Disney (DIS) plans to freeze hiring and cut some jobs as it strives to push the Disney (DIS)+ streaming service to profitability amid economic uncertainty, according to a memo seen by Reuters Friday.
Chief Executive Bob Chapek sent the memo to Disney executives, saying the company was instituting a targeted hiring freeze and planning “some small staff reductions” as it sought to manage costs.
“While some macroeconomic factors are beyond our control, achieving these goals requires all of us to continue to do our part to manage the things we can control — including our costs,” Chapek wrote in the memo.
The move came after Disney missed Wall Street estimates for its quarterly earnings on Tuesday as the entertainment giant racked up more losses from its push into video streaming, which it calls its direct-to-consumer business. (DTC). Shares of the company fell more than 13% on Wednesday after its results.
Disney said the fast-growing service added 12 million subscribers in its fiscal fourth quarter, but posted an operating loss of nearly $1.5 billion. The company said Disney+ will become profitable in fiscal 2024, with losses peaking in the quarter.
The streaming service is known for its original series, including “Star Wars” entries “The Mandalorian”, “Andor” and “Obi-Wan Kenobi”, Marvel entries “WandaVision”, “Hawkeye” and “She-Hulk: Attorney at Law”. and content hubs for Disney, Pixar, Marvel and “Star Wars” movies.
Wall Street analysts have expressed concern over Disney’s rising streaming costs. MoffettNathanson analyst Michael Nathanson observed in a note this week that “the company must prove that its pivot to DTC will be worth the investment price currently being paid.”
Corporate America is making deep cuts to its employee base to prepare for an economic downturn. Meta said this week it would cut more than 11,000 jobs, or 13% of its workforce, to control costs.
One of Disney’s peer studios, Warner Bros. Discovery, has undertaken extensive cost-cutting efforts, including layoffs, as the recently merged company restructures its content operations.
Chapek said Disney created a task force, including Chief Financial Officer Christine McCarthy and General Counsel Horacio Gutierrez, to help him make “important decisions.”
The company has already started looking at content and marketing spend, but Chapek said the cuts won’t sacrifice quality. Hiring will be limited to a small subset of critical positions, and some staff reductions are expected as the company seeks to make itself more profitable, Chapek wrote.
Chapek said business travel would be limited and trips would either require prior approval or be done virtually as much as possible.
“Our transformation is designed to ensure that we not only thrive today, but well into the future,” Chapek wrote.
The memo was first reported by CNBC.