Disney unveils 7000 job cuts as streaming business racks up more losses

Bob Iger

Walt Disney’s financial results for Q1, 2023 have come in below analyst expectations, with the cost of the company’s ambitious pivot to streaming still weighing heavily on the company’s performance. In response, Disney CEO Bob Iger has announced a wave of 7000 job cuts, as it attempts to deliver US$5.5 billion in cost savings.

During an investor call after the results were released, Iger said the company’s streaming platform Disney+ is in “a global arms race for subscribers”. With the platform losing around $1bn in Q1, 2023, he said: “The streaming business, which I believe is the future and has been growing, is not delivering the kind of profitability or bottom-line results that the linear business delivered for us over all over a few decades.”

Nevertheless, Iger maintained guidance that Disney+ will be profitable by 2024.

For Q1, 2023, the overall company’s revenues grew 8% to $23.5bn, while net income was up 11% to $1.28bn. The company’s direct-to-consumer services saw a 13% rise in revenues to $5.3bn while the traditional linear networks business slipped 5% to $7.3bn. Content sales/licensing were up by just 1% to $2.46bn.

Drilling deeper into these figures, the company’s international channels fared much worse than domestic channels, posting a 21% decline in revenues for Q1, 2023 to $1.2bn. Disney said the decrease was due to “lower advertising revenue, an unfavourable foreign exchange impact and a decrease in affiliate revenue”. Lower average viewership and rates, as well as channel closures, impacted the business.

As referenced above, Disney’s DTC business lost around $1bn in the quarter, reflecting higher programming and production costs. While the company added around 1.4 million to its Disney+ service, it saw revenues fall across both its domestic and international businesses. This was the result of lower ARPU (average revenue per user). One bright spot was ESPN+, which saw a 14% increase due to price increases. One likely outcome of the latest set of results is that Disney will probably aim to reduce the level of content it invests in while seeking to push up subscriber prices.

In addition to the job cuts, Iger said Disney is reorganising into three segments: an entertainment unit that oversees film, TV and streaming; a sports-focused ESPN unit; and a unit that manages Disney parks, experiences and products. The goal is to make the business more efficient, and reduce costs, according to the company.

Iger’s assessment of the Q1, 2023 results was as follows: “After a solid first quarter, we are embarking on a significant transformation, one that will maximise the potential of our creative teams and our brands and franchises. We believe the work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, position us to weather future disruption and economic challenges, and deliver value for shareholders.”

In one bright spot for hardcore Disney fans, Iger announced plans for sequels of popular movie franchises including Toy Story, Frozen and Zootopia.