Disney’s Iger Restructures, Announces Major Job And Cost Cuts

Back at The Walt Disney Co. for a second run as CEO, Bob Iger used the company’s quarterly conference call Wednesday afternoon to announce a restructuring designed to make the major units more cost-effective. He said the main focus is returning financial authority to “creative leaders.” Their marching orders include finding cost-cuts eventually totaling $5.5 billion annually. And that includes cutting some 7,000 jobs.

“We are going to take a really hard look at the cost for everything that we make — both across television and film, because things in a very competitive world have just suddenly gotten more expensive. And that is something that is already underway here,” Iger said in his Q&A session with Wall Street analysts.

“In addition, we’re going to look at the volume of what we make. And with that in mind we’re going to be fairly aggressive at better curation when it comes to general entertainment. Because, when you think about it, general entertainment is generally undifferentiated, as opposed to our core franchises and our brands, which because of their differentiation and quality deliver higher returns for us over the years. So, we think we have an opportunity to, through more aggressive curation, reduce some of our costs on the general entertainment side and in general in volume,” Iger explained.

The restructuring announced Wednesday creates a new division called Disney Entertainment headed by TV content chief Dana Walden and movie studio boss Alan Bergman. Their authority will cover the linear networks, streaming video services and both the TV and movie studios.

The ESPN businesses will be a separate unit, run by current chief James Pitaro. And the Parks, Experiences and Products division will continue to be run by Josh D’Amaro.

“I love the fact that we are re-linking the creative side of our business with the distribution and the monetization side of our business. And I think by doing that we’ll see the impact of that reorganization fairly quickly,” Iger said.

Having launched Disney+ in 2019 near the end of his previous run as CEO, Iger said streaming has created a “huge authority shift,” giving consumers ultimate control over content.

“When you think about what streaming is … it is the ultimate a la carte proposition for the consumer. It gives the consumer so much more authority than they ever had before. It gives them the ability to watch programs, not channels, not even bundles when you think about it,” he said.

“As the linear business continues to erode — and we’ve been eyes wide open on that … the streaming business, which I believe is the future and has been growing, is not delivering basically the kind of profitability or bottom line results that the linear business delivered for us over a few decades. So we’re in a very interesting transition period, which I think is inevitable heading toward streaming,” Iger said.

Meanwhile, he told analysts that the linear channels and movie theaters can provide Disney with a “significant amount of monetization” and the restructuring is designed to take advantage of that. He noted how the average viewer for Abbott Elementary on ABC is around 60, while that drops to 30 when streaming on Hulu.

“We’re not in any way stepping away from streaming — it remains our No. 1 priority — it is in many respects our future. But we’re not going to abandon the linear, or the traditional platforms, while they can still be a benefit to us and our shareholders,” Iger told the analysts.

Still reporting results as it had previously, Disney said that Domestic Channels revenues for the fiscal quarter ended Dec. 31, 2022, decreased 1% to $6.1 billion, and operating income increased 5% to $928 million. The company said the increase in operating income was due to higher results at Cable, while results at Broadcasting were comparable to the prior-year quarter. The increase at Cable was due to lower programming and production costs, partially offset by decreases in advertising and affiliate revenue.

Broadcasting results were comparable to the prior-year quarter as growth at the owned television stations from higher advertising revenue was largely offset by lower results at ABC. The decrease at ABC was due to lower advertising revenue, partially offset by higher affiliate revenue from contractual rate increases. The quarterly news release said lower advertising revenue resulted from fewer impressions reflecting a decline in average viewership and, to a lesser extent, fewer units delivered, partially offset by higher rates.