Disney to cut 7,000 jobs in major revamp by CEO

The Main Street Philharmonic marching band performs at the Magic Kingdom at Walt Disney World, in Lake Buena Vista, Fla., Tuesday, October 11, 2022. (Joe Burbank/Orlando Sentinel via AP)

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 US$5.5 billion in costs and make its streaming business profitable.

The layoffs represent an estimated 3.6% of Disney's global workforce.

Shares of Disney rose 4.7% to US$117.22 in after-hours trading.

The steps, including a promise to reinstate a dividend for shareholders, addressed some of the criticism from activist investor Nelson Peltz that the Mouse House was overspending on streaming.

"We are pleased that Disney is listening," a spokesperson for Peltz's Trian Group said in a statement late Wednesday.

Under a plan to cut costs and return power to creative executives, the company will restructure into three segments: an entertainment unit that encompasses film, television and streaming; a sports-focused ESPN unit; and Disney parks, experiences and products.

"This reorganization will result in a more cost-effective, coordinated approach to our operations," Iger told analysts on a conference call. "We are committed to running efficiently, especially in a challenging environment."

Iger said streaming remained Disney's top priority.

He said the company would "focus even more on our core brands and franchises" and "aggressively curate our general entertainment content."

Iger also said he would ask the company's board to restore the shareholder dividend by year end. Chief Financial Officer 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 the Disney board, had advocated for a restoration of the dividend by fiscal 2025.

"My sense is that Disney is already doing many of the things Nelson Peltz is demanding, though not necessarily in response to pressure from him," said Paul Verna, principal analyst at Insider Intelligence.

Iger said the company was not in discussions to spin off ESPN, which will continue to be led by Jimmy Pitaro.

TV executive Dana Walden and film chief Alan Bergman will lead the entertainment division.

THIRD RESTRUCTURING 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 decrease in subscriptions for its Disney+ streaming media unit, which lost more than US$1 billion.

Warner Bros Discovery Inc WBD.O and Netflix Inc. previously underwent layoffs.

Disney said it planned to cut US$2.5 billion in sales and general administrative expenses and other operating costs, an effort that is already under way. Another US$3 billion in savings would come from reductions in non-sports content, including the layoffs.

For the fiscal first quarter that ended on Dec. 31, Disney reported adjusted earnings per share of 99 cents, ahead of the average analyst estimate of 78 cents, according to Refinitiv data.

Net income came in at US$1.279 billion, below analyst estimates. Revenue hit US$23.512 billion, ahead of Wall Street estimates of $23.4 billion.

The reorganization marks a new chapter in the leadership of Iger, whose first tenure as CEO began in 2005. He went on to fortify 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 21st Century Fox's film and television assets in 2019 and launching the Disney+ streaming service that fall.

Iger stepped down as CEO in 2020 but returned to the role in November 2022.

Now, Iger will seek to put Disney's streaming business on a path to growth and profitability. The new structure also makes good on Iger's promise to restore decision-making to the company's creative leaders, who will determine what movies and series to make and how the content will be distributed and marketed.

This marks Disney's third restructuring in five years. It reorganized its business in 2018 to accelerate the growth of its streaming business, and again in 2020, to further spur streaming's growth.

The last time Disney made cuts was during the height of the pandemic, when it announced in November 2020 that it would lay off 32,000 workers, primarily at its theme parks. The cuts took place in the first half of fiscal 2021.

(Reporting by Dawn Chmielewski and Lisa Richwine in Los AngelesAdditional reporting by Chavi Mehta in BengaluruEditing by Kenneth Li, Peter Henderson and Matthew Lewis)