(EXTERNAL) Plans to freeze hiring and cut some jobs while trying to move Disney
(EXTERNAL)+ Streaming service to profitability amid economic uncertainty, according to a note seen by Reuters on Friday.
Chief Executive Bob Chapek sent a memo to Disney’s leaders, saying that the company is on a targeted freeze on hiring and expects “some small staff reductions” as it appears to manage costs.
“While some macroeconomic factors are beyond our control, achieving these goals requires that we all continue to do our part to manage the things we can control, particularly our costs,” Chapek said in the note.
The move comes after Disney missed Wall Street’s quarterly earnings estimates on Tuesday, as the entertainment giant suffered more losses from its transition to streaming video, which it calls its direct-to-consumer (DTC) business. Shares of the company fell more than 13% on Wednesday after the results.
Disney said fast-growing service added 12 million subscribers in its fiscal fourth quarter, but reported operating losses of approximately $1.5 billion. The company said Disney+ will be profitable in fiscal 2024 and losses will peak in the quarter.
The streaming service is known for original series such as “Star Wars” “The Mandalorian”, “Andor” and “Obi-Wan Kenobi”, “WandaVision”, “Hawkeye” and “She-Hulk: Lawyer Attorney”. ” and content hubs for Disney, Pixar, Marvel and “Star Wars” movies.
Wall Street analysts have expressed concern over Disney’s rising streaming costs. MoffettNathanson analyst Michael Nathanson observed in a note this week that “the company must prove that their return to DTC is worth the investment price currently being paid.”
Corporate America is making deep cuts to its employee base to prepare for an economic downturn. Meta said this week it will cut more than 11,000 jobs, or 13% of its workforce, to rein in costs.
One of Disney’s studio colleagues, Warner Bros. Discovery, has gone through dramatic cost-cutting efforts, including layoffs, as the recently merged company restructured its content operations.
Chapek said he created a task force to help Disney make “critical big picture decisions”, including Christine McCarthy, Chief Financial Officer, and General Counsel Horacio Gutierrez.
The company has already started looking at content and marketing spend, but Chapek said the cuts won’t compromise on quality. Chapek wrote that hiring will be limited to a small subset of critical positions, and some staff reductions are expected as the company tries to make itself more cost-effective.
Chapek said business travel will be limited and travel will require prior approval or be conducted virtually whenever possible.
“Our transformation is designed to enable us to evolve not just today, but in the future,” Chapek said.
The memo was first reported by CNBC.