Disney+, the streaming service of The Walt Disney Company, yesterday announced that it would join the convoy of big companies reducing their workforce through a wave of layoffs. The Mouse House is looking to lay off 7,000 employees, roughly 4% of its global workforce, as part of its restructuring plans.
The news comes after the company released its latest results for the fiscal first quarter that ended on Dec. 31. Net income came in at $1.279 billion, below analyst estimates. Revenue hit $23.512 billion, ahead of Wall Street estimates of $23.4 billion. The streaming service has lost over 2.8 million subscribers from 164.2 million subscribers in the last quarter of 2022.
According to a company blog post, this is the first time the number of Disney+ subscribers is this low since it launched in 2019, and it seems Disney+ will have to struggle to reach its targets for the coming years.
With costs going up around the world and the boom in subscriber numbers slowing down, Disney+ needs to become profitable by 2024, and ultimately, Disney has been spending too much on creating new content for streaming than it can bring in.
From the company’s blog
With this alarming news for investors, Disney CEO Bob Iger has further announced that the company is looking to make over $5.5 billion in cost savings. This includes $3 billion in non-sports-related content and $2.5 billion in general operating costs.
This marks Disney’s third restructuring in five years. It reorganized its business in 2018 to accelerate the growth of its streaming business and again in 2020 to further spur streaming’s growth.
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Disney+ is in a tough situation
Could this subscriber loss result from the company’s decision to increase the subscription fee of its Disney+ ad-free plan?
Six months ago, Disney+ overtook Netflix in the race for subscribers with 221 million streaming subscribers; This led its total subscriptions to reach 152.1 million at the end of Q2 2022, exceeding the 147 million mark predicted by analysts.
This was at a point where Netflix was struggling to retain the subscribers it had. In the Q2 of 2022, It laid off some employees as its revenue and subscriber numbers dropped, a massive hit on the company’s culture and status as a high-performing brand.
With this latest financial report, Disney+’s 2024 target to reach 246 million subscribers by 2024 seems a little shaky, providing a chance for Netflix, which already has over 230 million subscribers, to wear the crown as the king of streaming service.
However, these streaming giants’ future is still bleak, especially with the economic downturn, weak consumer demands, and other major challenges. Many companies, including Disney+, have resorted to creating a cost-structure task force to guide them during these tough times.
In the Q4 of 2022, the then-CEO, Bob Chapek, issued a memo citing all the company’s plans for the new year. which included limiting headcount additions through a targeted hiring freeze, among other “uncomfortable decisions “to cut costs.
These decisions are slowly rolling out with the workforce reduction and the cost management plans put in place already.
Read Also: With 221 million subscribers, Disney is leading Netflix in the race for subscribers
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