Disney to axe 7,000 employees as company suffers streaming decline
Entertainment giant The Walt Disney Company has decided to fire 7,000 employees as the company prepares to deal with a challenging economic environment. New CEO Bob Iger announced the decision during a call with analysts after the company published its quarterly results. After initially stepping down in 2020, Iger returned to Disney in November 2022 to replace outgoing CEO Bop Chapek.
Why does this story matter?
Iger came back to Disney's helm after two rocky years of Chapek. Chapek's time was marred by the pandemic, frosty relationships with actors and employees, and poor financial performance. Iger is known for making Disney an entertainment powerhouse during his first tenure. The company's board decided to bring him back to change its fortunes. The layoffs are only the beginning of Disney's revamp.
Layoffs are part of the latest restructuring at Disney
The layoffs are part of Disney's restructuring under Iger. This is the company's third restructuring in five years. The restructuring is aimed at making the company's operation cost-effective and coordinated. As part of the process, Iger is establishing three segments in the company: Disney Entertainment, Disney Parks experiences and products, and ESPN. The company also plans to restore decision-making to its creative leaders.
Slowdown in subscriber growth and increased competition affected streaming service
Ever since Iger came back into the fold, there have been rumors about layoffs. With the company's streaming service taking a hit due to a slowdown in subscriber growth and increased competition, job cuts were inevitable. Disney Plus only added 200,000 subscribers in the US and Canada in the last quarter. Globally, it (except Hotstar) grew by 1.2 million subscribers.
Higher costs at Disney Plus, Hulu led to operating loss
The company's direct-to-consumer division, which includes streaming services, saw its revenue increase by 13% to $5.3 billion. However, it had an operating loss of $1.1 billion. The loss was attributed to higher costs at Disney Plus and Hulu. "Our priority is the enduring growth and profitability of our streaming business," Iger said. According to him, Disney Plus will be profitable in 2024.
Iger plans to cut costs by $5.5 billion
Speaking about layoffs, Iger said, "I do not make this decision lightly. I have enormous respect and appreciation for the talent and dedication of our employees worldwide." He is "targeting $5.5 billion of cost savings across the company," and according to him, "layoffs will help achieve this." It is unclear which all departments will be hit by job cuts.
