Disney to cut 7,000 jobs as subscriber base dips
3 min read . Updated: 09 Feb 2023, 02:18 PM IST
Premium- The company is embarking on a significant companywide cost reduction plan that will be comprised of approximately 50% marketing, 30% labour, and 20% technology, procurement, and other expenses
The Walt Disney Co will be slashing its workforce by 7,000 as it saw its video streaming platform Disney+ lose paid subscribers by 1% in the October-December quarter to 161.8 million.
Disney+ Hotstar, which the service is known as in India and other Asian countries such as Malaysia, Thailand and Indonesia, saw subscribe count dip by 6% to 57.5 million from 61.3 million.
The average monthly revenue per paid subscriber for international Disney+ (excluding Disney+ Hotstar) decreased from $5.83 to $5.62 due to an unfavourable foreign exchange impact, the company said in a statement. The average monthly revenue per paid subscriber for Disney+ Hotstar increased from $0.58 to $0.74 due to higher per-subscriber advertising revenue.
Bob Iger, who was reappointed chief executive of Disney in a surprise move last November, said the company is looking at strategic reorganization, where there will be three core business segments: Disney Entertainment, ESPN and Disney Parks, Experiences, and Products.
“These organizational changes will be implemented immediately, and we will begin reporting under the new business structure by the end of the fiscal year. This reorganization will result in a more cost-effective, coordinated, and streamlined approach to our operations. We are targeting $5.5 billion of cost savings across the company," Iger said during an earnings call adding that reductions to non-content costs will total roughly $2.5 billion, not adjusted for inflation. “$1 billion in savings is already underway..in general, the savings will come from reductions in SG&A (selling, general and administrative expenses) and other operating costs across the company. To help achieve this, we will be reducing our workforce by approximately 7,000 jobs. On the content side, we expect to deliver approximately $3 billion in savings over the next few years, excluding sports," Iger added.
Iger said Disney’s priority is the enduring growth and profitability of its streaming business and current forecasts indicate Disney+ will hit profitability by the end of fiscal 2024. “We will focus even more on our core brands and franchises, which have consistently delivered higher returns. We will aggressively curate our general entertainment content, reassess all markets we have launched in and also determine the right balance between global and local content. We’ll adjust our pricing strategy, including a full examination of our promotional strategies and fine-tune our advertising initiatives on all streaming platforms. We will improve our marketing, better-balancing platform and program marketing while also leveraging our legacy distribution platforms for marketing and programming," he said.
Christine McCarthy, senior executive vice-president and chief financial officer said the company is embarking on a significant companywide cost reduction plan that will be comprised of approximately 50% marketing, 30% labour, and 20% technology, procurement, and other expenses. “Around $1 billion of this target was included in the guidance we gave last quarter. That fiscal 2023 segment operating income should grow in the high single-digit percentage range, which is still our current expectation. Longer term, we also expect to realize additional efficiencies in our content spending, with an annualized savings target of approximately $3 billion of future spending outside of sports," McCarthy said.
To be sure, media and entertainment industry experts have said Iger is expected to bring back growth for the entertainment giant’s India business under Disney Star by controlling costs including a relook at its huge investments in buying sports rights. Iger’s return less than a year after his exit had come with his successor Bob Chapek having been under fire for Walt Disney’s underwhelming performance.
“As far as India goes, Iger is likely take a closer view on costs, resulting in fewer or more-tightly budgeted shows for streaming and less crazy bidding for sports rights. The next two years are going to be quite tight given the economic environment in the US. This could also mean reorganization from a leadership perspective though his first focus is going to be the US and he would look at India only in the second year,“ a media analyst had said in an earlier interview to Mint, declining to be named.
While the ad-supported model already works for Disney+ Hotstar in India, the person had said it would become more dominant globally given that subscription revenues are no longer being seen as sustainable.
According to data accessed by business intelligence platform Tofler, the Walt Disney Company-owned Star India, had posted a 74% increase in its consolidated net profit for the financial year ended 31 March 2022. The company’s profit jumped to Rs. 1421.27 crore, from Rs. 815.72 crore in the corresponding quarter of the previous year.
