Bob Iger announces 7,000 layoffs at Disney, signals ‘significant transformation’

Bob Iger, in his first earnings call since returning to the company, announced Walt Disney Co. will shed 7,000 jobs as part of a broader effort to save $5.5 billion in costs.

Disney is facing pressure to control costs and boost profits as it continues to lose money from its key streaming business, which includes Disney+.

“After a solid first quarter, we are embarking on a significant transformation, one that will maximize the potential of our world-class creative teams and our unparalleled brands and franchises,” Iger said in a statement. “We believe the work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders.”

The company’s marquee streaming service Disney+ lost 2.4 million subscribers during the first quarter, bringing its total count to 161.8 million, mainly stemming from declines in its Disney+Hotstar product in India. The service gained subscribers elsewhere, adding 1.4 million subscribers in the U.S. and internationally, not including Hotstar.

Overall, Disney’s streaming apps — Disney+, Hulu and ESPN+ — have 235 million subscribers.

Disney’s streaming business continued to bleed cash, losing more than $1 billion during the three months that ended in December.

Nonetheless, Disney reported earnings and revenues that beat Wall Street estimates. The company generated sales of $23.5 billion, up 8% from the same quarter a year ago. Analysts on average had been expecting $23.4 billion in revenue. Disney’s profit was $1.28 billion, up 11%. The Burbank entertainment giant’s earnings of 99 cents a share exceeded projections of 78 cents.

The earnings were released after markets closed. Disney’s stock rose 2% in after hours trading after closing at $111.78 a share.

Disney’s last earnings report turned out to be a pivotal moment for company. Then-Chief Executive Bob Chapek cheerfully delivered the news of strong subscriber increases at Disney+, but that masked underlying problems : disappointing profits, including at the mighty theme parks, and severe losses at the company’s streaming businesses. During the fourth quarter, streaming lost a staggering $1.5 billion for Disney.

Chapek was abruptly ousted in November by the board of directors, which brought back Iger to run the company for two years.

While Iger’s return was greeted enthusiastically by Wall Street and employees, major challenges remain, including the need to drive profits from streaming — a business has Iger enthusiastically championed.

Layoffs and other cost cutting measures have been expected for months. Iger has instituted a mandatory return-to-work policy, requiring hybrid employees to be in the office four days a week.

Iger was quickly faced with a challenge from an influential outsider, the billionaire activist investor Nelson Peltz. Peltz’s hedge fund, Trian Fund Management, which has a $900 million stake in Disney, has been lobbying the company for a seat on its board of directors, and Peltz has criticized the company for “self-inflicted” wounds, including poor succession planning and the costly acquisition of 21st Century Fox.

Peltz’s overtures have been going on for months, starting in July. After being rebuffed, Peltz embarked on a proxy fight with Disney, encouraging shareholders to vote for him (or his son, Matthew) to join the board and also to vote against current board director, Michael Froman, a former U.S. trade representative.

Disney has been campaigning hard against Peltz, accusing him of being out of his depth when it comes to the media and entertainment business.

The company recently appointed former Nike Chief Executive Mark Parker as its next chairman, who will lead a succession-planning committee to find Iger’s replacement. During Iger’s first 15-year run as chief executive, he delayed his retirement multiple times. After handpicking Chapek as his successor, he quickly became disillusioned with the choice.

Parker replaces Susan Arnold, who is termed out after 15 years on the board.

The fight will come to a head in early April when Disney holds it annual shareholder meeting virtually, at which investors will vote on Disney’s 11-member board.