In a massive overhaul led by CEO Iger, Disney will eliminate 7,000 workers.
7,000 positions will be lost as part of a massive restructuring announced by Walt Disney Co (DIS.N) on Wednesday, led by freshly reinstated CEO Bob Iger, in an effort to slash $5.5 billion in costs and turn its streaming business profitable.
An estimated 3.6% of Disney’s global staff will be laid off.
After-hours trading saw a 4.7% increase in Disney shares to $117.22.
The actions addressed some of the concerns from activist investor Nelson Peltz that the Mouse House was overpaying on streaming, including a pledge to reintroduce a dividend for shareholders.
In a statement released late on Wednesday, a representative for Peltz’s Trian Group stated, “We are happy that Disney is listening.”
The corporation will be divided into three sectors as part of a strategy to reduce expenses and give creative executives more control: an entertainment unit that includes film, television, and streaming; an ESPN entity that focuses on sports; and Disney parks, experiences, and goods.
On a conference call with analysts, Iger stated, “This restructure will result in a more cost-effective, unified approach to our operations.” “We are dedicated to operating effectively, particularly in a difficult situation.”
Iger stated that Disney’s top priority is still streaming.
He declared that the business would “aggressively select our general entertainment content” and “focus even more on our key brands and franchises.”
Iger added that he would ask the board of the business to reinstate the shareholder dividend before the year was through. The initial payout, according to Chief Financial Officer Christine McCarthy, would probably be a “small percentage” of the pre-COVID level with a goal to gradually grow it.
Peltz, who is running for a position on the Disney board, has argued for the dividend to be reinstated by the fiscal year 2025.
Paul Verna, lead analyst at Insider Intelligence, stated, “My impression is that Disney is already doing many of the things Nelson Peltz is seeking, but not necessarily in reaction to his pressure.”
ESPN, which will continue to be run by Jimmy Pitaro, will not be spun off, according to Iger.
third reorganization in five years
In reaction to sluggish subscriber growth and rising competition for streaming consumers, Disney is the most recent media company to announce job losses. Disney’s streaming media division, which lost more than $1 billion, earlier revealed its first quarterly decline in memberships.
Previous layoffs occurred at Netflix Inc. (NFLX.O) and Warner Bros. Discovery Inc. (WBD.O).
Disney announced that it would reduce sales, general administration, and other operating costs by $2.5 billion, and that endeavor is already underway. Reducing non-sports content, such as the layoffs, would result in additional savings of $3 billion.
Disney beat the average analyst expectation of 78 cents for adjusted profits per share for the first quarter of its fiscal year that concluded on December 31.
Below analyst expectations, net income of $1.279 billion was reported. In contrast to Wall Street’s prediction of $23.4 billion, revenue reached $23.512 billion.
Iger’s leadership, which began in 2005 with the start of his first term as CEO, enters a new phase with the reorganization. He later acquired Pixar Animation Studios, Marvel Entertainment, and Lucasfilm to strengthen Disney with a lineup of strong entertainment companies. Iger restructured the business to benefit from the streaming revolution by purchasing the film and television assets of 21st Century Fox in 2019 and launching the Disney+ streaming service that fall.
Iger left his position as CEO in 2020 but took it back in November 2022.
Iger will now work to set Disney’s streaming division on a growth and profit-oriented course. The new structure also fulfills Iger’s pledge to return decision-making to the company’s creative leaders, who will choose which films and television series to produce and how to distribute and market the content.
Disney has undergone three restructurings in the last five years. In order to speed up the growth of its streaming business, it reorganized its operations in 2018. This was followed by another reorganization in 2020.
Disney last made reductions when it announced in November 2020 that it would fire 32,000 employees, mostly from its theme parks, at the height of the pandemic. During the first half of fiscal 2021, the cuts were made.