The Walt Disney Company will be cutting its workforce by 7,000 as it saw its video streaming platform Disney+ lose paid subscribers by 1% in the October-December quarter to 161.8 million.
The conglomerate said it would cut 7,000 jobs from its global workforce, part of a multibillion-dollar cost-cutting initiative aimed at streamlining the company’s operations in a period of media industry turmoil.
As of October 1, Disney employed about 220,000 people, of whom about 166,000 were based in the US. 7,000 jobs lost would account for around 3% of the global workforce.
CEO Bob Iger, who took over as the company's leader after the board ousted Bob Chapek in November, stated, "While this is important to confront the issues we're facing today, I do not make this choice lightly. I am aware of the human impact of these changes and have the utmost regard and appreciation for the ability and commitment of all of our employees.
Iger also took action to reward shareholders, but the news of job cuts will hurt Disney employees. When the Covid pandemic hit, the corporation stopped paying dividends. Iger stated they anticipate that to happen again.
"We expect to seek the board to approve the resumption of a dividend before the end of the calendar year," he said. "The pandemic repercussions to our business are now mostly behind us." "This will be achievable thanks to our initiatives to reduce costs. Even though it will start out small, we intend to grow on it over time.
The job layoffs are a result of cost-cutting measures that were also revealed on Wednesday. Iger stated that the business aims to save $5.5 billion in costs overall, $2.5 billion of which will come from annual cost savings in "non-content" operations. In terms of content operations, we mean commercial enterprises like movies and television programmes.
It was stated that labour savings would account for 30% of cost savings, technology and procurement would account for 20% of cost savings, and marketing expenses would account for 50% of cost savings. Disney is a major advertiser, so a $1 billion decrease in annual marketing spending portends greater problems for both tech and other media industries.
Iger made the significant employment layoffs known after the business reported fourth-quarter 2022 financial results that exceeded expectations. Disney's revenue for the quarter increased by 8% to $23.5 billion, exceeding analysts' expectations, according to Refinitiv, which had been $23.4 billion.
Although somewhat lower than a year earlier, earnings per share, which came in at 99 cents before special items, well exceeded expectations. This is far better than the projection of 78 cents per share, but it is down from the $1.06 per share it made on same basis a year earlier.
The results, according to the firm, were aided by great picture office performances, especially for the blockbuster "Avatar: The Way of Water," and remarkably strong theme park revenue.
Losses and a decline in Disney+ subscribers: Although the company reported losing Disney+ streaming customers in the most recent quarter, it was nevertheless able to reduce its losses over the prior three months. Disney reduced streaming marketing costs and changed pricing strategies in an effort to draw more lucrative subscribers. At the end of the quarter that concluded on October 1, there were 162 million members, a 1% decrease from 164 million. However, subscriber counts for its other streaming ventures, such as ESPN+ and Hulu, in which it has a stake, also increased by 2%. In spite of the fact that it was nearly twice as much as the $593 million loss it posted a year earlier, this enabled Disney to reduce its losses in the entire streaming business to $1.1 billion in the quarter from $1.5 billion in the quarter ending October 1.
Disney's streaming services, which are highlighted by its Disney+ offering, have recently reported gains in subscribers as well as losses.
Disney+ remains on track to be profitable in the following fiscal year, which runs from October through September 2024, the company said in a statement, though it noted that this could be impacted by an economic downturn. The demand for a profitable streaming service is considered as essential as people cut the cord on cable services. Disney had been making money off of cable subscription fees for many years.
Ige said the company is not abandoning streaming as a significant component of its future only because it is paying more attention to increasing profitability in that sector.
He remarked, referring to television and movie theatre programming, that "the streaming industry, which I believe is the future and has been expanding, is not really generating the kind of profitability or bottom line outcomes that the linear business generated for us over the course of a few decades."
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