Disney plans layoffs, “rigorous review” of spending and hiring freeze; “There will be difficult and uncomfortable decisions,” CEO Bob Chapek told employees

After a roller coaster ride in the stock market and disappointing earnings, The Walt Disney Company is ready to begin cutting expenses, costs and staff, CEO Bob Chapek said today.

“I am fully aware that this will be a difficult process for many of you and your teams,” Chapek wrote to Disney executives on Veterans Day as the House of Mouse approaches its 100th anniversary. “We will have to make difficult and uncomfortable decisions,” he added in the memo of a hearing that appears to have been ongoing for some time. “But it takes leadership, and I thank you in advance for standing by at this important time.”Read the full memo below)

Flatly predicting “a downsizing as part of this review,” Chapek of the top staff continued: “While not sacrificing the quality or performance of our unprecedented synergy machine, we must ensure that our investments are both efficient and results more tangible deliver. “Benefit – both to the public and to the company.”

Like its media peers, Disney, with its roughly 190,000 employees, felt the pain in 2022 as shares fell more than 40% and inflation, currency fluctuations and booming streaming competition hurt its business. Earlier this week, the company reported quarterly earnings that fell short of Wall Street earnings estimates and also issued a particularly gloomy outlook for fiscal 2023 revenue and earnings, further unnerving investors. Troubled stocks rallied earlier today, rising 5% to finally recover from a multi-year low set on Wednesday.

Pay-TV losses have hurt Disney, even though the company has promised to turn a profit from streaming by the end of fiscal 2024.

The staff cuts and freeze follow a series of reorganizations after it took over most of 21^St Century Fox in an industry-changing $71.3 billion deal in 2019. It transitioned to a simplified corporate structure with just two businesses: parks, experiences and products, and media and entertainment distribution.

Although Disney has the largest workforce, it is far from the only company cutting its ranks as some of the fundamentals of the overall economy look shaky.

Warner Bros. Discovery, struggling to pay down debt from the $43 billion WarnerMedia-Discovery merger completed last April, has also begun several rounds of cost-cutting. NBCUniversal has also cut jobs in recent years as it refocused its structure on streaming. Tech giants aren’t immune to the downturn either, as Meta Platforms announced it will lay off 13% of its workforce this week and Amazon signaled major cost-cutting efforts.

Read Bob Chapek’s memo here:

Disney guide

As fiscal 2023 begins, I want to talk to you directly about the cost containment efforts that Christine McCarthy and I referenced on this week’s earnings call. These efforts will help us achieve the important goal of achieving profitability for Disney+ in fiscal 2024 and make us a more efficient and agile company overall. This work takes place against a backdrop of economic uncertainty that affects all businesses and our industry.

While certain macroeconomic factors are beyond our control, we must all continue to do our part to manage the things we can control, especially our costs, to achieve these goals. You will all play a critical role in this effort, and as senior leaders, I know you will succeed.

To be clear, I have faith in our ability to achieve the goals we have set ourselves and in this management team to get us there.

To help us on this journey, I created a cost structure task force of senior executives: our CFO, Christine McCarthy, and our general counsel, Horacio Gutierrez. Together with me, this team will make the critical overall decisions needed to achieve our goals.

We are not starting this work from scratch and have already taken several next steps – which I wanted to share with you directly.

First, we worked with our content leaders and their teams to conduct a thorough review of the company’s content and marketing spend. While we will not sacrifice the quality or power of our unprecedented synergy engine, we must ensure that our investments are effective and deliver tangible benefits to the public and business.

Second, we limit the increase in staff through a targeted staff freeze. The retirement of the small subset of the most critical business functions will continue, but all other functions will be suspended. Your segment leaders and HR teams have more specific information about how this will apply to your teams.

Third, we are reviewing our SG&A costs and have identified room for improved efficiency and an opportunity to transform the organization to become more agile. The task force will drive this work in collaboration with the segment teams to drive both savings and organizational improvements. As we go through this review process, we will look at all avenues of work and labor to find savings and we expect some staff cuts as part of this review. In the short term, business travel must now be limited to the essentials. In-person workshops or offsites that require travel require prior approval and review by a member of your executive team (ie, reporting directly to the segment president or company director). These meetings will take place virtually as much as possible. Attendance at conferences and other external events is also restricted and requires approval from a member of your leadership team.

Our transformation is designed to ensure we thrive not just today, but well into the future – and you’ll be hearing more from our task force in the coming weeks and months.

I am fully aware that this will be a difficult process for many of you and your teams. We will have to make difficult and uncomfortable decisions. But it takes leadership, and I thank you in advance for your commitment at this important time. Our company has overcome many challenges in its 100 year history and I have no doubt that we will achieve our goals and create a more agile company better suited for tomorrow’s environment.

Thanks again for your guidance.

– Bob