Disney will begin layoffs, implement a targeted hiring freeze and limit corporate travel as part of a sweeping cost-cutting measure announced to management Friday.
In a note obtained by Variety, which was sent to top executives on Friday afternoon, Disney CEO Bob Chapek wrote: “I am fully aware that this will be a difficult process for many of you and your teams. We are going to have to make decisions difficult and uncomfortable. But that’s exactly what leadership demands, and I thank you in advance for stepping up at this important time. Our company has faced many challenges in its 100-year history, and I am convinced that we will achieve our goals and create a more agile company that is better adapted to the environment of tomorrow.”
Chapek says Disney will also conduct a “rigorous review of the company’s content and marketing spend,” with all of those efforts being overseen by a newly formed “cost structure task force” comprised of Chief Executive Chapek. Financier Christina McCarthy and General Counsel Horacio Gutierrez.
The layoffs and cost-cutting news hit four days after Disney reported rough quarterly results, which sent the company’s stock tumbling to its lowest price in more than two years.
While the company has seen subscriptions for Disney+, which launched its ad-supported tier on December 21. On October 8, greatly exceeding Wall Street expectations, Disney announced an operating loss for its streaming segment of $1.47 billion for the quarter ended October 1. 1, 2022, about 800 million dollars more than the previous year period. Revenue rose 8% to $4.9 billion, which the company attributed to higher losses at Disney+ and ESPN+ and weaker results at Hulu. Meanwhile, revenue from Disney’s linear television networks (pay TV and broadcast) fell 5% in the quarter.
Chapek wrote on Friday that these “cost management efforts,” which he and McCarthy alluded to during the earnings call and which are “taking place against a backdrop of economic uncertainty” affecting all of Hollywood, “will help us to achieve the important goal of achieving profitability for Disney+ in fiscal year 2024 and making us a more efficient and agile company overall.
Disney representatives did not immediately respond to Varietyrequest for comment.
See Chapek’s memo in full below.
As we begin fiscal 2023, I want to communicate directly with you about the cost management efforts that Christine McCarthy and I mentioned on this week’s earnings call. These efforts will help us both achieve the important goal of achieving profitability for Disney+ in fiscal year 2024 and make us a more efficient and agile company overall. This work is taking place against a backdrop of economic uncertainty that all businesses and our industry face.
Although some macroeconomic factors are beyond our control, to achieve these goals we must all continue to do our part to manage the things we can control, including our costs. You will all have a vital role to play in this effort, and as senior leaders, I know you will succeed.
To be clear, I am confident in our ability to achieve the goals we have set for ourselves, and in this management team to get us there.
To guide us on this journey, I have established a cost structure task force comprised of senior executives: our Chief Financial Officer, Christine McCarthy and our General Counsel, Horacio Gutierrez. With me, this team will make the important decisions necessary to achieve our goals.
We are not starting this work from scratch and have already defined several next steps, which I wanted you to hear from me directly.
First, we undertook a rigorous review of the company’s content and marketing spend in conjunction with our content managers and their teams. While we don’t sacrifice the quality or strength of our unrivaled synergy machine, we must ensure that our investments are both effective and deliver tangible benefits to both the public and the company.
Second, we are limiting headcount additions through a targeted hiring freeze. Hiring for the small subset of the most critical and business-focused positions will continue, but all other roles are on hold. Your segment managers 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 agile. The task force will lead this work in partnership with segment teams to achieve both cost savings and organizational improvements. During this evaluation process, we will review all operational and workforce opportunities to find savings, and we anticipate some staff reductions as part of this review. In the immediate future, business travel should now be limited to essential travel only. In-person or off-site work sessions requiring travel will require prior approval and review from a member of your leadership team (i.e., a direct report from the Segment President or General Manager of the company). Whenever possible, these meetings should take place virtually. Attendance at conferences and other external events will also be restricted and will require the approval of a member of your management team.
Our transformation is designed to ensure we thrive not just today, but well into the future – and you’ll hear more from our task force in the weeks and months ahead.
I am fully aware that this will be a difficult process for many of you and your teams. We are going to have to make difficult and uncomfortable decisions. But that is exactly what leadership requires, and I thank you in advance for stepping up at this important time. Our company has overcome many challenges over its 100-year history, and I am confident that we will achieve our goals and create a more agile company that is better suited to the environment of tomorrow.
Thanks again for your leadership.