Disney's Streamlining Strategy: Trimming Costs by an Additional $2 Billion to Boost Streaming Profitability

The company revealed plans to further reduce costs by an additional $2 billion, in addition to the previously announced $5.5 billion in cost-cutting measures, which involved significant layoffs. Disney emphasized its ongoing commitment to extensively reduce expenses as it seeks to rebuild its operations in an evolving media landscape.

No layoffs are currently planned, according to the company. CEO Bob Iger indicated during a call with investors that the cuts would mainly affect the struggling linear TV business. Meanwhile, although the Disney+ streaming business is still reporting losses, the company was able to significantly decrease the losses in that division. Disney+ has never been profitable, but after raising prices, its streaming sales increased by 12% in the last quarter. Furthermore, the loss narrowed to $420 million, compared to $1.4 billion in the same quarter the previous year.

CEO Bob Iger stated that the current quarter's results indicate the substantial advancements achieved in the previous year. Although there are still tasks ahead, these endeavors have enabled us to surpass the phase of rectification and commence the process of reconstructing our business. As a result, Disney's stock has risen by 4% in after-hours trading, rebounding from its lowest point in almost a decade.

The company reported revenue of $21.2 billion, coming in slightly below expectations of $21.3 billion, according to estimates from analysts surveyed by Refinitiv.

The Disney store in the Times Square neighborhood of New York, US, on Monday, Oct. 30, 2023.

Angus Mordant/Bloomberg/Getty Images

Disney's report comes at a challenging time for the company, as it faces financial difficulties with its streaming business, the impact of cord cutting, a series of box office failures, an ongoing strike by actors, and legal battles with Florida Governor Ron DeSantis, who is also a Republican presidential candidate.

The company stated that it is aggressively managing its costs and plans to cut an additional $2 billion in expenses compared to previous projections. In February, Disney had already announced 7,000 job cuts as part of a $5.5 billion cost-saving plan. However, the company now aims to achieve a total cost reduction of $7.5 billion. Although no further job cuts have been announced, the increased cost-cutting measures may imply future layoffs.

The HULU logo is visible at the convention center, as photographed during San Diego Comic-Con International in San Diego, California, on July 23, 2023. (Photo credit: Chris Delmas / AFP) (Photo by CHRIS DELMAS/AFP via Getty Images)

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Disney to acquire remaining stake in Hulu for expected $8.6 billion

Disney's theme park division had a remarkable performance, with an impressive growth rate of over 30% compared to the previous year. The company attributed this success to the strong performance of its international theme parks and Disney cruises. However, it was noted that revenues for Walt Disney World in Central Florida were not as strong.

The company's fiscal fourth quarter spanned from July to October of this year, coinciding with the traditionally slower summer season observed at Walt Disney World Resort in Central Florida. In July, visitors to Disney World experienced shorter ride wait times and fewer crowds than anticipated.

Disney+, the leading streaming service of Disney, witnessed a 1% growth in its subscriber count in the US and Canada during the quarter. Moreover, it observed a notable increase of 11% in international subscribers. According to Iger, the ad-supported version of Disney+ successfully garnered over 2 million new subscriptions in the fourth quarter.

Disney's streaming service venture has incurred losses exceeding $10 billion since its launch in 2019. During Disney's earnings call, Iger restated the company's confidence in achieving profitability for its streaming services by the conclusion of 2024.

Iger expressed optimism about the future prospects of our streaming business. In October, Disney increased the cost of the ad-free Disney+ subscription to $13.99 per month, while maintaining the price of its advertising tier at $7.99 per month.

However, Disney's streaming endeavors go beyond Disney+. In a recent announcement, Disney revealed its plans to purchase Comcast's one-third ownership in Hulu for $8.61 billion, granting Disney full control over the streaming platform.

Iger said a beta version of a combined Hulu-Disney+ app will launch in December, with a formal rollout planned for early Spring 2024.

This is a developing story and will be updated.