Payel Halder, February 11, 2023
Walt Disney Co. announced on Wednesday that it would be undergoing a restructuring under CEO Bob Iger, which will result in the cutting of 7,000 jobs. The goal of the restructuring is to save $5.5 billion in costs and make the streaming business more profitable. The layoffs represent around 3.6% of Disney’s global workforce.
In a statement, a spokesperson for activist investor Nelson Peltz’s Trian Group said, “We are pleased that Disney is listening.” Peltz had been critical of Disney for overspending on streaming, but the company’s recent moves, including the promise to reinstate a dividend for shareholders, have addressed some of those concerns.
Under the restructuring plan, Disney will reorganize into three segments: an entertainment unit encompassing film, television, and streaming; a sports-focused ESPN unit; and Disney parks, experiences, and products. CEO Bob Iger said in a conference call, “This reorganization will result in a more cost-effective, coordinated approach to our operations. We are committed to running efficiently, especially in a challenging environment.” Iger also added that streaming remained Disney’s top priority and the company would focus more on its core brands and franchises.
CFO Christine McCarthy said that the initial dividend would likely be a “small fraction” of the pre-COVID level and would increase over time. Iger also said that he would ask the board to restore the shareholder dividend by the end of the year.
Disney plans to cut $2.5 billion in sales and general administrative expenses and other operating costs, and an additional $3 billion in savings would come from reductions in non-sports content, including the layoffs.
For the fiscal first quarter ending on December 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 $1.279 billion, below analyst estimates, while revenue hit $23.512 billion, ahead of Wall Street estimates of $23.4 billion.
This restructuring marks a new chapter in Iger’s leadership, who first took the role of CEO in 2005. He has since acquired several powerful entertainment brands, including Pixar Animation Studios, Marvel Entertainment, and Lucasfilm. He 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 same year. Iger returned to the role of CEO in November 2022.
Now, Iger will be seeking to put Disney’s streaming business on a path to growth and profitability, and the new structure will allow for the company’s creative leaders to have more control over decision-making, including what movies and series to make and how the content will be distributed and marketed. This is Disney’s third restructuring in five years, with previous restructure taking place in 2018 and 2020. The last time Disney made cuts was during the height of the pandemic in November 2020, resulting in the layoff of 32,000 workers, primarily at its theme parks. These cuts took place in the first half of fiscal 2021.
