Disney intends to lay off approximately 7,000 entertainment jobs in an enormous overhaul and re-organization that the company projects will save $5.5 billion in cost synergies. In his first earnings report since returning as CEO, Bob Iger announced the massive cuts Wednesday and laid out a structure that will unify virtually all of Disney’s entertainment branches under one roof.
Iger’s first move is the formation of Disney Entertainment, which will bring together Disney Studios, General Entertainment, Animation, Disney+, 20th Century Studios, Searchlight, and Hulu, all under the leadership of current General Entertainment head Dana Walden and Studios head Alan Bergman, both of whom will be co-chairmen under the new banner.
ESPN, which will continue to be led by James Pitaro, will remain a separate entity and include ESPN+. ESPN won’t be spun off from Disney at large, or at least not yet. A third division will be Disney Parks, Experiences, and Products, which will continue to remain separate and also includes gaming and publishing. The new structure is effective immediately.
The re-org and layoffs will mean dismantling of DMED, or Disney Media & Entertainment Distribution, the company’s tech and product team put in place by former CEO Bob Chapek and led by Chapek’s longtime lieutenant Kareem Daniel. DMED had oversight of everything from ad sales for Disney content and Disney+, distribution, operations and tech, and called the shots on how content was released, removing power from the creatives. Daniel exited Disney in Iger’s first move upon returning as CEO back in November, and Iger vowed to return that power to the storytellers.
The 7,000 layoffs are expected to significantly impact DMED’s ranks, but layoffs could impact all entertainment branches at the company.
In the earnings call, Iger said the re-organization was crucial to empower the storytelling and creativity that fuels Disney, but it’s also designed to make them accountable for the content’s financial performance. The new group will have oversight in the content Disney makes, how it is distributed and monetized, and how it is marketed. He added that the former structure under Chapek “severed that link.”
Disney’s stock is up roughly 10% in after-market trading following the news.
Analysts expected a re-org once Iger returned to the fold. Figuring out oversight of Disney+ after it reported Q4 operating losses of $1.5 billion was high on the list. Still unclear is how Iger handles the company’s two-thirds stake in Hulu and if he might buy out the remaining stake from Comcast; it’s also unclear if Iger might pull the trigger on spinning off ESPN. A February 3 Bloomberg report said Iger would explore licensing film and TV content to rival streamers (potentially Hulu among them), a departure from the current streaming strategy.
Looming over all this is an upcoming proxy fight between the Disney board and activist investor Nelson Peltz. The CEO of Trian Management, Peltz had Chapek’s ear and has been lobbying for a board seat for months. Last week he targeted current board member Michael B.G. Froman in his case to Disney shareholders to vote him on the board. Disney’s board has not been shy in advising shareholders to vote against Peltz, saying he “lacks a basic understanding of our industry by his own admission,” and despite months of talks, Trian hadn’t “actually presented a single strategic idea for Disney” and is “oblivious” to bigger-picture changes in media.
Still to be determined is how Florida lawmakers want to handle governance of theWalt Disney World resort in Orlando, which returned to the headlines this week after Republicans in the state’s house proposed a bill to alter Disney’s self-governance status.
In Wednesday’s earnings report to kick off the fiscal year 2023, Disney beat analyst expectations and grew revenue in the direct-to-consumer business to reach $5.3 billion, but lost 2.4 million Disney+ subscribers globally and suffered another $1.05 billion in losses in the direct-to-consumer division for the quarter. Subscriber losses stemmed from the loss of 3.8 million subscribers from Disney+ Hotstar in India and parts of Southeast Asia after the streamer lost rights to IPL cricket. Disney+ now has 161.8 million subscribers and saw some growth in subscribers domestically at Disney+, as well as at Hulu and ESPN+.
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