Walt Disney plans to cut jobs and introduce a hiring freeze as the company seeks to halt red ink on its streaming operations, which have caused billions of dollars in losses over the past three years.
“We’re going to have to make tough and uncomfortable decisions,” Disney CEO Bob Chapek wrote in a memo to employees provided to the Financial Times.
Chapek has created a “cost structure task force” led by two lieutenants, Christine McCarthy, chief financial officer, and Horacio Gutierrez, general counsel. The group will “review every avenue of operations and labor to find savings, and we anticipate some staff reductions as part of that review,” the memo said. Disney hasn’t announced targets for the cuts.
The moves come after Disney reported Tuesday financial results that disappointed Wall Street and sent shares down more than 11 percent. Disney’s streaming services, led by Disney Plus, posted operating losses of $1.5 billion largely due to rising content spending and marketing spend — two areas Chapek’s memo focused on cost-cutting.
He said the company will not “sacrifice quality” and that additional investments “must be efficient and come with tangible benefits for the audience and the company.”
Chapek said this week that streaming losses would start to “shrink” in the current quarter, with Disney Plus expected to post its first profit in 2024. As part of its drive for profitability, the company will increase the price of its streaming services and introduce a new ad-supported tier for Disney Plus next month.
As part of its cost-cutting program, Disney will also limit business travel to “essential travel” and encourage meetings to be held virtually.
Like other Hollywood companies, it’s gearing up for the end of the growth-at-any-cost phase of the streaming wars. At the height of the coronavirus pandemic, Wall Street cheered as Disney, Netflix and Warner Bros splurged on content to attract new streaming subscribers. But after Netflix’s subscriber growth hit a wall earlier this year, investors have called for it to find a path to profitability.
Since then, Netflix has cut jobs, and Warner Bros Discovery is also targeting downsizing, with a number of its departments — including its marketing division and Eureka News Now — preparing for layoffs.
In digital media, the picture is bleaker, with Twitter cutting 3,700 jobs following Elon Musk’s acquisition of the company and Facebook parent Meta cutting 11,000 jobs.
Disney shares rose 5 percent on Friday. The stock is down 40 percent this year.