Disney executives have already discussed some of the tools the Company could use if an economic slowdown impacts things and we got an update on Disney’s current financial situation, but some important changes could be on the way.
During the Q4 2022 earnings report and call, Disney revealed some big updates on Disney+ subscriber numbers, a jump in revenues, and an increase in revenues specifically within the Disney Parks, Experiences, and Products division. But they also reported big losses due to Hurricane Ian and stock values fell following the call. And now it seems Disney is taking some steps to potentially cut costs moving forward.
According to CNBC, Disney is planning to “institute a targeted hiring freeze as well as some job cuts.” This is based on an internal memo that was sent to some executives.
CNBC reports that a memo was sent to division leads on Friday, November 11th, and was obtained by CNBC. In the memo, Disney CEO Bob Chapek indicated that Disney would be “limiting headcount additions through a targeted hiring freeze.”
Chapek noted that the efforts they’ll be taking will help them to achieve the goal of making Disney+ profitable by 2024 and making the company as a whole more “efficient and nimble.” He also recognized that the changes were being made “against
a backdrop of economic uncertainty that all companies and our industry are contending with.”
He went on to say, “Hiring for the small subset of the most critical, business-driving positions will continue, but all other roles are on hold. Your segment leaders and HR teams have more specific details on how this will apply to your teams.”
In the memo, Chapek goes on to note, “As we work through this evaluation process, we will look at every avenue of operations and labor to find savings, and we do anticipate some staff reductions as part of this review.”
In terms of other cost-cutting measures, Chapek reportedly told executives that they should limit their business travel to essential trips only, and meetings should be done virtually as much as possible.
Disney will also be setting up a “cost structure taskforce.” Chief Financial Officer Christine McCarthy, Bob Chapek, and General Counsel Horacio Gutierrez will be on that taskforce.
In the memo, Chapek wrote “I am fully aware this will be a difficult process for many of you and your teams…We are going to have to make tough and uncomfortable decisions. But that is just what leadership requires, and I thank you in advance for stepping up during this important time.”
It seems that Disney is also looking at content and marketing spending. In the memo, Chapek noted that while they won’t sacrifice qualify, they “must ensure our investments are both efficient and come with tangible benefits to both audiences and the company.”
This comes after Disney’s streaming services reported a loss of $1.47 billion in the last quarter, more than double the loss from a year before. Losses are expected to improve in 2023 (according to Christine McCarthy) and streaming at Disney is set to be profitable by 2024.
This move to implement a hiring freeze comes after Disney’s Q4 earnings report and call. CNBC notes that during that report, Disney reported “disappointing quarterly results.” Despite revenue increases, Disney fell short of some expectations in terms of what it would hit when it comes to profit and key revenue segments.
They also warned that growth in their streaming sector could “taper” moving forward.
Shares of Disney stock fell about 8% in after-hours trading, but have since increased a bit (as of November 11th).
During the earnings call, Christine McCarthy did note that Disney was looking at ways to cut costs. Specifically, she noted, “We are actively evaluating our cost base currently, and we’re looking for meaningful efficiencies…Some of those are going to provide some near-term savings, and others are going to drive longer-term structural benefits.”
You can read the full memo below (as shared by CNBC).
Disney Leaders-
As we begin fiscal 2023, I want to communicate with you directly about the cost management efforts Christine McCarthy and I referenced on this week’s earnings call. These efforts will help us to both achieve the important goal of reaching profitability for Disney+ in fiscal 2024 and make us a more efficient and nimble company overall. This work is occurring against a backdrop of economic uncertainty that all companies and our industry are contending with.
While certain macroeconomic factors are out of our control, meeting these goals requires all of us to continue doing our part to manage the things we can control—most notably, our costs. You all will have critical roles to play in this effort, and as senior leaders, I know you will get it done.
To be clear, I am confident in our ability to reach the targets we have set, and in this management team to get us there.
To help guide us on this journey, I have established a cost structure taskforce of executive officers: our CFO, Christine McCarthy and General Counsel, Horacio Gutierrez. Along with me, this team will make the critical big picture decisions necessary to achieve our objectives.
We are not starting this work from scratch and have already set several next steps—which I wanted you to hear about directly from me.
First, we have undertaken a rigorous review of the company’s content and marketing spending working with our content leaders and their teams. While we will not sacrifice quality or the strength of our unrivaled synergy machine, we must ensure our investments are both efficient and come with tangible benefits to both audiences and the company.
Second, we are limiting headcount additions through a targeted hiring freeze. Hiring for the small subset of the most critical, business-driving positions will continue, but all other roles are on hold. Your segment leaders and HR teams have more specific details on how this will apply to your teams.
Third, we are reviewing our SG&A costs and have determined that there is room for improved efficiency—as well as an opportunity to transform the organization to be more nimble. The taskforce will drive this work in partnership with segment teams to achieve both savings and organizational enhancements. As we work through this evaluation process, we will look at every avenue of operations and labor to find savings, and we do anticipate some staff reductions as part of this review. In the immediate term, business travel should now be limited to essential trips only. In-person work sessions or offsites requiring travel will need advance approval and review from a member of your executive team (i.e., direct report of the segment chairman or corporate executive officer). As much as possible, these meetings should be conducted virtually. Attendance at conferences and other external events will also be restricted and require approvals from a member of your executive team.
Our transformation is designed to ensure we thrive not just today, but well into the future—and you will hear more from our taskforce in the weeks and months ahead.
I am fully aware this will be a difficult process for many of you and your teams. We are going to have to make tough and uncomfortable decisions. But that is just what leadership requires, and I thank you in advance for stepping up during this important time. Our company has weathered many challenges during our 100-year history, and I have no doubt we will achieve our goals and create a more nimble company better suited to the environment of tomorrow.
Thank you again for your leadership.
-Bob
Stay tuned for more updates.
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Sounds to me like big crowds aren’t translating into big profits. Maybe those of us who used to pay full price for our WDW vacations just might be missed after all. To steal someone else’s quote, “The rain that fills the river falls as single drops”. My Disney vacations have gone from average of 2 per year, every year to 1 in the past 4 years with no current plans to return until park hopping and no park ressies are required. If enough of us “raindrops” take our water to someone else’s river, maybe Chapek will dry up and blow away.
Well, why don’t they just get rid of BOB since it was a bad quarter and he is top leadership, and save the other jobs of people that actually contribute positively to the organization. That will save a lot of money, to get rid of 1 highly overpaid person Last couple of trips I see where cuts where at that effect my vacation experience in a negative way (food quality, housekeeping, etc), need to get back to pre-Bob, pre Iger era which was more magical
Perhaps my Paycheck and mis management cronies should take a pay freeze or give up their performance bonus rather than eliminate the people who actually work.
Start the cost cutting measures at the executive level especially Chapek’s excessive pay amount. It’s always the lower level employees that pay the price. Come on Chapek. I’m calling you out, take a major income cut. Like 50 % or more.
Somehow I doubt Chapek will make the “tough and uncomfortable” decision to take a pay cut himself.
Maybe I missed it, but I didn’t see mention of the higher ups refusing their bonuses or taking a pay cut.
I hope that doesn’t mean a freeze on wdw parks staff. We just got back and we saw groups doing orientation. We also noticed regular bathroom attendants/cleaners just about everywhere we went, rides had more attendants, which really helped with crowd control/line cutting. It finally felt like it was getting back to normal.
If this happens watch out folks it is going to get worse at Disney.