Bob Chapek wants Disney+ to be profitable by FY2024, but hitting that target is going to cause pain for the Walt Disney Co.
Disney’s chief executive confirmed on Friday what he had reported during its fourth quarter earnings call earlier this week: Cost reductions are coming to the Mouse House.
In a memo to Disney executives reviewed by The Times, Chapek said he had established a “cost structure task force,” including chief financial officer Christine McCarthy and general counsel Horacio Gutierrez.
The company, Chapek said, has begun a “rigorous review” of its content and marketing spend, instituting a hiring freeze and planning layoffs. The Burbank-based entertainment giant is also looking to limit travel to essential business only.
“We will review all operations and labor opportunities to find cost savings, and we anticipate staff reductions as part of this review,” Chapek said in the email.
Chapek did not say how many jobs would be cut. A Disney representative did not immediately respond to a request for comment.
This comes after Disney announced its results for the fourth fiscal quarter, in which Disney+ added 12.1 million subscribers, which was more than analysts expected.
However, the gains came at a high cost. The company’s streaming operations — which also include Hulu and ESPN+ — lost nearly $1.5 billion in the quarter and more than $4 billion in the full year, Disney said Tuesday. Disney shares fell in response.
Here is Chapek’s full memo:
As we begin fiscal 2023, I want to communicate directly with you about the cost management efforts that Christine McCarthy and I mentioned on this week’s earnings call. These efforts will help us both achieve the important goal of achieving profitability for Disney+ in fiscal year 2024 and make us a more efficient and agile company overall. This work is taking place against a backdrop of economic uncertainty that all businesses and our industry face.
Although some macroeconomic factors are beyond our control, to achieve these goals we must all continue to do our part to manage the things we can control, including our costs. You will all have a vital role to play in this effort, and as senior leaders, I know you will succeed.
To be clear, I am confident in our ability to achieve the goals we have set for ourselves, and in this management team to get us there.
To guide us on this journey, I have established a cost structure task force comprised of senior executives: our Chief Financial Officer, Christine McCarthy and our General Counsel, Horacio Gutierrez. With me, this team will make the important decisions necessary to achieve our goals.
We are not starting this work from scratch and have already defined several next steps, which I wanted you to hear from me directly.
First, we undertook a rigorous review of the company’s content and marketing spend in conjunction with our content managers and their teams. While we don’t sacrifice the quality or strength of our unrivaled synergy machine, we must ensure that our investments are both effective and deliver tangible benefits to both the public and the company.
Second, we are limiting headcount additions through a targeted hiring freeze. Hiring for the small subset of the most critical and business-focused positions will continue, but all other roles are on hold. Your segment managers and HR teams have more specific details on how this will apply to your teams.
Third, we are reviewing our SG&A costs and have determined that there is room for improved efficiency, as well as an opportunity to transform the organization to be more agile. The task force will drive this work in partnership with segment teams to achieve both cost savings and organizational improvements. During this evaluation process, we will review all operational and workforce opportunities to find savings, and we anticipate some staff reductions as part of this review. In the immediate future, business travel should now be limited to essential travel only. In-person or off-site work sessions requiring travel will require prior approval and review from a member of your leadership team (i.e., a direct report from the Segment President or General Manager of the company). Whenever possible, these meetings should take place virtually. Attendance at conferences and other external events will also be restricted and will require the approval of a member of your management team.
Our transformation is designed to ensure we thrive not just today, but well into the future – and you’ll hear more from our task force in the weeks and months ahead.
I am fully aware that this will be a difficult process for many of you and your teams. We are going to have to make difficult and uncomfortable decisions. But that is exactly what leadership requires, and I thank you in advance for stepping up at this important time. Our company has overcome many challenges over its 100-year history, and I am confident that we will achieve our goals and create a more agile company that is better suited to the environment of tomorrow.
Thanks again for your leadership.