Disney Earnings: The company plans to cut costs by an additional $2 billion

Disney Earnings: The company plans to cut costs by an additional $2 billion


Angels
CNN

Disney said it will continue to cut costs significantly as it looks to rebuild its business in a rapidly changing media environment.

The company announced that it would reduce expenses by another $2 billion, in addition to the $5.5 billion reduction it had previously announced, which included eliminating thousands of jobs.

The company said there are no further layoff plans. CEO Bob Iger suggested on a call with investors that the cuts would come primarily from its struggling linear TV business.

Meanwhile, the company continues to lose money in its Disney+ streaming business, but has managed to significantly reduce its losses in that department. It never made money on Disney+. After the price hike, revenues for Disney+, Hulu and related streaming services that don’t include ESPN+ jumped 12% last quarter, and their losses narrowed to $420 million, down from $1.4 billion in the same quarter a year earlier.

“Our results this quarter reflect the significant progress we have made over the past year,” CEO Bob Iger said in a statement. “While we still have work to do, these efforts have allowed us to get through this repair period and begin building our business again.”

Disney stock rose more than 3% in after-hours trading, rebounding from its lowest level in nearly 10 years.

The company reported revenue of $21.2 billion, slightly below expectations of $21.3 billion, according to estimates from analysts polled by Refinitiv.

Angus Mordaunt/Bloomberg/Getty Images

The Disney Store in Times Square, New York, USA, on Monday, October 30, 2023.

Disney’s report comes during a difficult time for the company as it struggles with its money-guzzling streaming business, cord-cutting, a recent string of box office flops, an ongoing actors’ strike and legal battles with Republican presidential candidate Florida Gov. Ron DeSantis.

The company said it is “aggressively managing its cost base” and plans to cut costs by $2 billion more than previously reported. Kevin Lansbury, Disney’s interim chief financial officer, said the ongoing actors’ strike has also helped the company reduce some short-term production costs.

Disney previously announced 7,000 job cuts in February as part of a $5.5 billion cost-saving plan. The company said Wednesday that its efficiency target had risen to $7.5 billion.

Disney’s theme parks and cruises division has been a bright spot for the company, increasing more than 30% over last year. The company pointed to its strength in its global theme parks and Disney cruises. However, the company said Walt Disney World’s revenues in Central Florida were weaker.

The company’s fourth fiscal quarter began in July and ended on October 1, and included the summer slump at Walt Disney World Resort in Central Florida. In July, Disney World park-goers experienced lower-than-expected wait times and less crowds than expected.

Consumer strength has fueled gains in Disney’s parks division, Lansbury said.

He added: “At the local level, we feel that we are in good condition, and at the international level, we feel that we are in good condition.” “We don’t actually see anything in terms of economic residuals.”

Disney+, Disney’s flagship streaming service, increased its subscriber base in the US and Canada by 1% this quarter, and added 11% more subscribers internationally.

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 the streaming service venture since its launch in 2019.

On Disney’s earnings call, Iger reiterated that the company is “confident” that its streaming services will achieve profitability by the end of 2024.

“We are optimistic about the future of our live streaming business,” Iger said.

In October, Disney raised the price of an ad-free Disney+ subscription to $13.99 per month, but kept the ad tier price steady at $7.99 per month.

But Disney+ isn’t the company’s only streaming bet.

Earlier this month, Disney announced that it would acquire Comcast’s one-third stake in Hulu for $8.61 billion, meaning Disney will now own 100% of the streaming service.

A beta version of the combined Hulu-Disney+ app will launch in December, with an official rollout planned for early spring 2024, Iger said.

Disney’s linear TV business continues to slide, with revenue down 9% in the fourth quarter from a year ago — a bigger decline than in the recent third quarter, when revenue fell 7%.

Earlier this year, comments made by Iger sparked speculation that some of Disney’s linear television assets, which include ABC, Disney Channel, FX and National Geographic, might be put up for sale.

The company continues to “evaluate options for each of our linear networks with the goal of determining the best strategic path for the company and maximizing shareholder value,” Iger said.

However, Iger also said that a review of the company’s linear TV assets “revealed significant long-term cost opportunities, which we are implementing while continuing to deliver high-quality content.”

The company said it saw a decline in advertising revenue, especially on ABC, due to lower average viewership and lower political ad revenue.

ESPN was an outsider in Disney’s media portfolio, and continued to lure sports fans to cable television. The network saw its best overall viewership in four years, according to Iger.

Questions surround the company’s upcoming content slate due to Hollywood strikes that have halted major studio productions this year, including a writers’ strike that ended in September, and an ongoing actors’ strike.

In a Wednesday interview with CNBC, Iger said the impact of the strikes on Disney’s business, so far, has been “minimal,” though if the strikes continue longer, “it could become significant.”

“Obviously we would like to try to maintain the summer of movies, the whole industry is focused on that. We don’t have a lot of time to do that,” he said.

Disney announced last month that it would delay the release of the live-action “Snow White” movie 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.

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