Disney to cut 7,000 jobs as Bob Iger seeks $5.5 billion in savings

Bloomberg

Walt Disney Co. shares rose as much as 7% in early trading after Chief Executive Officer Bob Iger announced plans for a dramatic restructuring of the world’s largest entertainment company, including 7,000 job cuts and $5.5 billion in cost savings.
The reductions include plans to cut $3 billion from its budget for movies and TV shows and the rest in non-content related areas. About $1 billion of the savings are already underway, Iger said Wednesday on a conference call with investors.
As part of the change, Disney’s CEO also announced that the company will be reorganized into three divisions: an entertainment unit that includes its main TV, film and streaming businesses; the ESPN sports networks; and the theme-park unit, which includes cruise ships and consumer products.
Shares of Disney jumped in trading before New York exchanges opened on Thursday. The stock had declined about 22% in the 12 months through Wednesday, though the shares had been regaining ground this year following Iger’s appointment at the end of 2022.
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The reorganization is intended to improve profit margins, Iger said, and represents his third major transformation of the business following efforts to beef up its film franchises through acquisitions and the development of its online business.
Iger, who returned to the lead the company in November after his successor Bob Chapek was fired, has been under pressure to improve results. Activist investor Nelson Peltz is seeking a board seat at the April 3 annual meeting, arguing in part that Disney shares have underperformed and the company needs better cost controls.
On a conference call with analysts, Disney said it has no plans to spin off ESPN — a possibility that Iger said was studied but rejected in his absence. In entertainment, Disney will look at shrinking the cost of films and TV shows, which Iger said had become “extraordinarily expensive” in recent years due to competition.
Eventually, Iger said, Disney will offer the ESPN network as an a la carte option online, but there are no imminent plans to do.
He also said Disney’s zeal to grow streaming subscriptions at a time when Wall Street rewarded user growth more than profitability had led to unsustainable price promotions that the company won’t pursue as often. In recent months, investors have focused on more on the potential profitability of the media industry’s staggering investments in online film and TV shows.
“We’re going to continue to go after subs but we’re going to be more judicious about how we do that,” Iger said.
Outsized losses in streaming contributed to the ouster of Chapek late last year and the return of Iger, who led the company from 2005 to 2020. The Burbank, California-based entertainment giant is seeking to achieve profitability in streaming next year and fend off Peltz, who holds a stake worth about $1 billion. Iger indirectly addressed some of Peltz’s concerns: In addition to reducing expenses, he said the board would consider restoring the company’s dividend later this year, something the activist investor had also flagged.
“Iger is the right person to do this, and Peltz is barking up the wrong tree,” Ross Gerber, CEO of the asset management firm Gerber Kawasaki, said in an interview with Bloomberg TV.