Disney’s Bob Iger plans to lay off 7,000 employees in a “significant transformation” to cut costs as it eliminates some of his predecessor’s efforts.
On Wednesday, Iger announced his plans to restructure the company, effectively eliminating the Disney Media and Entertainment Distribution group founded under former CEO Bob Chapek.
The new structure will have just three divisions, according to the Hollywood Reporter, Disney Entertainment – which will include film and TV assets as well as Disney+; ESPN – which will include ESPN and ESPN+; and Parks, Experiences and Products – this includes Theme Parks and the Consumer Products team.
As part of this transition, Disney will cut 7,000 jobs — equivalent to just over 3 percent of its global workforce. The cuts are likely to primarily affect the entertainment and ESPN businesses, although the company beat analysts’ expectations for the fourth quarter of 2022.
The change comes as Florida Gov. Ron DeSantis takes control of Disney’s Reedy Creek Improvement District and the company faces a proxy fight with an activist investor trying to gain a seat on the board.
Disney boss Bob Iger plans to lay off around 7,000 employees as part of the company’s restructuring
Announcing the new structure on Wednesday, Iger compared it to changes he made at the media giant in 2005, when he first became CEO, and in 2016, when Disney announced a move to streaming when it expanded its assets through the acquisition of 21st Century Fox strengthened .
“Our new structure aims to give our creative leads back more authority and hold them accountable for how their content performs financially,” he said on a conference call.
“Our previous structure broke that connection and needs to be re-established,” he continued, noting, “Going forward, our creative teams will drive what content we create, how it’s distributed and monetized, and how it’s marketed.”
According to the plans, Alex Bergman and Dana Walden will jointly lead the Disney Entertainment division, while Jimmy Pitaro will continue to lead ESPN and Josh D’Amaro will continue to lead parks and experiences.
And in addition to the planned layoffs, Disney CFO Christine McCarthy said the company is targeting $5.5 billion in cost savings, including $3 billion related to future content savings, with the remaining $2.5 billion -Dollars come from existing marketing, staffing and technology costs.
But the move comes as Disney beats earnings expectations.
The company announced Wednesday that it made $1.28 billion, or 70 cents a share, for the three months ended December 31, versus net income of $1.1 billion, or 60 cents a share, for the year Previous year.
Excluding one-time items, Disney earned 99 cents a share. Analysts on average were expecting adjusted earnings of 78 cents per share, according to FactSet.
Total revenue increased eight percent to $23.51 billion from $21.82 billion a year earlier. Analysts were expecting sales of just $23.44 billion.
The company also said Disney+ ended the quarter with 161.8 million subscribers, down 1 percent from Oct. 1, while Hulu and ESPN+ each saw a 2 percent increase in paid subscribers.
Following the news, Disney shares were up 3 percent in after-hours trading.
A majority of the layoffs are expected to come in the entertainment division, which includes Disney+ as well as ESPN, which includes ESPN+
Disney ended the fourth quarter of 2022 at $1.28 billion, or 70 cents a share
Disney shares are higher after the earnings announcement on Wednesday
The move to cut costs and lay off thousands of employees comes as billionaire investor Nelson Peltz seeks a seat on the company’s board in an ongoing proxy war with Iger.
Last week, Peltz – the founder of Trian Management – sent a letter to Disney shareholders on Thursday urging them to vote for him instead of longtime board member Michael BG Froman.
It was just the latest step Peltz took in his ongoing war with Disney, having previously filed filings with the United States Securities and Exchange Commission to request a seat at the Mickey Mouse table and campaign on social media to start.
In his letter, which was posted on his Restore the Magic website, Trian takes aim at Disney’s board of directors, noting the company’s declining stock price and earnings per share over the past year and the decision to eliminate dividends.
Peltz — who is worth $1.4 billion and currently owns 0.5 percent of Disney through his firm Trian Partners — is trying to woo shareholders, writing that “earnings per share have increased by a staggering 50% since 2019 percent has declined because costs have exploded, even though Disney generated 41 percent more sales.”
At the same time, the share price collapsed by 44 percent in 2022.
“For a company with so many assets – unparalleled customer loyalty and access, valuable intellectual property, renowned brands, an enviable content library and a talented and dedicated workforce – it is disappointing and simply unacceptable that shareholders have suffered so much,” he said.
“We cannot stand idly by,” the letter continues. “And we hope you won’t either.
“If shareholders like us and you remain passive without demanding more accountability and a empowered mentality in boardrooms, why shouldn’t we expect the stock to do anything but fall back to another eight-year low?”
“As owners of this great company, we must act,” it said, before promoting Peltz’s work at other companies including Unilever, Procter & Gamble and Wendy’s.
“Nelson is willing to ask the tough questions at Disney and strive for excellence in strategy, leadership, culture and performance,” the letter continues, claiming, “Disney executives and directors don’t want Nelson in the boardroom.
“Based on our experience, we believe they don’t want to be challenged, answer difficult questions, or engage in heated debates. They prefer the status quo.
“But shareholders need someone in the boardroom who is experienced enough, committed enough and objective enough to insist that Disney realize its full potential,” the letter concludes.
“Current Disney directors are waking up to challenging day jobs: building cars, selling clothes, processing credit card transactions, sequencing genes. All important things.
“But these savvy directors are busy, and we think there’s no way they can possibly focus enough on Disney to make sure 2023 and 2024 won’t be like 2022. If they could, 2022 wouldn’t have been like 2022.”
The letter then goes to the kill – urging shareholders to vote for him and withhold votes for Froman.
“As a seasoned maverick and independent voice, Nelson Peltz will seek to work with the rest of Disney’s board of directors to ensure Disney uses his famous imagination to create a brighter future for Disney shareholders.”
“Together we can restore the magic.”
Billionaire investor Nelson Peltz (pictured in October) last week sent an open letter to Disney shareholders in his ongoing bid to get a seat on the board
Peltz asked shareholders to vote for him in place of longtime board member Mike Froman (pictured in May).
In response to the letter, Disney issued a statement, stating, “Focused on creating sustainable value over the long term, Disney’s Board of Directors continually works to ensure it has the right mix of experience, skills and perspectives appointed to specifically guide Disney as it navigates this dynamic period.
“Disney’s board of directors does not endorse Nelson Peltz (or his son Matthew, who could run as Mr. Peltz’s deputy) as a candidate and believes that the election of either Mr. Peltz or his son would jeopardize Disney’s management strategy in one.” Time of important changes in the media landscape.
“Inexplicably, Trian is seeking to replace Michael Froman, a valued director with a deep knowledge of global trade and international business who the board believes is far better qualified than Mr. Peltz or his son to add value to shareholders. ‘ the executives said in an email to .
‘Neither Mr. Peltz nor his son offer the Disney Board additional skills or experience that could replace Mr. Froman’s decades of experience.’
In addition, the company sent its own letter to shareholders, urging them not to vote for Peltz.
It states: “Your board is committed to delivering sustainable, superior shareholder value. Over the past several years, we have focused on ensuring the board has the right combination of experience, skills and perspective to lead Disney through a time of unprecedented change in the media business.’
The letter said Parker will become CEO after the 2023 stockholders meeting and said, “Your board does not support Mr. Peltz (or his son) as a candidate and believes his election would jeopardize our efforts to lead Disney at all.” shareholders.
“In more than six months working with Mr. Peltz, he has demonstrated, both in interviews and in written materials, that he does not understand Disney’s businesses and lacks the perspective and experience to contribute to the goal of creating shareholder value in a rapidly changing environment Environment to create media ecosystem.’
The letter concludes, “We look forward to providing you with further information on the board and management team’s strategy for creating shareholder value in today’s rapidly changing media ecosystem and the reasons why Mr. Peltz’s election fails to meet this plan will benefit.
“In the meantime, we urge you to simply discard and NOT vote with a blue proxy card sent to you by Trian Group. Please wait to vote until you can do so on a fully informed basis.’