Disney (DIS) plans to freeze hiring and cut some jobs to bring streaming service Disney (DIS)+ to profitability amid economic uncertainty, according to a Reuters memo on Friday.
Chief Executive Bob Chapek sent the memo to Disney executives, saying the company is implementing a targeted hiring freeze and expecting “some small staff cuts” to control costs.
“While certain macroeconomic factors are beyond our control, achieving these goals requires that we all continue to do our part to manage the things we can control – most notably our costs,” Chapek wrote in the memo.
The move came after Disney missed Wall Street estimates for quarterly earnings on Tuesday, as the entertainment giant fed further losses from its foray into streaming video, which it describes as a direct-to-consumer (DTC) business. Shares of the company fell more than 13% on Wednesday following the results.
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. The company said Disney+ would become profitable in fiscal 2024, with losses peaking in the quarter.
The streaming service is known for original series, including Star Wars entries The Mandalorian, Andor and Obi-Wan Kenobi, Marvel entries WandaVision, Hawkeye and She-Hulk: Attorney at law”. ‘ and content hubs for Disney, Pixar, Marvel and Star Wars films.
Wall Street analysts have expressed concern about Disney’s escalating streaming costs. MoffettNathanson analyst Michael Nathanson noted in a note this week that “the company must demonstrate that its move to DTC is worth the investment price it is currently paying.”
Corporate America is making deep cuts in its employee base to prepare for an economic downturn. Meta said this week it would cut more than 11,000 jobs, or 13% of its workforce, to contain costs.
One of Disney’s studio peers, Warner Bros Discovery, has undergone dramatic cost-cutting efforts, including layoffs, as the recently merged company restructures its content operations.
Chapek said Disney has set up a task force, which includes Chief Financial Officer Christine McCarthy and General Counsel Horacio Gutierrez, to help it make “critical overall decisions.”
The company has already started looking at content and marketing spend, but Chapek said the cuts won’t affect quality. Hiring will be limited to a small subset of critical positions, and some staff cuts are expected as the company seeks to become more cost-effective, Chapek wrote.
Chapek said business travel would be limited and travel would need to be pre-approved or done virtually as much as possible.
“Our transformation is designed to ensure that we are successful not only today but also in the future,” wrote Chapek.
The memo was first reported by CNBC.