Disney’s leadership has announced a number of cost-saving moves, including a hiring freeze and potential layoffs.
A memo sent by CEO Bob Chapek reads: “I am fully aware this will be a difficult process for many of you and your teams. We are going to have to make tough and uncomfortable decisions. But that is just what leadership requires, and I thank you in advance for stepping up during this important time.
“Our company has weathered many challenges during our 100-year history, and I have no doubt we will achieve our goals and create a more nimble company better suited to the environment of tomorrow.”
Like its media peers, the approximately 190,000-employee strong Disney has felt the pain in 2022, with its stock down more than 40% and inflation, foreign currency fluctuation and the bruising streaming competition applying pressure to its operations.
Earlier this week, the company reported quarterly earnings below Wall Street earnings expectations and also issued strikingly soft guidance for fiscal 2023 revenue and profit, further unnerving investors.
While the company saw subscriptions for Disney+ significantly surpass Wall Street’s expectations, Disney reported an operating loss for its streaming segment of $1.47 billion for the quarter ended Oct. 1, 2022, about $800 million more than the year-earlier period.
Revenue increased 8% to $4.9 billion, which the company attributed to higher losses at Disney+ and ESPN+ and lower results at Hulu. Meanwhile, revenue for Disney’s linear television networks (pay TV and broadcast) dropped 5% in the quarter.
Warner Bros Discovery, which is battling to reduce debt from the $43 billion merger of WarnerMedia and Discovery that closed last April, has also initiated several rounds of cost cuts. NBCUniversal has also shed jobs as it has reoriented its structure around streaming.
See Chapek’s memo in full below.
As we begin fiscal 2023, I want to communicate with you directly about the cost management efforts Christine McCarthy and I referenced on this week’s earnings call. These efforts will help us to both achieve the important goal of reaching profitability for Disney+ in fiscal 2024 and make us a more efficient and nimble company overall. This work is occurring against a backdrop of economic uncertainty that all companies and our industry are contending with.
While certain macroeconomic factors are out of our control, meeting these goals requires all of us to continue doing our part to manage the things we can control—most notably, our costs. You all will have critical roles to play in this effort, and as senior leaders, I know you will get it done.
To be clear, I am confident in our ability to reach the targets we have set, and in this management team to get us there.
To help guide us on this journey, I have established a cost structure taskforce of executive officers: our CFO, Christine McCarthy and General Counsel, Horacio Gutierrez. Along with me, this team will make the critical big picture decisions necessary to achieve our objectives.
We are not starting this work from scratch and have already set several next steps—which I wanted you to hear about directly from me.
First, we have undertaken a rigorous review of the company’s content and marketing spending working with our content leaders and their teams. While we will not sacrifice quality or the strength of our unrivaled synergy machine, we must ensure our investments are both efficient and come with tangible benefits to both audiences and the company.
Second, we are limiting headcount additions through a targeted hiring freeze. Hiring for the small subset of the most critical, business-driving positions will continue, but all other roles are on hold. Your segment leaders and HR teams have more specific details on how this will apply to your teams.
Third, we are reviewing our SG&A costs and have determined that there is room for improved efficiency—as well as an opportunity to transform the organization to be more nimble. The taskforce will drive this work in partnership with segment teams to achieve both savings and organizational enhancements. As we work through this evaluation process, we will look at every avenue of operations and labor to find savings, and we do anticipate some staff reductions as part of this review. In the immediate term, business travel should now be limited to essential trips only. In-person work sessions or offsites requiring travel will need advance approval and review from a member of your executive team (i.e., direct report of the segment chairman or corporate executive officer). As much as possible, these meetings should be conducted virtually. Attendance at conferences and other external events will also be restricted and require approvals from a member of your executive team.
Our transformation is designed to ensure we thrive not just today, but well into the future—and you will hear more from our taskforce in the weeks and months ahead.
I am fully aware this will be a difficult process for many of you and your teams. We are going to have to make tough and uncomfortable decisions. But that is just what leadership requires, and I thank you in advance for stepping up during this important time. Our company has weathered many challenges during our 100-year history, and I have no doubt we will achieve our goals and create a more nimble company better suited to the environment of tomorrow.
Thank you again for your leadership.