Walt Disney Co. recently announced it plans to cut approximately 7,000 jobs and reduce costs by roughly $5.5 billion. This is an effort to reorganize the company’s corporate structure so that it gives more power to content executives and puts a greater emphasis on sports media at the company.
Bob Iger made the announcement in his first earnings call since returning as the chief executive officer of Disney. Iger outlined plans for significant changes to the company, reversing many of the approaches former CEO Bob Chapek took. Per the Wall Street Journal, Iger seeks to change Disney’s slate of movies and television shows, possibly reinstate the dividend and change the pricing model for the company’s streaming video services, among other things.
Iger spoke on the restructuring on Disney’s most recent earnings call:
“Since I first became CEO in 2005, I have guided the Walt Disney Company through two significant transformations. The first was to confer greater creative control and authority to our creative businesses and to focus on great brands and franchises.”
“…Now, it’s time for another transformation, one that rationalizes our enviable streaming business and puts it on a path to sustained growth and profitability while also reducing expenses to improve margins and returns and better positioning us to weather future disruption, increased competition, and global economic challenges.”
“We must also return creativity to the center of the company, increase accountability, improve results, and ensure the quality of our content and experiences.”
The CEO then went on to address the cost management initiatives Disney is undertaking:
“Managing costs, maximizing revenue, and driving growth from the content being produced will be their responsibility…..This reorganization will result in a more cost-effective, coordinated, and streamlined approach to our operations. And we are committed to running our businesses more efficiently, especially in a challenging economic environment.”
“In that regard, we are targeting $5.5 billion of cost savings across the company. First, reductions to our noncontent costs will total roughly $2.5 billion, not adjusted for inflation. $1 billion in savings is already underway, and Christine will provide more details. But in general, the savings will come from reductions in SG&A and other operating costs across the company.”
“To help achieve this, we will be reducing our workforce by approximately 7,000 jobs. While this is necessary to address the challenges we’re facing today, I do not make this decision lightly. I have enormous respect and appreciation for the talent and dedication of our employees worldwide, and I’m mindful of the personal impact of these changes. On the content side, we expect to deliver approximately $3 billion in savings over the next few years, excluding sports.”
Iger has been under pressure to turn Disney’s streaming service profitable and boost the company’s stock prices as it has tumbled nearly 40 percent since 2021. Since the announcement, Disney shares have rose nearly 6% in after-hours trading. The stock closed $111.78 on Wednesday, up 29 percent year-to-date.
It will be interesting to see the direction Iger takes Disney’s business model. Many have felt Disney prioritized political activism in recent years as opposed to focusing solely on entertainment. Correlating that with the company’s tumble in share price can invoke the adage, “Go woke, go broke.”
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