Walt Disney to axe 7,000 jobs in $5.5bn cost-cutting plan

Walt Disney chief executive Bob Iger announced plans to cut 7,000 jobs, about 3 per cent of the company’s workforce, as part of a broad restructuring that he said would save $5.5bn over the next few years, revive its creative output and make its streaming business profitable.

Investors have been waiting to hear Iger’s strategic plan to reinvigorate the company since his surprise reappointment in November. In a statement, he said Disney was “embarking on a significant transformation” that would lead to “sustained growth and profitability” in streaming.

Disney shares jumped as much as 9 per cent in after-hours trading following the announcement.

In a call with Wall Street analysts, Iger took aim at some criticisms that have been levelled at Disney in recent weeks by activist investor Nelson Peltz, who is seeking a seat on the company’s board.

Peltz has called for Disney to reinstate its dividend, which was halted during the coronavirus pandemic. Iger appeared to blunt that argument, telling investors on Wednesday he will ask the board to consider restarting the dividend at a modest level by the end of this year and gradually increase it.

Disney has asked shareholders to reject Peltz’s push when its shareholders hold their annual meeting on April 3.

Iger’s predecessor, Bob Chapek, was dismissed by the board late last year after Disney’s streaming business posted a $1.5bn quarterly loss. The company pledged to reduce the loss by $200mn in the most recent quarter, and exceeded that target by cutting losses by about $400mn to $1.1bn, according to an earnings report on Wednesday.

Christine McCarthy, the company’s chief financial officer, said losses would continue to improve in the current quarter.

After a breakneck push for streaming subscribers led to heavy spending by Disney and its rivals, Iger said it was time to “take a hard look at cost of everything we make across television and film” — particularly when it came to programming outside of franchises such as Marvel and Star Wars.

“We’re going to look at the volume of what we make and be fairly aggressive at better curation when it comes to general entertainment,” he said.

Many on Wall Street have asked whether Disney should sell or spin off its ESPN sports television unit, which has been hurt by cord-cutting, but Iger insisted it has an important place in the company. Under the group’s new structure, ESPN will be one of three units, alongside Disney Entertainment and theme parks.

Iger said giving ESPN its own unit was not done with the intention of eventually spinning it off. That option was explored under Chapek, who decided it was “not something the company wanted to do”, Iger added.

Disney’s revenue rose 8 per cent to $23.5bn in the quarter and net income increased 11 per cent to $1.3bn. Earnings of 99 cents per share were well ahead of Wall Street expectations of 78 cents, but down from $1.06 a year earlier.

Disney Plus, its flagship streaming service, shed about 2.4mn subscribers in the quarter, due largely to its loss of Indian Premier League cricket. Iger, like his peers at traditional media groups, is looking to emphasise profitability as the main streaming metric instead of subscriber growth.

Its overall number of streaming subscribers — which includes sites ESPN Plus and Hulu, along with Disney Plus — was slightly down from the previous quarter at 235mn. Still, Iger said he thinks streaming will eventually be a strong business.

“The streaming business, which I believe is the future, has not been delivering the growth the kind of bottom-line results that linear TV delivered over a few decades. We’re in an interesting transition period, but one I think is inevitably heading towards streaming.”