Disney said Wednesday it’s planning to reorganize into three segments, while also cutting hundreds of jobs and slashing costs.
The media and entertainment giant said it might now be made up of three divisions:
- Disney Entertainment, which incorporates most of its streaming and media operations
- An ESPN division that features the TV network and the ESPN+ streaming service
- A Parks, Experiences and Products unit
The move marks probably the most significant motion Bob Iger has taken since returning to the corporate as CEO in November. Disney announced the changes minutes after it posted its most up-to-date quarterly earnings. The announcements also come as Disney engages in a proxy fight with activist investor Nelson Peltz and his firm Trian Management.
“We’re pleased that Disney is listening,” a Trian spokesperson said Wednesday.
On Wednesday, during its quarterly earnings call with investors, Disney also announced it might be cutting $5.5 billion in costs, which will likely be made up of $3 billion from content, excluding sports, and the remaining $2.5 billion from non-content cuts. Disney executives said about $1 billion in cost cutting was already underway since last quarter.
Disney also said it might be eliminating 7,000 jobs from its workforce. That might be about 3% of the roughly 220,000 people it employed as of Oct. 1, in accordance with an SEC filing, with roughly 166,000 within the U.S. and about 54,000 internationally.
Disney’s stock rose about 5% in off-hours trading.
Media firms, reminiscent of Warner Bros. Discovery, have been pulling back on content spending and looking out to make their streaming businesses profitable. Heightened competition has led to slowing subscriber growth, and firms have been looking to seek out recent avenues of revenue growth. Some, like Disney+ and Netflix, have added cheaper, ad-supported options.
“We’ll take a really hard have a look at the associated fee of every part we make across television and film,” Iger said on a call with investors Wednesday.
The reorganization has been underway since Iger returned to the helm of Disney, replacing his hand-picked successor Bob Chapek.
The entertainment group will likely be led by top lieutenants Dana Walden and Alan Bergman, who’re each considered contenders to take over for Iger in lower than two years. ESPN Chairman Jimmy Pitaro will lead the ESPN segment, while Josh D’Amaro, already the pinnacle of Disney’s parks, experiences and products segment, will remain on top of things.
Iger addresses ESPN speculation
The long run of ESPN under Disney’s ownership has been an issue for sometime for investors. Last yr, Third Point, which is led by activist investor Dan Loeb, had urged the corporate to spin out ESPN. Disney and Third Point later reached a deal, after reversing course on its thoughts for the long run of ESPN.
Iger addressed speculation that the corporate may look to spin out ESPN on account of the sports network being siloed into its own unit. He noted that while ESPN has been struggling on account of cord-cutting, the ESPN brand and programming stays healthy and in-demand.
“We’re not engaged in any conversations or considering a by-product of ESPN,” Iger said on Wednesday. He said the move was considered “in my absence,” and was concluded it wasn’t the appropriate move for Disney.
Iger did note that he and Pitaro can be more selective on what it spends on sports rights, noting the upcoming negotiations for NBA rights.
We’re not engaged in any conversations or considering a by-product of ESPN.
Chapek’s removal got here shortly after Disney had reported its fiscal fourth quarter earnings, disappointing on profit and certain key revenue segments. Chapek had also warned that Disney’s strong streaming numbers would taper off in the long run. He had also told employees shortly thereafter that Disney can be cutting costs through hiring freezes, layoffs and other measures.
Shortly after his return, Iger sent a memo to employees announcing the business can be reorganized, particularly the Disney Media and Entertainment unit. The reorganization immediately meant the departure of Kareem Daniel, the pinnacle of the corporate’s previous media and entertainment unit, and right hand to Chapek.
Iger had said he would put more “decision-making back within the hands of our creative teams and rationalize costs” on the time. The goal can be to have a recent structure in place in the approaching months, with elements of DMED remaining, CNBC reported. He added during a town hall that he would not lift the corporate’s hiring freeze as he reassessed Disney’s cost structure.
On Wednesday, Iger again echoed those comments about returning control to the creative minds at the corporate.
“Our company is fueled by storytelling and creativity, and virtually every dollar we earn, every transaction, every interaction with our consumers, emanates from something creative,” Iger said Wednesday. “I even have at all times believed that the most effective technique to spur great creativity is to ensure that the people who find themselves managing the creative processes feel empowered.”
Editor’s note: This text was updated to reflect the proper variety of Disney employees worldwide
Tune in to CNBC at 9 a.m. ET Thursday for an exclusive interview with Disney CEO Bob Iger.
