Disney cuts 7,000 workers with laser focus on streaming business

Dive Brief:

The Walt Disney Company announced layoffs of 7,000 employees, or 3.6% of its workforce, as part of a restructuring plan to cut costs and “return power to creative executives,” CEO Bob Iger said on the company’s first quarter earnings call Wednesday.
“Our new structure is aimed at returning greater authority to our creative leaders and making them accountable for how their content performs financially,” Iger told analysts on the call. “Our former structure severed that link and it must be restored,” he said.
Workforce slashes at the Mouse House follow suit with fellow media companies Warner Bros. Discovery and Netflix — who both previously underwent layoffs in response to slowing subscriber growth and increased competition for streaming viewers.

Dive Insight:

The Los Angeles media giant reported a net loss of 2.4 million subscribers for its Disney+ streaming service in the last three months of 2022 — its first decline since launching in 2020 — according to the earnings report, which was also Iger’s first since his return.

Iger left his post as Disney’s top executive back in 2020, and then returned in November of 2022 after CFO Christine McCarthy expressed a lack of confidence in his replacement, Bob Chapek, the Wall Street Journal previously reported. McCarthy, a 23-year Disney alum, has been its CFO for seven years, according to her LinkedIn profile.

The company’s subscriber loss was attributed to a domestic price increase of Disney+, which McCarthy said will also negatively impact the fiscal second quarter.

“That impact, in addition to slower than previously expected growth in some international markets, suggests core Disney+ subscriptions may grow only modestly in Q2 at a similar pace to the first quarter,” she said.

The announced layoffs are a part of Disney’s plan for a “strategic reorganization,” — its third in five years — which includes the break up of three core business segments: Disney Entertainment, ESPN and Disney Parks, and Experiences and Products.

The Mouse House has plans to reduce costs by $2.5 billion in sales and general administrative expenses and other operating costs, as well as another $3 billion in savings which would come from reductions in non-sports content, including the layoffs, which are effective immediately, McCarthy said on the call.

“While this is necessary to address the challenges we are facing today, I do not make this decision lightly,” said Iger on the call, adding that “this is one of the most important steps we can take to improve the economics of our streaming business. There is a lot to accomplish, but let me be clear. This is my number one priority,” he said

Warner Bros Discovery also recently went through a round of layoffs in an effort to combat an “irrational time of overspending with limited focus on return on investment,” said CFO Gunnar Wiedenfels at Citi’s 2023 Communications, Media & Entertainment Conference in January.