Disney to cut 7,000 jobs as CEO Bob Iger seeks "transformation"
The Walt Disney Co. said Wednesday it will cut about 7,000 jobs as part of a "significant transformation" announced by CEO Bob Iger.
The job cuts amount to about 3% of the media and entertainment's global workforce and were announced after Disney reported quarterly results that topped Wall Street's forecasts. The layoffs are part of a broader effort by Disney to lower costs by $5.5 billion.
Iger, who returned as CEO in November following a challenging two-year tenure by his handpicked successor, Bob Chapek, is under pressure to revive the company's financial fortunes and its stock price, which has tumbled 24% in the last year. Disney is struggling with costs for luring new subscribers to its streaming service, Disney+, amid heated competition from Netflix, HBO and others.
"In our zeal to go after subscribers, we got too aggressive in our promotions," Iger said on a conference call to discuss the company's first-quarter results, which were released on Wednesday.
Iger said the company wants to "lean more into our core franchises and our brands" while also reducing costs "on everything we make."
Disney faces pressure from Nelson Peltz, a billionaire investor who is seeking to join its board of directors as part of a proxy fight against the company. Disney has urged shareholders to vote against Peltz, CEO of Trian Partners, according to Reuters. The proxy vote is set for April 3.
Shares of Disney jumped 5.6% in after-hours trading.
"The company unveiled a new structure, with the big difference being that ESPN is now going to be operated as separate entity (although Iger says a spinoff of ESPN isn't being planned)," Wall Street analyst Adam Crisafulli of Vital Knowledge said in a research note.
As of Oct. 1, Disney employed 220,000 people, of which about 166,000 worked in the U.S. and 54,000 internationally.
In its latest results, solid growth at Disney's theme parks helped offset tepid performance in its video streaming and movie business.
Disney said Wednesday that it earned $1.28 million, or 70 cents per share, in the three months through Dec. 31. That compares with net income of $1.1 billion, or 60 cents per share, a year earlier. Excluding one-time items, Disney earned 99 cents per share. Analysts, on average, were expecting adjusted earnings of 78 cents per share, according to FactSet.
Revenue grew 8% to $23.51 billion from $21.82 billion a year earlier. Analysts were expecting revenue of $23.44 billion.
The company said Disney+ ended the quarter with 161.8 million subscribers, down 1% from since Oct. 1. Hulu and ESPN+ each posted a 2% increase in paid subscribers during the quarter.
"Since my return, I have drilled down into every facet of the streaming business to determine how to achieve both profitability and growth. And so with that goal in mind, we will focus even more on our core brands and franchises, which have consistently delivered higher returns," Iger said in a call to discuss Disney's latest earnings. "We will aggressively curate our general entertainment content. We will reassess all markets we have launched in and also determine the right balance between global and local content. We'll adjust our pricing strategy, including a full examination of our promotional strategies."
Disney+ has grown fast since launching in 2019, even briefly topping Netflix last year in a count of subscribers, but like other streaming services it faces the high cost of producing content.