Posted in: Disney+, streaming, TV | Tagged: bob chapek, disney, disney plus, The Walt Disney Company

Disney CEO Chapek Warns of Impending Cuts in Spending, Costs, Staffing

While Warner Bros. Discovery has taken the brunt of the bad headlines when it comes to media financial dealings (and rightfully so, some would say) as it looks to cut $3.5B in savings, to say that 2022 hasn't been a very good year Wall Street-wise for companies like Netflix, Paramount Global, and others would be an understatement. That truth became more painfully clear earlier today, with Deadline Hollywood reporting that The Walt Disney Company CEO Bob Chapek is calling for cuts in spending, costs, and staffing. Nearing the end of a year that saw the company's stock down more than 40% as inflation, global volatility, and an increasingly competitive streaming landscape have been major factors, with this week's quarterly earnings report showing an initially soft 2023 financial map not exactly endearing "The Mouse" to Wall Street.

"I am fully aware this will be a difficult process for many of you and your teams. We are going to have to make tough and uncomfortable decisions. But that is just what leadership requires, and I thank you in advance for stepping up during this important time," Disney's CEO wrote to the staff in a company-wide message. Chapek would lay out a three-point plan to begin turning the company's futures around, including "a rigorous review of the company's content and marketing;" "limiting headcount additions through a targeted hiring freeze;" and "reviewing our SG&A [Selling, General, and Administrative] costs" to look where cuts can be made for "improved efficiency" and to help "The Mouse" become "more nimble." Here's a look at Chapek's memo (courtesy of Deadline Hollywood).

Disney Leaders-

As we begin fiscal 2023, I want to communicate with you directly about the cost management efforts Christine McCarthy and I referenced on this week's earnings call. These efforts will help us to both achieve the important goal of reaching profitability for Disney+ in fiscal 2024 and make us a more efficient and nimble company overall. This work is occurring against a backdrop of economic uncertainty that all companies and our industry are contending with.

While certain macroeconomic factors are out of our control, meeting these goals requires all of us to continue doing our part to manage the things we can control—most notably, our costs. You all will have critical roles to play in this effort, and as senior leaders, I know you will get it done.

To be clear, I am confident in our ability to reach the targets we have set, and in this management team to get us there.

To help guide us on this journey, I have established a cost structure taskforce of executive officers: our CFO, Christine McCarthy and General Counsel, Horacio Gutierrez. Along with me, this team will make the critical big picture decisions necessary to achieve our objectives.

We are not starting this work from scratch and have already set several next steps—which I wanted you to hear about directly from me.

First, we have undertaken a rigorous review of the company's content and marketing spending working with our content leaders and their teams. While we will not sacrifice quality or the strength of our unrivaled synergy machine, we must ensure our investments are both efficient and come with tangible benefits to both audiences and the company.

Second, we are limiting headcount additions through a targeted hiring freeze. Hiring for the small subset of the most critical, business-driving positions will continue, but all other roles are on hold. Your segment leaders 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 nimble. The taskforce will drive this work in partnership with segment teams to achieve both savings and organizational enhancements. As we work through this evaluation process, we will look at every avenue of operations and labor to find savings, and we do anticipate some staff reductions as part of this review. In the immediate term, business travel should now be limited to essential trips only. In-person work sessions or offsites requiring travel will need advance approval and review from a member of your executive team (i.e., direct report of the segment chairman or corporate executive officer). As much as possible, these meetings should be conducted virtually. Attendance at conferences and other external events will also be restricted and require approvals from a member of your executive team.

Our transformation is designed to ensure we thrive not just today, but well into the future—and you will hear more from our taskforce in the weeks and months ahead.

I am fully aware this will be a difficult process for many of you and your teams. We are going to have to make tough and uncomfortable decisions. But that is just what leadership requires, and I thank you in advance for stepping up during this important time. Our company has weathered many challenges during our 100-year history, and I have no doubt we will achieve our goals and create a more nimble company better suited to the environment of tomorrow.

Thank you again for your leadership.

-Bob

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