Bob Iger during a forum organized by Bloomberg in September 2019.Mark Lennihan (AP)
Turbulent times in the happiest place on earth. Disney this Wednesday reported that it will cut 3.2% of its workforce, about 7,000 employees. The entertainment giant told shareholders this afternoon that the move is part of a cost-cutting strategy and is targeting savings of around $5,500 million. The company confirms it has spun the wheel to part with Bob Chapek’s management and that leadership is back in the hands of Bob Iger, who surprisingly came out of retirement to return to the role in November.
Iger shared the news of the cuts with his staff. This was minutes after the end of the call with investors, which reported that the benefits of completing 2022 were up 8% sequentially. “We need to ensure that the structure of the company and the size of our workforce match our current needs and circumstances. Our success in the future depends on the decisions we make today,” Iger wrote. As of last October, the company employed around 220,000 people worldwide.
One word kept flying over the call Disney leadership had with investors: restructuring. Iger assured that the company is undertaking a “significant transformation” that breaks with the previous CEO’s vision. A portion of the savings the company is targeting will come from the area of content published on Disney+, whose growth commitment has caused an outflow of $8,000 million. The executive has announced that it will conduct “aggressive curation” of series and films in production that have general entertainment and international content. “Products have become very expensive in such a competitive world… We will also be reviewing the volume of our actions,” said Iger, who calculates that he can save about $3,000 million by doing away with audiovisual content.
Last quarter, Disney, led by Chapek, presented disappointing numbers that caused the titles’ price to fall 12%. The stock price has been left at around 40% of its value over the past year. Chapek then asked for patience, assuring that Disney+ would be profitable by 2024. Shares traded at $11 this Wednesday, a minimal change from the previous day. It remains to be seen how the market will react to the announcement of the cuts.
Iger was responsible for leading the entertainment giant on the path of exploiting content based on the group’s intellectual property and produced by studios Marvel, Pixar, Fox and Lucasfilm, acquisitions of which he completed. With his return to the company, the manager wants to reduce the offer and “focus on the core brands and franchises”. The company also intends to reduce an additional $2.5 billion in operating expenses.
Iger’s new vision includes changing the growth strategy Chapek chose to take to grow Disney+. This amid the so-called streaming war, the dispute between entertainment giants to expand their subscriptions on the basis of strengthening their catalogs. “I think the very aggressive efforts we’ve been making to get new subscribers globally were too aggressive and maybe not that necessary,” Iger admitted on the call. The CEO said the price hike the streaming service had over the past year hasn’t had a major impact and that subscriptions are down just 1%.
Bob Iger has asked his employees for “patience” and “trust” as he conducts the company’s reorganization. He asked employees to remember the two changes he made during his previous stint as CEO, which began in 2005. In the first, he took over as the creative spearhead of the company with the purchase of the studios that have served the company. The second transformation took place in 2016, when the foundation for the leap into the digital world was laid. His entry came three years later, in 2019, when the platform was launched, which now has 161 million subscribers.
It’s not clear if Iger has the time to make the desired changes. Especially since there are already activist investors who have started to put pressure on the leadership. The most important is Nelson Peltz of the investment fund Trian. Last month he launched a campaign trying to persuade shareholders to get on the board. His argument is that the company needs to consider a future time when Iger is no longer at the helm of Disney. The 71-year-old CEO will only be in office for two more years. In November it was said that his successor would be prepared during this time.
One of the biggest claims the market and investors have on Iger today is the future of ESPN, Disney’s sports channel. Rumors have been circulating for months that the group is considering divesting one of the most valuable brands in its portfolio. Iger explained this afternoon that it is not among his plans to sell it, but that he does not rule out making more profound changes to the chain to adapt it to the world of streaming, at a time when linear television is adapting to a wall bumps. On another occasion to distance himself from Chapek, Iger claimed that the rumors of the transaction belonged to previous management, but that the sale under his leadership would result in a negative operation for the group.
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