Walt Disney plans to cut jobs and institute a hiring freeze as the company tries to halt the red ink at its streaming operations, which have racked up billions in losses over the past three years.
“We are going to have to make tough and uncomfortable decisions,” Bob Chapek, Disney chief executive, wrote in a memo to staff seen by the Financial Times.
Chapek has launched a “cost structure task force” led by two lieutenants, Christine McCarthy, chief financial officer, and Horacio Gutierrez, general counsel. The group will “look at every avenue of operations and labour to find savings, and we do anticipate some staff reductions as part of this review”, the memo said. Disney did not disclose targets for the cuts.
The moves come after Disney reported financial results that disappointed Wall Street on Tuesday, sending the shares down by more than 11 per cent. Disney’s streaming services, led by Disney Plus, posted operating losses of $1.5bn, largely because of soaring content spending and marketing expenses — two areas that were targeted for cost cuts in Chapek’s memo.
He said the company would not “sacrifice quality”, adding investments had to be “efficient and come with tangible benefits to both audiences and the company”.
Chapek said this week that streaming losses would begin to “narrow” in the current quarter, with Disney Plus expected to turn its first profit in 2024. As part of the push towards profitability, the company will raise the price of its streaming services and introduce a new advertising-supported tier to Disney Plus next month.
As part of its cost-cutting programme, Disney will also limit business travel to “essential trips” and encourage meetings to be conducted virtually.
Like other Hollywood companies, it is adjusting to the end of the growth-at-all-costs phase of the streaming wars. During the height of the coronavirus pandemic, Wall Street cheered as Disney, Netflix and Warner Bros spent heavily on content as a way to add new streaming subscribers. But after Netflix’s subscriber growth hit a wall earlier this year, investors have demanded to see a path to profitability.
Since then, Netflix has made job cuts, and Warner Bros Discovery is also aiming to cut its headcount, with a number of its divisions — including its marketing division and CNN — bracing for lay-offs.
The picture is darker in digital media, with Twitter shedding 3,700 jobs following Elon Musk’s takeover of the company, and Facebook parent Meta cutting 11,000 workers.
Disney shares rose 5 per cent on Friday. The stock is down 40 per cent this year.