Wednesday. Iger said the company is aiming for $5.5 billion of cost savings across the company, with $2.5 billion of that coming from annual savings in “non-content” operations. Content operations refers to business units such as movies and television shows.
The majority of cost savings would come from marketing expenses, labor savings and less spending on technology, procurement and other expenses. Disney is a major advertiser and a decrease in marketing expenditures is bad for other media and tech companies.
The company said the results were helped by strong box office showings, including for the hit “Avatar: The Way of Water,” and exceptionally robust theme park revenue.
Streaming as Driven by Story and Creativity: What We Do for the Future and Where We Will Make the Most Dissemination
“The streaming business, which I believe is the future and has been growing, is not delivering basically the kind of profitability or bottom line results that the linear business delivered for us over a few decades,” he said, referring to programming on television or in movie theaters.
He said that streaming “remains our #1 priority. It is, in many respects, our future, but we’re not going to abandon the linear or the traditional platforms while they can still be a benefit to us and our shareholders.”
He said that the company is driven by story and creativity. “I’ve always believed that the best way to spur great creativity is to make sure that people who are managing the creative processes feel empowered. Our new structure is meant to give our creative leaders greater authority and make themaccountable for how their content performs financially. Our former structure severed that link and it must be restored.”