Disney (DIS) is planning a hiring freeze and layoffs as it tries to turn its Disney (DIS)+ streaming service around amid economic uncertainty, a memo seen by Reuters on Friday showed.
Chief Executive Bob Chapek sent a memo to Disney leaders saying the company is implementing a targeted hiring freeze and expects “some small layoffs” to manage costs.
“While certain macroeconomic factors are beyond our control, achieving these goals requires all of us to continue to do our part to manage the things we can control – most notably, our costs, ’” Chapek wrote in the memo.
The move comes after Disney missed Wall Street expectations for quarterly earnings on Tuesday, as the entertainment giant took more losses from its push into streaming video, which it calls a direct-to-consumer (DTC) business . Shares of the company fell more than 13% after the results were released on Wednesday.
Disney said the fast-growing service added 12 million subscribers in its fiscal fourth quarter, but reported an operating loss of nearly $1.5 billion. Disney+ will be profitable in fiscal 2024, with losses peaking in the current quarter, the company said.
The streaming service is known for original series, including “The Mandalorian,” “Andor” and “Obi-Wan Kenobi” in the “Star Wars” series, “WandaVision,” “Hawkeye” in the Marvel series and “She-Hulk: The Lawyer,” as well as content hubs for Disney, Pixar, Marvel, and Star Wars movies.
Wall Street analysts are concerned about Disney’s rising streaming costs. “The company will have to prove that their move to DTC is worth the investment price they are currently paying,” MoffettNathanson analyst Michael Nathanson said in a note this week.
U.S. companies are slashing jobs in response to the recession. Meta said this week it would cut more than 11,000 jobs, or 13% of its workforce, to rein in costs.
As the recently merged companies restructure their content businesses, one of Disney’s peers, Warner Bros., has seen the company take drastic cost-cutting measures, including layoffs.
Chapek said Disney has formed a task force, including chief financial officer Christine McCarthy and general counsel Horacio Gutierrez, to help him make “key big-picture decisions.”
The company has already started looking at content and marketing spend, but Chapek said the cuts won’t be at the expense of quality. Hiring will be limited to a small number of key positions, Chapek wrote, and some layoffs are expected as the company looks to make itself more cost-effective.
Business travel will be limited and travel will need to be pre-approved, or virtually, where possible, Chapek said.
“Our transformation is designed to ensure that we thrive not only today but in the future,” Chapek wrote.
The memo was first reported by CNBC.