Disney’s reorganization is set for its first earnings report since Bob Iger’s return

Initial excitement and relief over Bob Iger’s return as Disney CEO has given way to concern as speculation mounts about an impending restructuring of the company — and with it rumors of layoffs likely to follow.

Rumors of the unveiling of a new organizational chart are mounting amid mounting pressure on the company (including activist investor Nelson Peltz) to stage a turnaround with Iger regaining control. Details of the restructuring moves, which could include some form of consolidation within the company’s marketing operations and at Disney Television Studios, are likely to be announced soon and could coincide with the company’s next earnings report on February 8, sources tell Deadline.

And then there’s the future of Disney Media and Entertainment Distribution’s leadership.

Iger wasted no time in releasing a high-profile pink slip after replacing Bob Chapek last November; Less than a full day after returning to the corner office, DMED Chairman Kareem Daniel has left the company. Iger has made no secret of his distaste for DMED, which Chapek developed to centralize distribution decisions under Daniel, a Chapek loyalist. In particular, the division succeeded in fueling resentment and mistrust, stripping the company’s creative thinking of decision-making powers, and straining creative relationships.

Disney did not respond to a request for comment from Deadline.

As DMED dissolves, questions arise about the dissolution process and the fate of the remaining executives. At the top of the list are Debra O’Connell, president of networks at Disney Media & Entertainment Distribution, and her senior vice president, chief operating officer Chuck Saftler, both highly respected inside the company and outside.

Saftler, the longest-serving FX employee who joined the network in December 1993, was an integral part of FX Networks chairman John Landgraf’s team before being promoted to the DMED position. Saftler has been heavily involved with the networks in his current role — he’s credited with the recent ratings resurgence at FXX through off-network comedy programming and film acquisitions. There are several scenarios as to what would happen to him, but it is conceivable that he will still be part of the tight-knit group of FX executives who have been together for decades.

Another area that attracts a lot of speculation is Disney Television Studios, which consists of 20th Television, ABC Signature, 20th Animation, and Walt Disney Television Alternative. (In addition, there are two other separate TV production arms, FXP and Searchlight Television.)

The situation at the time of Disney’s $71.3 billion acquisition of Fox assets raised questions about whether Disney would keep the then-ABC Studios and 20th Century Fox Television separate. They eventually remained independent studios with their own infrastructure, although Fox 21 Studios merged into 20th TV, which is now run by Karey Burke. Meanwhile, 20th Television Animation became a separate division headed by Marci Proietto and ABC Studios was renamed ABC Signature, with Jonnie Davis at the helm.

The consolidation talk is even stronger this time, there are several scenarios circulating about which areas could be merged. Everything seems to be on the table.

A successful potential consolidation of 20th TV and ABC Signature will depend on merging their two very different cultures. “Can two fried eggs make an omelette?” asked a well-placed observer. Dana Walden, who rose to become president of Disney General Entertainment Content, knows a lot about bridging divides as she is now the top ex-Fox executive at Burbank.

Walden recently consolidated another part of the division it acquired last summer, reuniting advertising and communications years after their separation. It eliminated one position with the possibility of further cuts.

Deadline has learned that the film studio is currently thriving Avatar: The Way of Water, is not expected to be part of the ongoing cuts. Any layoffs at Disney as a result of the reorganization could be smaller and more targeted than we’ve seen from other Hollywood outlets in recent months, we hear. Part of that is the sprawling nature of the company. Now that some of the Chapek-era pricing issues have been addressed and Iger has taken some team-building visits to Anaheim and Orlando, rifts in the top-earning parks, experiences and products division appear to be healing.

Of course, transforming the company will not be easy. Disney, like other media companies, is struggling with the continued decline of linear television and the high cost of streaming against a backdrop of a fragile economy and an uncertain advertising environment.

At the heart of Disney’s bottom line, we’re told, is its most attractive industry: accounting.

Due to the byzantine nature of the company’s current system, the production company of a given program or series sends a program to DMED. DMED then reimburses production for the cost of that program or series through an intercompany transaction. Most importantly for Wall Street, all losses are on DMED’s books – which doesn’t look good. “How we resolve this will determine to a small extent how Wall Street reacts,” one Tinseltown trader said of Disney’s dilemma.

A key focus of the cost-cutting effort is to stimulate the stock price, a decline in which prompted Peltz to launch a proxy fight. Shares hit a multi-year low in late 2022 after Chapek presided over a disastrous earnings report. As SEC filings after his departure made clear, he lost the board’s confidence earlier this year, further preventing a smooth return from the Covid cave. Peltz wants a seat on the company’s board of directors, a vote that will be voted on in March at what is likely to be the liveliest shareholder meeting since the Roy Disney-Michael Eisner affair in 2004.

Regaining the trust of the Straits is Job 1 for Iger and the board. “Whatever it takes, whatever cost they have to cut, they’re going to do it,” an industry insider told Deadline. “Returning to street mores solves the problems of Peltz and other activist investors, it solves shareholder grumbling, it solves everything for now,” the insider added.

Disney stock, like much media earlier this year, looks refreshed. While still far from its recent high of $189 in early 2021, it closed 1.5% higher at $108.45 on Thursday and is up 24% year-to-date.

Anthony D’Alessandro and Jill Goldsmith contributed to this report.