Disney to lay off 7,000 jobs to cut costs

Mumbai : In the first quarterly earnings call since his return, Disney CEO Bob Iger outlined his plan to turn around the entertainment behemoth, laying out a plan to save $5.5 billion by eliminating about 7,000 jobs and restructuring the company into three divisions—Entertainment, Parks, and ESPN.

Disney announced the elimination of 7,000 jobs from its global workforce as part of a multibillion-dollar cost-cutting initiative aimed at streamlining the company's operations during a period of turmoil in the media industry.

“While this is necessary to address the challenges we’re facing today, I do not make this decision lightly,” said CEO Bob Iger,

He further added, “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.”

As of 1 October 2022 , Disney employed approximately 220,000 people, with approximately 166,000 of them based in the United States. A reduction of 7,000 jobs represents approximately 3 per cent  of its global workforce.

The job cuts are part of a cost-cutting effort that was also announced. Iger stated that the company's goal is to save $5.5 billion in costs across the board, with $2.5 billion coming from annual savings in "non-content" operations. Content operations are business units that include things like movies and television shows.

It stated that 50 per cent of the cost savings would come from marketing expenses, 30% from labour savings, and 20 per cent from less spending on technology, procurement, and other expenses. Because Disney is a major advertiser, a $1 billion decrease in annual marketing expenditures portends more difficulties for other media and technology companies.

Revenue

The Walt Disney Company today reported earnings for its first quarter ended 31 December 2022.

Disney's revenue increased 8 per cent  to $23.51 billion in the three months ending 31 December 2022 from $21.82 billion the previous year.

In the three months ending on 31 December 2022 , Disney earned $1.28 billion, or 70 cents per share. This compares to a net income of $1.1 billion, or 60 cents per share, the previous year.

The Walt Disney CEO Robert A. Iger said,  “After a solid first quarter, we are embarking on a significant transformation, one that will maximize the potential of our world-class creative teams and our unparalleled brands and franchises,”

He further added “We believe the work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders.

Disney Parks, Experiences and Products revenues for the quarter increased 21 per cent  to $8.7 billion and segment operating income increased 25 per cent  to $3.1 billion. Higher operating results for the quarter reflected increases at our domestic parks and experiences and, to a lesser extent, our international parks and resorts

While revenue for the segment that includes Disney's movie business increased 1 per cent  year on year to $14.78 billion from $14.59 billion.

Domestic Channels' quarterly revenues fell 1 per cent  to $6.1 billion while its operating profit rose 5 per cent  to $928 million. The increased results at Cable were the cause of the greater operating income, whilst the results at broadcasting were comparable to the same quarter last year.

Revenues from international channels fell by 21 per cent  to $1.2 billion during the quarter, while operating income dropped by 64 per cent  to $131 million.

Reduced programming and production expenses helped to somewhat offset the decline in operational income, which was caused by decreased affiliate revenue, lower advertising revenue, and a negative foreign exchange impact.

Advertising revenue fell as a result of lower average viewership and rates. Affiliate revenue fell due to the impact of channel closures in the previous year, which was partially offset by higher contractual rates. Lower sports programming and production costs were attributed to lower cricket rights costs, which were partially offset by higher production costs and costs for new soccer rights.

“The decreases in cricket programming costs and advertising viewership reflected no Indian Premier League (IPL) cricket matches aired in the current quarter compared to thirteen matches aired in the prior-year quarter as matches shifted from fiscal 2021 into fiscal 2022 due to COVID-19.” the company said .  

“IPL matches typically occur in the second and third quarters of our fiscal year. The decrease in cricket programming costs was also due to lower costs per match for the International Cricket Council T20 World Cup compared to the prior-year quarter”, the company future added.

Direct-to-Consumer revenues for the quarter increased 13 per cent  to $5.3 billion and operating loss increased $0.5 billion to $1.1 billion. The increase in operating loss was due to a higher loss at Disney+ and a decrease in results at Hulu, partially offset by improved results at ESPN+.

The decrease in results at Hulu was primarily due to higher programming and production costs and a decrease in advertising revenue, partially offset by subscription revenue growth. The increase in four programming and production costs was attributable to an increase in subscriber-based fees for programming the Live TV service, more content provided on the service and higher average costs per hour. Higher subscriber-based fees for programming the Live TV service were due to rate increases and more subscribers. The decrease in advertising revenue was caused by lower impressions, partially offset by an increase in rates. Subscription revenue growth was due to increases in retail pricing and subscribers.

With 161.8 million subscribers at the end of the third quarter, Disney+ has lost 1 per cent from 1 October . Each of Hulu and ESPN+ reported a 2 per cent gain in paid subscribers over the course of the quarter.

In December, the company introduced new price tiers for its U.S. Disney+ service, raising the monthly price for ad-free viewing from $7.99 to $10.99 and creating a new basic Disney+ service with ads for $7.99 per month.