Disney ( DIS ) plans to freeze hiring and cut some jobs as it strives to move its Disney ( DIS )+ streaming service to profitability against a backdrop of financial uncertainty, according to a memo seen by Reuters on Friday.
CEO Bob Chapek sent the memo to Disney executives, saying the company is initiating a targeted hiring freeze and expects “some small reductions”[ads1]; as it looks to manage costs.
“While certain macroeconomic factors are beyond our control, meeting these goals requires that we all continue to do our part to manage the things we can control — especially 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 took more losses from its video streaming efforts, which it refers to as its direct-to-consumer (DTC) business. Shares in the company fell more than 13% on Wednesday after the results.
Disney has said the fast-growing service added 12 million subscribers in the fourth quarter, but reported an operating loss of nearly $1.5 billion. The company said Disney+ would turn 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” movies.
Wall Street analysts expressed concern about Disney’s escalating streaming costs. MoffettNathanson analyst Michael Nathanson observed in a note this week that “the company needs to prove that its pivot to DTC will be worth the investment price currently being paid.”
Corporate America is making major cuts in its workforce 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, including layoffs, as the newly merged company restructures its content business.
Chapek said Disney has created a task force, including CFO Christine McCarthy and general counsel Horacio Gutierrez, to help him make “critical, big-picture decisions.”
The company has already started looking at content and marketing costs, but Chapek said the cuts would not sacrifice quality. Hiring will be limited to a small subset of critical positions, and some staff reductions are expected as the company looks to become more cost-effective, Chapek wrote.
Chapek said business travel will be limited and travel will require prior approval, or be conducted virtually as much as possible.
“Our transformation is designed to ensure that we thrive not only today, but well into the future,” Chapek wrote.
The memo was first reported by CNBC.