Entertainment giant Disney announced that it is letting go of 7,000 employees on Wednesday, as CEO Bob Iger outlined a plan to restructure the company he returned to lead last year.
These job cuts come after similar moves by US tech companies who are reducing their workforce following a hiring boom that began during the COVID-19 pandemic. Iger stated during a call to analysts following the release of Disney’s latest financial results that this decision was not made lightly.
As per the company’s 2021 annual report, Disney employs a total of 190,000 people worldwide, with 80% of them being full-time employees. Iger mentioned that the company will be thoroughly evaluating costs associated with their television and film production. He explained that with the increasing competitiveness in the industry, production costs have become more expensive.
Disney’s streaming service, Disney+, experienced a decrease in subscribers for the first time last quarter, as customers reduced their spending. On December 31st, the number of subscribers fell by 1% to 161.8 million, compared to three months prior. Although this decline was expected by analysts, the stock price of Disney still rose by more than 5% in post-session trading.
Analyst Paul Verna from Insider Intelligence noted that there are still several challenges that Disney faces, including the decline of its traditional TV business, the unprofitability of its streaming service, and pressure from an activist investor to control costs and plan for succession after Iger. Iger stated that the company will also be evaluating the amount of content produced and the pricing of their streaming services.
He reflected on the early days of Disney+ as a competitor to Netflix and Amazon Prime, admitting that they may have become too aggressive in promoting the service.
Disney remains committed to its popular franchises such as the Marvel film “Black Panther: Wakanda Forever” and has plans to release sequels to the successful films “Frozen” and “Zootopia.” Whether the layoffs and restructuring will prove effective remains to be seen, as Verna has warned.
Disney’s entertainment empire, which encompasses theme parks, film studios, and cruise ships, generated $23.5 billion in revenue for the past quarter, exceeding expectations of analysts. Iger, who stepped down as CEO in 2020 after nearly two decades of leading the company, was brought back after the board of directors dismissed his replacement Bob Chapek for his inability to control costs. Chapek was also criticized for centralizing power among a small group of executives with little Hollywood experience.
Iger’s new role as CEO faces several challenges, including pressure from activist investor Nelson Petz to make significant cost cuts after claiming that Disney overpaid for the acquisition of the 20th Century Fox movie studio.
Additionally, Disney is also in a disagreement with Florida governor Ron DeSantis who is seeking to regain control of the area surrounding Walt Disney World, which has been under the control of the entertainment company. DeSantis, a conservative who is rumored to be considering a run for US presidency, is displeased with Disney for speaking out against a state law that prohibits lessons on sexual orientation in schools.
Meanwhile, Disney faces more challenges as its rival Netflix has recently recovered from its own difficulties and reported a significant increase in new subscribers at the end of last year. To reduce costs, Netflix has launched a campaign to stop password sharing among its subscribers worldwide and has already begun cracking down on password sharing in Canada, New Zealand, Portugal, and Spain.