Robert A. Iger, Chairman and CEO of The Walt Disney Company attends the unveiling ceremony of six Shanghai Disney Resort theme parks at the Shanghai Expo Center on July 15, 2015 in Shanghai, China.
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disney said Wednesday it plans to reorganize into three segments, while cutting thousands of jobs and cutting costs.
The media and entertainment giant said it would now consist of three divisions:
- Disney Entertainment, which includes most of its streaming and media operations
- An ESPN division that includes the TV network and the ESPN+ streaming service
- A Parks, Experiences and Products unit
The move marks the most significant step Bob Iger has taken since returning to the company as CEO in November. Disney announced the changes minutes after published its latest quarterly results. The announcements also come as Disney embarks on a proxy fight with activist investor Nelson Peltz.
Wednesday, during his quarterly income call with investors, Disney also announced that it would cut costs by $5.5 billion, including $3 billion from content, excluding sports, and the remaining $2.5 billion from non-content cuts . Disney executives said about $1 billion in cost-cutting has already been underway since last quarter.
Disney also said it would cut 7,000 jobs from its workforce. This would represent around 3% of the approximately 220,0000 people it employed on October 1, according to an SEC filingwith approximately 166,000 in the United States and approximately 54,000 internationally.
Disney shares rose more than 5% in aftermarket trading.
Media companies, such as Discovery of Warner Bros., have reduced their content spend and are looking to monetize their streaming business. Increased competition has slowed subscriber growth, and companies have sought to find new avenues for revenue growth. Some, like Disney+ and Netflix, have added cheaper, ad-supported options.
“We will be looking very closely at the cost of everything we do in television and film,” Iger said in a call with investors Wednesday.
The reorganization has been underway since Iger returned to lead Disney, replacing his hand-picked successor, Bob Chapek.
The entertainment group will be led by top lieutenants Dana Walden and Alan Bergman, who are each seen as suitors succeed Iger in less than two years. ESPN President Jimmy Pitaro will lead the ESPN segment, while Josh D’Amaro, already the head of Disney’s Parks, Experiences and Merchandise segment, will remain in charge.
ESPN’s future under Disney ownership has been a question for investors for some time. Last year, activist investor Third Point urged the company to create ESPN. Disney and Third Point later reached an agreementafter changing course on his thoughts for ESPN’s future.
Chapek’s kidnapping came shortly after Disney released its fiscal fourth quarter results, disappointing on earnings and some key revenue segments. Chapek had also warned that Disney’s strong streaming numbers would decline in the future. He also told employees soon after that Disney would cut costs by freezing hiring, laying off and taking other measures.
Shortly after his return, Iger sent a memo to employees announcing that the company would be reorganized, particularly the Disney Media and Entertainment unit. The reorganization immediately meant the departure of Kareem Daniel, the head of the company’s former media and entertainment unit, and Chapek’s right-hand man.
Iger had said he would put more “decision-making back in the hands of our creative teams and streamline costs” at the time. The goal would be to put a new structure in place in the coming months, with elements of DMED remaining, CNBC reported. He added at a town hall that he would not lift the company’s hiring freeze as he reassessed Disney’s cost structure.
On Wednesday, Iger again echoed those comments about returning control to the company’s creative minds.
“Our business is fueled by storytelling and creativity, and virtually every dollar we make, every transaction, every interaction with our consumers, stems from something creative,” Iger said Wednesday. “I’ve always believed that the best way to spur great creativity is to make sure the people managing the creative processes feel empowered.”