KEY POINTS
- Walt Disney is considering thousands of job cuts as part of a broader cost-reduction exercise.
- Some managers have reportedly been asked to identify ways to achieve 20 per cent annual cost savings.
- The reductions could come from job eliminations and cuts to other operating expenses.
- CEO Josh D’Amaro plans to reinvest part of the savings in film and television programming, technology, theme parks and cruise businesses.
- Disney had 231,000 employees worldwide at the end of its last fiscal year.
MAIN STORY
Bloomberg has reported that Walt Disney Co. is considering thousands of job cuts as the entertainment company pushes managers to identify ways to reduce annual operating costs by 20 per cent, according to people familiar with the discussions.
According to the bloomberg report, the savings could come from eliminating jobs and reducing other expenses, the people said, asking not to be identified because the discussions are private.
The potential cuts are expected to affect different parts of Disney’s operations, including its theme parks, television networks and film studio, although some divisions could face greater reductions than others.
The report reveals that Chief Executive Officer Josh D’Amaro reportedly plans to reinvest part of the savings in film and television programming, technology, theme parks and the company’s cruise ship business.
The cost-reduction exercise comes as Disney seeks to deliver double-digit growth in adjusted earnings per share in the current fiscal year.
Disney has already undertaken several rounds of cost reductions in recent years, cutting billions of dollars in expenses and eliminating thousands of positions across its divisions.
Previous reductions affected ABC, Pixar, ESPN, the film studio and the experiences unit. The company had a global workforce of 231,000 employees at the end of its last fiscal year.
The latest reported plans follow earlier restructuring activity within the entertainment business. The Wall Street Journal reported on October 1 that Disney was planning changes to its television division, alongside job cuts in its legal and global affairs unit.
Other major entertainment companies, including Netflix, Sony Pictures Entertainment, Paramount and Warner Bros., have also reduced their workforces as the industry adjusts to declining traditional television revenue and slower streaming subscriber growth.
The companies are also competing for audiences who increasingly spend time on social media, online video platforms and streaming services operated by technology companies such as Amazon and Apple.
THE ISSUES
Disney’s reported 20 per cent cost-saving target reflects the pressure on traditional entertainment businesses to control expenses while competing for audiences across multiple platforms.
Television networks face declining revenue as viewing habits change, while streaming companies must balance subscriber growth with the cost of producing and distributing content.
For Disney, the challenge is to reduce operating costs without weakening the creative and technology investments needed to attract viewers and visitors to its entertainment businesses.
The proposed approach also highlights the changing nature of corporate restructuring. Rather than directing all savings towards improving short-term profitability, D’Amaro reportedly intends to channel part of the money back into areas considered important to the company’s future growth.
However, the scale and distribution of any job losses remain unclear, as Disney has not confirmed the reported plans.
WHAT’S BEING SAID
“There is a need to constantly evaluate how you’re structured and how big is the organization. Technology set their sights on our business and we must survive and thrive and grow, and that’s what we’re going to do.” – Dana Walden, President, Disney.
WHAT’S NEXT
Disney’s managers are expected to identify potential savings across their respective operations. The reported exercise could result in thousands of job eliminations, although the company has not confirmed the number of positions that may be affected.
The extent of the restructuring and how much of the savings will be redirected into programming, technology, theme parks and cruise operations remain to be seen.
BOTTOM LINE
Disney is weighing another major cost-reduction exercise as the entertainment industry adjusts to changing viewing habits and pressure on traditional television revenue. The company is seeking to lower expenses while directing part of the savings towards businesses and investments it considers important for future growth.
Source: Bloomberg
