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disney said Wednesday it plans to reorganize into three segments while cutting thousands of jobs and cutting costs.
The media and entertainment giant said it now consists of three divisions.
- Disney Entertainment, which includes most of its streaming and media businesses
- ESPN division, which includes TV networks and ESPN+ streaming services
- Parks, Experiences and Product Units
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The move marks the most significant action since Bob Iger returned to the company as CEO in November. Disney announced the change just minutes after announcing its latest quarterly results. The announcement also comes as Disney participates in a proxy contest with activist investor Nelson Peltz and his company, Trian Management.
A Trian spokesperson said Wednesday, “We’re glad Disney listened.
on Wednesdays during Quarterly earnings On a conference call with investors, Disney also announced $5.5 billion in cost savings. This is made up of his $3 billion from non-sports content and the rest of his $2.5 billion from non-content cuts. Disney executives say about $1 billion in cost savings is already underway since last quarter.
Disney also said it would cut 7,000 jobs from its workforce. That would be about 3% of the roughly 220,000 people employed as of October 1st. According to the SEC filingapproximately 166,000 in the United States and approximately 54,000 internationally.
Disney shares rose about 5% in after-hours trading.
media companies such as warner bros discovery, is looking to reduce content spending and make its streaming business more profitable. Increased competition is slowing subscriber growth, and businesses are looking for new avenues of revenue growth. Some have added cheaper ad-supported options, like Disney+ and Netflix.
“We take a very hard look at all the costs of producing in television and film,” Iger said on a conference call with investors Wednesday.
The reorganization has been underway since Iger returned to Disney’s helm to replace hand-picked successor Bob Chapek.
The entertainment group will be led by Dana Walden and Alan Bergman, who are seen as potential successors to Iger within two years. ESPN Chairman Jimmy Pitaro will lead his ESPN segment, while Josh D’Amaro, already head of Disney’s Parks, Experiences and Products segment, will lead.
Iger addresses ESPN speculation
Investors have questioned the future of Disney-owned ESPN. Third Point, led by activist investor Dan Loeb, asked the company to spin out ESPN last year.Disney and Third Point A deal was later reached after reversing thoughts about ESPN’s future.
Iger addressed speculation that the company may be considering spinning out ESPN because the sports network is siled into its own unit. Despite the struggle, ESPN’s brand and programming remain healthy and in demand, he said.
Iger said Wednesday that “the ESPN spinoff has not been discussed or considered. He said the move was deemed ‘in my absence’ and concluded that it was not the right move for Disney.”
Iger said he and Pitaro would be more selective in how much money they spend on sports rights, referring to upcoming negotiations for NBA rights.
Chapek’s dismissal comes shortly after Disney reported its fourth-quarter earnings, disappointing earnings and certain key revenue segments. Chapek also warned that Disney’s strong streaming numbers would decline in the future. Then he said
Shortly after returning home, Iger sent a memo to his employees announcing that he would reorganize his business, particularly the Disney Media and Entertainment Division. The reorganization immediately meant the resignation of Kareem Daniel, the former head of the company’s media and entertainment division and Chapek’s right-hand man.
Iger said at the time, “It puts decisions in the hands of the creative team and streamlines costs.” The goal is to keep elements of DMED but introduce a new structure in the coming months, CNBC reported. At the Town Hall, he added that the company would not lift its hiring freeze as it reassessed Disney’s cost structure.
On Wednesday, Iger reiterated his comments about returning control to the company’s creative minds.
“Our company is fueled by storytelling and creativity, and virtually every dollar we make, every transaction, and every interaction we have with consumers comes from being creative. “I have always believed that the best way to inspire great creativity is to make those who manage the creative process feel empowered.”
Tune in to CNBC Thursday at 9am for an exclusive interview with Disney CEO Bob Iger.