CEO Bob Chapek also said the company is undertaking a “rigorous review of the company’s content and marketing spending.”
The Walt Disney Company is trying to reduce expenses.
Disney CEO Bob Chapek outlined new initiatives to cut costs in a memo to senior executives. These included a targeted hiring freeze, potential staff reductions, a “cost structure taskforce,” and a “rigorous review of the company’s content and marketing spending.”
Disney, like many big firms in media, entertainment, and technology, is looking to cut costs in the face of a challenging macroeconomic environment, with advertising being hammered particularly hard. Chapek’s message is released at this time.
When asked about cost-cutting initiatives during the company’s fiscal Q4 earnings call earlier this week, Disney CFO Christine McCarthy responded that “we are aggressively analyzing our cost base today, and we are seeking real reductions.” Chapek’s memo elaborates on that point in more detail.
The company’s cost structure taskforce, which, according to Chapek, “will make the important big picture decisions essential to achieve our objectives,” will be comprised of McCarthy, Chapek, and general counsel Horacio Gutierrez.
“The task force will drive this work in partnership with segment teams to achieve both savings and organizational enhancements,” he added. “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 meantime, Disney is implementing a targeted hiring freeze, with only business-critical roles being filled, and business travel is being restricted to “essential” travel only.
“I am fully aware this will be a difficult process for many of you and your teams,” Chapek wrote. “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.”
Chapek hinted that the business will be more picky about where it spent its money on the content front.
He stated, “While we won’t compromise on quality or the power of our unmatched synergy machine, we must make sure our investments are both effective and have real returns for both viewers and the company.
The Chapek memo comes at a difficult time for the media when every major player is looking for ways to cut expenses. While Warner Bros. Discovery has been suffering layoffs in its many divisions ever since Discovery joined with WarnerMedia in the spring, NBCUniversal has provided early retirement packages to long-serving employees.
Executives at Paramount have also signaled that cost-cutting efforts are coming, with some anticipated to happen before the end of the year.
Chapek’s full memo is below.
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 spend 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 task force 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 task force 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.