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Disney to lay off 7,000 workers to cut costs and restructure company in sweeping overhaul by CEO Bob Iger

Disney to lay off 7,000 workers to cut costs and restructure company in sweeping overhaul by CEO Bob Iger

Disney to lay off 7,000 workers to cut costs and restructure company in sweeping overhaul by CEO Bob Iger

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Walt Disney on Wednesday announced a sweeping restructuring under recently reinstated CEO Bob Iger, cutting 7,000 jobs as part of an effort to save $5.5 billion (about Rs 45,000 crore) in costs and to make its streaming business profitable.

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The layoffs represent about 3.6% of Disney’s global workforce.

Shares of Disney rose 4.7% to $117.22 (about 10,000 rupees) in after-hours trading.

The steps, including the promise to restore a shareholder dividend, addressed some of activist investor Nelson Peltz’s criticism that the Mouse House was spending too much on streaming.

“We’re glad Disney is listening,” a spokesperson for Peltz’s Trian Group said in a statement Wednesday.

As part of a plan to cut costs and re-empower 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.

“This reorganization will result in a coordinated and more cost-effective approach to our operations,” Iger told analysts on a conference call. “We are committed to operating efficiently, especially in a challenging environment.”

Iger said streaming remains Disney’s top priority.

He said the company would “focus even more on our core brands and franchises” and “aggressively curate our general entertainment content.”

Iger also said he would ask the company’s board to reinstate the shareholder dividend by the end of the year. Chief Financial Officer Christine McCarthy said the initial dividend would likely be a “small fraction” of the pre-COVID level with a plan to increase it over time.

Peltz, who is seeking a seat on Disney’s board, had argued for a reinstatement of the dividend by fiscal year 2025.

“I feel like Disney is already doing a lot of the things that Nelson Peltz is asking for, but not necessarily in response to pressure from him,” said Paul Verna, senior analyst at Insider Intelligence.

Iger said the company is not in talks to create ESPN, which will continue to be run by Jimmy Pitaro.

Television executive Dana Walden and film chief Alan Bergman will lead the entertainment division.

Third restructuring in five years

Disney is the latest media company to announce job cuts in response to slowing subscriber growth and increased competition for streaming viewers. Disney earlier announced its first quarterly drop in subscriptions for its streaming media unit Disney+, which lost more than $1 billion (about Rs. 8,300 crore).

Warner Bros Discovery Inc and Netflix have already been terminated.

Disney said it plans to cut $2.5 billion (about Rs 21,000 crore) in selling and general administration and other operating costs, an effort that is already underway. A further $3 billion (about Rs 25,000 crore) in savings would come from the reduction of non-sports content, including layoffs.

For the fiscal first quarter that ended Dec. 31, Disney reported adjusted earnings per share of 99 cents, above analysts’ average estimate of 78 cents, according to Refinitiv data.

Net profit came in at $1.279 billion (about Rs 10,600 crore), below analysts’ estimates. Revenue reached $23.512 billion (about Rs. 1.94 lakh crore), ahead of Wall Street estimates of $23.4 billion (about Rs. 1.93 lakh crore).

The reorganization marks a new chapter in the leadership of Iger, whose first term as CEO began in 2005. He then bolstered Disney with a roster of powerhouse entertainment brands, acquiring Pixar, Marvel Entertainment and Lucasfilm. Iger also repositioned the company to capitalize on the streaming revolution, acquiring the film and TV assets of 21st Century Fox in 2019 and launching the Disney+ streaming service this fall.

Iger stepped down as CEO in 2020, but returned to the role in November 2022.

Going forward, Iger will seek to put Disney’s streaming business on a path to growth and profitability. The new structure also delivers on Iger’s promise to return decision-making to the company’s creative leaders, who will determine which films and series to make and how the content will be distributed and marketed.

This is Disney’s third restructuring in five years. It revamped its operations in 2018 to accelerate growth in its streaming business, and again in 2020 to further drive streaming growth.

The last time Disney made cuts was at the height of the pandemic, when it announced in November 2020 that it would be laying off 32,000 workers, mostly at its theme parks. The cuts took place in the first half of fiscal 2021.

© Thomson Reuters 2023


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