Disney warns staff they’re on the brink of job cuts as they plan to freeze hiring

On Nov 12, 2022

Now DISNEY warns staff they’re on the brink of job cuts as the entertainment giant plans to freeze hiring – as shares fell double digits and their streaming services lost $1.5B last quarter

Disney looks set to become the next major corporation to freeze hiring and cut job after a second straight quarter losing over $1billion
The House of Mouse reported over 235 million streaming subscribers on all platforms, as Disney+ beat Wall Street expectations by adding 12.1 million
Despite the gains, the company continues to lose in the streaming market, nearly doubling year-over-year to $1.47 billion
Chapek addressed the memo to Disney’s division leaders, saying the company is instituting a targeted hiring freeze and anticipates ‘some small staff reductions’
He wrote: ‘While certain macroeconomic factors are out of our control, meeting these goals requires all of us to continue doing our part’

By Reuters and Joseph Michalitsianos and Stephen M. Lepore For Dailymail.Com

Published: 22:30, 11 November 2022 | Updated: 03:39, 12 November 2022

Disney looks set to become the next major corporation to freeze hiring and cut job after a second straight quarter losing over $1billion.

The news comes after a quarter where, despite their subscription gains, the company continues to lose in the streaming market, nearly doubling their fall year-on-year to $1.47 billion.

Disney CEO Bob Chapek addressed the memo to Disney’s division leaders, saying the company is instituting a targeted hiring freeze and anticipates ‘some small staff reductions’ as it looks to manage costs.

He wrote: ‘While certain macroeconomic factors are out of our control, meeting these goals requires all of us to continue doing our part to manage the things we can control – most notably, our costs.’

The House of Mouse reported over 235 million streaming subscribers on all platforms, as Disney+ beat Wall Street expectations by adding 12.1 million subscribers.

The additions increased the total to 164.2 million on Disney+, while other company platforms such as Hulu and ESPN+ also grew their subscriptions last quarter.

Disney looks set to become the next major corporation to freeze hiring and cut job after a second straight quarter losing over $1billion

The move comes after Disney missed Wall Street estimates for quarterly earnings on Tuesday as the entertainment giant racked up more losses from its push into streaming video, which it refers to as its direct-to-consumer business.

Corporate America braces for large-scale layoffs

Disney won’t be alone in laying off employees or forcing hiring freezes.

Perhaps most famously, Twitter laid off half its workforce after Elon Musk’s $44billion takeover, though some have reportedly been asked back.

Meta announced plans earlier this week to cut 13 percent of its workforce, more than 11,000 employees.

Intel Corp. said that it will make ‘adjustments’ in the fourth quarter, while Microsoft has already cut 1,000 employees.

The cuts are not limited to big tech, as Citigroup and Morgan Stanley are both either cutting or about to cut several jobs.

Johnson & Johnson may cut some workers due to inflation.

Warner Brothers Discovery, one of Disney’s chief rivals in the streaming space, will cut five to 10 percent of workers.

Shares of the company fell more than 13 percent on Wednesday following its results, though it rebounded slightly on Friday to a price of $95.01 a share.

Wall Street analysts voiced concern about Disney’s escalating streaming costs, with MoffettNathanson analyst Michael Nathanson observing, in a note earlier this week, ‘the company has to prove that their pivot to DTC will be worth the investment price that is currently being paid.’

Corporate America is making deep cuts to its employee base to brace for an economic downturn. Meta Platforms said earlier this week it would cut more than 11,000 jobs, or 13 percent of its workforce to rein in costs.

Chapek said the company has established a task force, with Chief Financial Officer Christine McCarthy and General Counsel Horacio Gutierrez, to help him make ‘critical big picture decisions.’

The company already has begun looking at content and marketing spending, but Chapek said the cuts would not sacrifice quality.

Hiring will be limited to a small subset of critical positions, and some staff reductions are anticipated, as the company looks to make itself more cost-efficient, he wrote.

Chapek said business travel would be limited and trips would require advance approval, or conducted virtually, as much as possible.

‘Our transformation is designed to ensure we thrive not just today, but well into the future,’ Chapek wrote.

Chapek said Tuesday that the losses from streaming have peaked, and the company will be back on the road to profitability in 2024.

Disney+ plans to hike the prices of the service in December, and is planning an ad-supported tier which is expected to increase revenue.

Overall, Disney raked in $20.1billion in Q4, with an operating income of $1.6billion.

The Disney bundle, which offers multiple platforms at a discount, forced the average revenue per user to fall at both Disney+ and Hulu.

‘The rapid growth of Disney+ in just three years since launch is a direct result of our strategic decision to invest heavily in creating incredible content and rolling out the service internationally,’ said Chapek.

The Disney bundle, which offers multiple platforms at a discount, forced the average revenue per user to fall at both Disney+ and Hulu

Chapek said the company has established a task force, with Chief Financial Officer Christine McCarthy (pictured left) and General Counsel Horacio Gutierrez (pictured right), to help him make ‘critical big picture decisions.’

Outside of the streaming world, Disney reported that its Parks, Experiences and Products division had a record year with $7.4 billion in revenue and a total of $28.7 billion for the fiscal year

‘By realigning our costs and realizing the benefits of price increases and our Disney+ ad-supported tier coming December 8, we believe we will be on the path to achieve a profitable streaming business that will drive continued growth and generate shareholder value,’ he added.

Outside of the streaming world, Disney reported that its Parks, Experiences and Products division had a record year with $7.4billion in revenue and a total of $28.7billion for the fiscal year.

The company also had lower content sales due to less theatrical film releases, which meant fewer movies to put into the home entertainment market.

Netflix, which used to dominate the streaming space, counted 223 million subscribers according to the most recent tally.

Disney CEO’s full memo to division leaders Friday

Disney Leaders-

As we begin fiscal 2023, I want to communicate with you directly about the cost management efforts Christine McCarthy and I referenced on this week’s earnings call. These efforts will help us to both achieve the important goal of reaching profitability for Disney+ in fiscal 2024 and make us a more efficient and nimble company overall. This work is occurring against a backdrop of economic uncertainty that all companies and our industry are contending with.

While certain macroeconomic factors are out of our control, meeting these goals requires all of us to continue doing our part to manage the things we can control—most notably, our costs. You all will have critical roles to play in this effort, and as senior leaders, I know you will get it done.

To be clear, I am confident in our ability to reach the targets we have set, and in this management team to get us there.

To help guide us on this journey, I have established a cost structure taskforce of executive officers: our CFO, Christine McCarthy and General Counsel, Horacio Gutierrez. Along with me, this team will make the critical big picture decisions necessary to achieve our objectives.

We are not starting this work from scratch and have already set several next steps—which I wanted you to hear about directly from me.

First, we have undertaken a rigorous review of the company’s content and marketing spending working with our content leaders and their teams. While we will not sacrifice quality or the strength of our unrivaled synergy machine, we must ensure our investments are both efficient and come with tangible benefits to both audiences and the company.

Second, we are limiting headcount additions through a targeted hiring freeze. Hiring for the small subset of the most critical, business-driving positions will continue, but all other roles are on hold. Your segment leaders 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 nimble. The taskforce will drive this work in partnership with segment teams to achieve both savings and organizational enhancements. As we work through this evaluation process, we will look at every avenue of operations and labor to find savings, and we do anticipate some staff reductions as part of this review. In the immediate term, business travel should now be limited to essential trips only. In-person work sessions or offsites requiring travel will need advance approval and review from a member of your executive team (i.e., direct report of the segment chairman or corporate executive officer). As much as possible, these meetings should be conducted virtually. Attendance at conferences and other external events will also be restricted and require approvals from a member of your executive team.

Our transformation is designed to ensure we thrive not just today, but well into the future—and you will hear more from our taskforce in the weeks and months ahead.

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. 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.

Thank you again for your leadership.

-Bob