Disney Q1: Streaming Bled $1B, Disney+ Shed 2.4M Subs, 7K Jobs On The Block

Disney is restructuring and will eliminate about 7,000 jobs and $3 billion in content expenses as part of a push to cut $5.5 billion in costs over the next several years.

Newly returned CEO Bob Iger announced the shakeup during the company’s earnings call for Disney’s fiscal Q1 2023, ended Dec. 31 — his first since he was brought back to replace board-ousted chief Bob Chapek.  

Despite a report that included a loss of $1.1 billion and sluggish subscriptions growth in its direct-to-consumer/streaming business, Disney’s revenue and profit results beat analysts’ expectations. Q1 sales increased 8% year-over-year, to $23.5 billion, and profit rose 11% to $1.28 billion. Earnings were 99 cents a share, versus analysts’ projection of 78 cents.

The cost-slashing/efficiency initiative — along with news that activist investor Peltz had ended his proxy fight with the company —  drove Disney’s stock, which lost 44% of its value in 2022, up by 5% in after-hours trading. The stock soon lost that gain, but it is  nevertheless still up by 24% year-to-date.



Disney+ experienced its first subscription loss in the quarter: down 2.4 million, to 161.8 million total. The losses came mainly from Disney+Hotstar in India. Disney+ subscriptions in the U.S. and other international markets rose by 1.4 million.

The streaming unit’s $1-billion loss in the quarter was up 78% from the year-ago quarter’s $593 million loss. That was despite a 13% gain in revenue, to $5.3 billion, and a modest combined gain of 1 million subscribers across Disney+, Hulu and ESPN, to a total of 234.7 million, in the first fiscal quarter.

Last quarter’s modest subscriptions growth in part reflected price hikes announced in July 2022, after content costs drove a $1.1-billion fiscal Q3 loss in the streaming business, despite a combined gain of 15 million subscribers. ESPN+’s price was increased as of August, Hulu’s prices in October, and Disney+’s in December, in tandem with the launch of its with-ads version. (Disney also significantly upped prices for Hotstar, driving its monthly revenue per paid subscriber up by 28% in the quarter at the cost of increased subscriber churn.)

Under Chapek, Disney targeted reaching 230 million to 260 million Disney+ subscribers by the end of 2024. But like Netflix before it, Disney will in future no longer provide guidance on long-term subscription growth goals, instead focusing on “enduring growth and profitability” in the streaming business, said Iger.

The company, which offered Disney+ and the Disney bundle for just $6.99 and $12.99, respectively, to drive rapid subscriber growth after Disney+’s 2019 launch — “might have gotten a bit too aggressive in terms of our promotion” in its “zeal to go after subscribers,” Iger acknowledged yesterday.

Now, Disney will scrutinize the costs of “everything that we make” in film and TV, said Iger. To achieve the $3 billion in content cuts over the next few years, non-franchise-based general entertainment content will be heavily “curated,” he said, even as content in lucrative franchises such as “Frozen” and “Toy Story” is aggressively expanded.

Non-content operational costs are targeted for $2.5 billion in reductions. The job cuts represent 3.6% of Disney’s 190,000 global workforce. Iger did not specify where the cuts will  be made, but they are likely to come from multiple divisions, including a controversial distribution unit created by Chapek.

The new corporate structure, to be implemented immediately, is designed to return Disney’s creative leaders to being “accountable to how their content performs financially,” said Iger, adding that the existing structure had “severed that link.” The move undoes most of Chapek’s organizational changes.

Creative teams will be responsible for which content is produced, how it is distributed and monetized, and how it is marketed, Iger said. Managing costs, maximizing revenue and driving growth from the content will also be their responsibility, he added.

The new structure divides the company into three parts.

Disney Entertainment, headed by co-chairs Dana Walden and Alan Bergman, will  oversee all of Disney's entertainment, media and content businesses globally, including streaming. Walden rose the ranks through Disney after joining the company in 2019 through its acquisition of Fox's entertainment properties. Bergman has been with Disney since 1996. He was formerly co-chairman of Walt Disney Studios.

ESPN — which Iger firmly stated will not be spun off, refuting persistence rumors — will continue to be led by chairman Jimmy Pitaro, who joined Disney in 2010.

Disney Parks, Experiences and Products — which includes cruises, games and publishing, as well as parks, resorts and consumer products — will continue to be led by chairman Josh D'Amaro, a Disney veteran of more than two decades. This segment saw operating profits rise by 25% in the quarter, as it continued its recovery from COVID shutdowns. 

"We believe the work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders," Iger summed up in the earnings release.

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