Disney’s theme parks did well last year making huge profits, but their streaming services which include Disney Plus, ESPN and Hulu lost money.
In a conference call with investors yesterday, returning Disney CEO Bob Iger who had previously led the company from 2005 to 2020, announced a new structural plan for the company that aims to cut more than $5 billion in costs. He hopes to offset losses from Disney’s streaming division of about 1 Billion dollars this past quarter.
Disclosure: Mr. Iger is married to Willlow Bay the Dean of USC’s Annenberg School.
Part of Iger’s plan is to lay off 7,000 Disney employees. That’s about 4% of its global workforce.
This, despite quarterly profit and revenue at Disney from all divisions except streaming. Overall profits last year exceeded the expectations of analysts.
For example, Disney’s U.S. theme parks reported slightly more than $2 billion dollars in profit last quarter. 36% higher than during the same quarter a year ago.
Iger also announced that Disney will reorganized into three divisions: Disney Entertainment, ESPN, and a Parks, Experience, and Products division.
The Disney Entertainment division will consolidate content production and distribution of film and TV, which includes its streaming services. The two departments were previously separate.
David Craig teaches Communications at Annenberg. He sees this restructuring as a return to basics.
David Craig: So in a way, this was Iger returning to what has always been the core of Disney success, which is around creating intellectual property that can be monetized across all of their services and divisions.
Disney’s current top film executive, along with the current entertainment and television chief will join forces to lead the new Disney Entertainment division. They’ll be tasked with quickly turning it around to bring the company more profit at a time when new players -- including tech companies with huge bankrolls are entering the streaming entertainment game.
Craig believes that this is a reflection of the struggle between Hollywood and tech companies.
David Craig: So that’s what I mean by Silicon Valley has now not only entered into Hollywood and disrupted Hollywood, but by virtue of having massive capital and deep pockets as means to compete and swallow up Hollywood, not to erase Hollywood. So it’s become a very competitive landscape now. We no longer live in the age of five or six media conglomerates. In fact, none of the media conglomerates even compare to those tech firms from Silicon Valley.
On the phone call with investors on Wednesday CEO Bob Iger said, “We will take a very hard look at the cost of everything we make across television and film.”