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Disney announces hiring freeze, ‘cost structure taskforce’ after earnings miss

Disney is implementing a “targeted” hiring freeze and creating a “cost structure taskforce” as it looks to reduce spending after missing Wall Street expectation in its most recent earnings report.

Bob Chapek

In a memo sent to senior leaders on Friday, CEO Bob Chapek said he will lead the taskforce alongside chief financial officer Christine McCarthy and general counsel Horacio Gutierrez as they make the “critical big picture decisions necessary to achieve our objectives.”

Several of the steps are already underway, including a “rigorous review of the company’s content and marketing spending,” said Chapek.

“While we will not sacrifice quality or the strength of our unrivalled synergy machine, we must ensure our investments are both efficient and come with tangible benefits to both audiences and the company.”

The hiring freeze will apply to all departments except a “small subset of the most critical, business-driving positions,” he added.

The measures are intended to ensure Disney’s SVoD platform Disney+ reaches profitability by the end of fiscal 2024 and becomes more “efficient and nimble” overall. Chapek said he is “confident” its targets can be met.

The memo came two days after the company reported that Disney+ had added an impressive 12.1 million subscribers in the fourth quarter to reach 164.2 million overall. However, its direct-to-consumer losses widened to US$1.47bn in the fourth quarter, up from US$1.1bn in the third quarter. Across the whole business, quarterly revenue was US$20.1bn, less than the US$21.2bn expected by Wall Street analysts.

The earnings miss, coupled with growing doubt over whether Disney+ can be profitable within two years and a rough outlook for its linear networks business, sent the share price down to a 52-week low. As of Friday, Disney shares were trading at US$95 per share, down from US$156 at the turn of the year.

While Chapek did not explicitly say that layoffs would be forthcoming, the memo suggests they are likely.

“I am fully aware this will be a difficult process for many of you and your teams. We are going to have to make tough and uncomfortable decisions. But that is just what leadership requires, and I thank you in advance for stepping up during this important time,” he said.

Of course, Disney is not alone in enduring a tough year on the stock market. All of its streaming competitors are in the same boat and have seen billions wiped off their valuations. Since the turn of the year, Netflix stock is down 51%, Warner Bros Discovery (WBD) 54% and Paramount Global 42%.

WBD, which officially formed in April through the combination of Discovery and WarnerMedia, is enacting sweeping cost reductions and layoffs, while Paramount Global execs hinted that headcount reductions might be forthcoming during its third-quarter earnings call. Earlier in the year, Netflix made at least 450 layoffs after posting its first subscriber losses in more than a decade.

Chapek concluded by saying he believes the cost-cutting measures will set up Disney to compete more effectively in today’s turbulent market.

“Our company has weathered many challenges during our 100-year history, and I have no doubt we will achieve our goals and create a more nimble company better suited to the environment of tomorrow.”

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