Disney (DIS) plans to make its Disney (DIS)+ streaming service profitable amid economic uncertainty and plans to freeze hiring and lay off workers, according to a memo seen by Reuters on Friday.
Chief Executive Bob Chapek, who sent the memo to Disney’s leaders, said the company was implementing a targeted hiring freeze and expected “small layoffs” to manage costs.
“While certain macroeconomic factors are beyond our control, achieving these goals requires all of us to continue to do our part in managing the things we can control — especially our costs,” Chapek said in the memo wrote in.
The move comes after Disney missed Wall Street’s quarterly earnings expectations on Tuesday, as the entertainment giant suffered more from its foray into streaming video, which it calls its direct-to-consumer (DTC) business. . Shares of the company fell more than 13% after the results were released on Wednesday.
Disney has said the fast-growing service added 12 million subscribers in the fiscal fourth quarter, but reported an operating loss of nearly $1.5 billion. Disney+ will be profitable in fiscal 2024, with losses peaking in the current quarter, the company said.
The streaming service is known for original series including “Star Wars” entries “The Mandalorian,” “Andorra,” and “Obi-Wan Kenobi,” and Marvel entries “WandaVision,” “Hawkeye,” and “Obi-Wan Kenobi.” She-Hulk: The Attorney,” and a content hub for Disney, Pixar, Marvel, and “Star Wars” films.
Wall Street analysts have expressed concern about Disney’s rising streaming costs. “Companies must demonstrate that their pivot to DTC will be worth the investment price they are paying today,” MoffettNathanson analyst Michael Nathanson said in a report this week.
Corporate America is slashing its employee base in response to a recession. Meta said this week that it would cut more than 11,000 jobs, or 13% of its workforce, to rein in costs.
One of Disney’s studio peers, Warner Bros. Discovery, has undergone drastic cost-cutting efforts that include layoffs as the recently merged companies restructure their content operations.
Chapek said Disney has created a task force, including CFO Christine McCarthy and General Counsel Horacio Gutierrez, to help him make “big, big decisions.”
The company has started looking at content and marketing spending, but Chapek said the cuts won’t sacrifice quality. Hiring will be limited to a small subset of key positions, with some layoffs expected as the company looks to make itself more cost-effective, Chapek wrote.
Chapek said business travel will be restricted and travel will need to be pre-approved, or as much as possible.
“Our transformation is designed to ensure that we thrive not only today, but also in the future,” Chapek wrote.
The memo was first reported by CNBC.