LOS ANGELES: Walt Disney Co 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 in costs and make its streaming business profitable.
Layoffs account for approximately 3.6% of Disney’s global workforce.
Shares of Disney rose 4.7% to $117.22 in afterhours trading.
The steps, including a promise to reinstate a dividend for shareholders, addressed some of activist investor Nelson Peltz’s criticisms that the Mouse House was spending too much on streaming.
“We’re glad Disney is listening,” a spokesperson for Peltz’s Trian Group said Wednesday.
As part of a plan to cut costs and give power back to creative executives, the company will restructure itself into three segments: an entertainment unit encompassing film, television and streaming; a sports-focused ESPN unit; and Disney parks, experiences and products.
“This reorganization will result in a more cost-effective and coordinated approach to our operations,” Iger told analysts on a conference call. “We are committed to working efficiently, especially in a difficult environment.”
Iger said streaming remained Disney’s top priority.
He said the company will “focus even more on our core brands and franchises” and “aggressively curate our general entertainment content.”
Iger also said he will ask the company’s board to reinstate the shareholder dividend by the end of the year. CFO 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 advocated restoring the dividend by fiscal 2025.
“My feeling is that Disney is already doing a lot of the things Nelson Peltz is asking for, even if not necessarily in response to his lobbying,” he said Paul Vernalead Insider Intelligence analyst.
Iger said the company is not in talks to spin off ESPN, which will continue to be led by Jimmy Pitaro.
Television executive Dana Walden and head of cinema Alan Bergman will lead the entertainment division.
THIRD RENOVATION 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 reported its first quarterly decline in subscriptions for its Disney+ streaming media unit, which lost more than $1 billion.
Warner Bros Discovery Inc and Netflix Inc have previously suffered layoffs.
Disney said it plans to cut $2.5 billion in sales and general administrative and other operating costs, an effort that is already underway. Another $3 billion in savings would come from reducing non-sports content, including layoffs.
For the fiscal first quarter ended Dec. 31, Disney reported adjusted earnings per share of 99 cents, higher than the average analyst estimate of 78 cents, according to data from Refinitiv.
Net income was $1.279 billion, below analyst estimates. Revenue reached $23.512 billion, topping Wall Street estimates by $23.4 billion.
The reorganization marks a new chapter in Iger’s leadership, whose first tenure as CEO began in 2005. He has continued to strengthen Disney with a roster of powerful entertainment brands, acquiring Pixar Animation Studios, Marvel Entertainment and Lucasfilm. Iger also repositioned the company to capitalize on the streaming revolution, acquiring the film and television assets of 21st Century Fox in 2019 and launching the Disney+ streaming service in the fall.
Iger stepped down as CEO in 2020, but returned to the role in November 2022.
Now, Iger will look to put Disney’s streaming business on a path of growth and profitability. The new facility also fulfills Iger’s promise to give decision-making back 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 marks Disney’s third restructuring in five years. It retooled its business in 2018 to accelerate the growth of its streaming business, and again in 2020, to further drive streaming growth.
The last time Disney made cuts was during 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 occurred in the first half of the 2021 fiscal year.
Layoffs account for approximately 3.6% of Disney’s global workforce.
Shares of Disney rose 4.7% to $117.22 in afterhours trading.
The steps, including a promise to reinstate a dividend for shareholders, addressed some of activist investor Nelson Peltz’s criticisms that the Mouse House was spending too much on streaming.
“We’re glad Disney is listening,” a spokesperson for Peltz’s Trian Group said Wednesday.
As part of a plan to cut costs and give power back to creative executives, the company will restructure itself into three segments: an entertainment unit encompassing film, television and streaming; a sports-focused ESPN unit; and Disney parks, experiences and products.
“This reorganization will result in a more cost-effective and coordinated approach to our operations,” Iger told analysts on a conference call. “We are committed to working efficiently, especially in a difficult environment.”
Iger said streaming remained Disney’s top priority.
He said the company will “focus even more on our core brands and franchises” and “aggressively curate our general entertainment content.”
Iger also said he will ask the company’s board to reinstate the shareholder dividend by the end of the year. CFO 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 advocated restoring the dividend by fiscal 2025.
“My feeling is that Disney is already doing a lot of the things Nelson Peltz is asking for, even if not necessarily in response to his lobbying,” he said Paul Vernalead Insider Intelligence analyst.
Iger said the company is not in talks to spin off ESPN, which will continue to be led by Jimmy Pitaro.
Television executive Dana Walden and head of cinema Alan Bergman will lead the entertainment division.
THIRD RENOVATION 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 reported its first quarterly decline in subscriptions for its Disney+ streaming media unit, which lost more than $1 billion.
Warner Bros Discovery Inc and Netflix Inc have previously suffered layoffs.
Disney said it plans to cut $2.5 billion in sales and general administrative and other operating costs, an effort that is already underway. Another $3 billion in savings would come from reducing non-sports content, including layoffs.
For the fiscal first quarter ended Dec. 31, Disney reported adjusted earnings per share of 99 cents, higher than the average analyst estimate of 78 cents, according to data from Refinitiv.
Net income was $1.279 billion, below analyst estimates. Revenue reached $23.512 billion, topping Wall Street estimates by $23.4 billion.
The reorganization marks a new chapter in Iger’s leadership, whose first tenure as CEO began in 2005. He has continued to strengthen Disney with a roster of powerful entertainment brands, acquiring Pixar Animation Studios, Marvel Entertainment and Lucasfilm. Iger also repositioned the company to capitalize on the streaming revolution, acquiring the film and television assets of 21st Century Fox in 2019 and launching the Disney+ streaming service in the fall.
Iger stepped down as CEO in 2020, but returned to the role in November 2022.
Now, Iger will look to put Disney’s streaming business on a path of growth and profitability. The new facility also fulfills Iger’s promise to give decision-making back 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 marks Disney’s third restructuring in five years. It retooled its business in 2018 to accelerate the growth of its streaming business, and again in 2020, to further drive streaming growth.
The last time Disney made cuts was during 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 occurred in the first half of the 2021 fiscal year.
