Disney has said it will continue to cut costs sharply as it seeks to rebuild its business in a rapidly changing media environment.
The company announced that it will cut costs by another $2 billion, adding to thousands of job cuts, including the $5.5 billion in cuts it previously announced.
The company said it has no further plans for layoffs. In a call with investors, CEO Bob Iger suggested the cuts would come mainly from its struggling online TV business.
Meanwhile, the company continues to lose money in its Disney+ streaming business, but has managed to significantly reduce losses in that segment. Never made a profit on Disney+. After adjusting for price increases, revenue at related streaming services, which excludes Disney+, Hulu and ESPN+, rose 12 percent last quarter, and losses narrowed to $420 million, down from $1.4 billion in the same quarter a year ago.
“Our quarterly results reflect the significant growth we achieved last year,” CEO Bob Iger said in a statement. While we still have work to do, these efforts have allowed us to move past this period of repair and begin rebuilding our business.
Disney shares rose more than 3% in afternoon trading, marking a near 10-year low.
The company reported revenue of $21.2 billion, slightly below the $21.3 billion expected by analysts surveyed by Refinitiv.
Angus Mordant/Bloomberg/Getty Images
on Monday, October 30, 2023 at the Disney Store in New York’s Times Square neighborhood.
Disney’s report comes at a time of shock for the company as it grapples with a cash-strapped streaming business, cord-cutting, recent box office flops, an ongoing actors’ strike and a legal battle with Republican presidential candidate Florida Gov. Ron DeSantis.
The company stated that it is “significantly managing its cost base”, which it plans to reduce costs by $ 2 billion more than previously reported. The ongoing actors’ strike has helped the company cut some short-term production costs, said Kevin Lansbury, Disney’s interim chief financial officer.
Disney previously announced 7,000 job cuts in February as part of a $5.5 billion cost-cutting plan. On Wednesday, the company said its efficiency target had risen to $7.5 billion.
Disney’s theme park and cruise segment was a bright spot for the company, up more than 30% compared to last year. The company has shown strength in international theme parks and Disney cruises. However, the company said revenue for Walt Disney World in Central Florida was weak.
The company’s fiscal fourth quarter began in July and ended Oct. 1, and included a summer break at Walt Disney World Resort in Central Florida. Travelers at Disney World parks in July experienced shorter-than-expected wait times and less crowds than expected.
Lansbury said consumer strength boosted profits in the Disney Parks division.
“We feel good domestically and we feel good internationally,” he said. We are not seeing anything in terms of economic stagnation.
Disney+, Disney’s flagship streaming service, increased subscriptions in the US and Canada by 1% in the quarter, and added 11% more subscribers globally.
Ad-supported Disney+ added more than 2 million subscriptions in the fourth quarter, Iger said.
In total, Disney has lost more than $10 billion on its streaming service since its launch in 2019.
On Disney’s earnings call, Iger reiterated that the company expects its distribution services to achieve profitability by the end of 2024.
“We are bullish about the future of our streaming business,” Iger said.
In October, Disney raised the ad-free Disney+ subscription to $13.99 per month but kept the price of the ad tier at $7.99 per month.
But Disney+ isn’t the company’s only streaming bet.
Earlier this month, Disney announced it would buy Comcast’s one-third stake in Hulu for $8.61 billion, meaning Disney now owns 100% of the streaming service.
Iger said a beta version of the combined Hulu-Disney+ app will launch in December, with a formal release planned for early spring 2024.
Disney’s linear TV business continues to slide, with revenue falling 9% in the fourth quarter from a year earlier — compared to the most recent third quarter, when revenue fell 7%.
Earlier this year, comments by Iger fueled speculation that some of Disney’s linear TV assets, including ABC, Disney Channel, FX and National Geographic, could be up for sale.
Iger said the company will “continue to evaluate options for each of the online networks with the goal of identifying the best strategic path for the company and maximizing shareholder value.”
However, Iger said his evaluation of the company’s linear TV assets “found long-term revenue opportunities that we will pursue as we continue to deliver high-quality content.”
The company attributed the decline in advertising revenue to the ABC network primarily due to lower average viewers and lower political advertising revenue.
ESPN was an outlier in Disney’s media portfolio, continuing to draw sports fans to cable TV. The network saw its best total viewership in four years, Iger said.
Questions surround the company’s upcoming slate of content because of the Hollywood strike that halted major studio productions this year, the writers’ strike that ended in September and the ongoing actors’ strike.
In an interview with CNBC on Wednesday, Iger said that the impact of the strikes on Disney’s business so far is “not negligible,” but that it “could be significant” if the strikes continue longer.
“We really want to try to protect the summer season of movies, the whole industry is focused on that. We don’t have much time to do that,” he said.
Last month, Disney announced that the live-action “Snow White” movie would be delayed by a year from March 2024 to March 2025 due to the actors’ strike.
Clarification: This story has been updated to clarify which services were included in Disney’s $420 million quarterly streaming loss.