Disney to Accelerate Cost Cutting

Nearly a year after returning to Disney as chief executive, Bob Iger laid out his vision of the company’s future, putting streaming and live entertainment at the center, fed by a studio business that he plans to personally help reinvent.

The Wall Street Journal reports Iger told investors in a fourth-quarter earnings call that Disney will focus on four “building blocks” that provide the foundation for future growth: streaming, theme parks and cruises, studios and the ESPN sports network.

Disney said Wednesday it would slash $2 billion more in costs than previously planned as the company sharply narrowed losses in its streaming business.

There are still major challenges to overcome. Disney’s streaming business has lost nearly $11 billion since the launch of Disney+ in late 2019. Its movie studio is in the midst of a box-office slump that has been exacerbated by delays caused by Hollywood strikes, and ESPN is looking for strategic partners as it plans to eventually transform into a streaming-only business by 2025.

Bob Iger

Iger said the studio would focus more on quality than quantity and that it lost some of its focus during and after the pandemic. “We’re all rolling up our sleeves, including myself, to do just that,” he said.

The common thread underlying Disney’s recent challenges and potential opportunities is the transition from traditional media like film and legacy TV to streaming, which has upended Hollywood’s business model and roiled nearly every entertainment company.

In his comments Wednesday, Iger stressed the importance of getting streaming right. The company’s main streaming service, Disney+, added 6.9 million “core” subscribers—those in North America and other markets such as Europe and Asia, excluding India, where it is able to charge higher subscription prices—in the most recent quarter, about twice what Wall Street analysts polled by FactSet predicted. Disney+ added 500,000 domestic subscribers.

The entertainment giant said Wednesday it is seeking $7.5 billion in cost cuts, up from the $5.5 billion it targeted at the beginning of this year.

Disney reported that its streaming business is making progress in narrowing its losses. The business, which also includes Hulu and ESPN+, lost $387 million in the most recent quarter, down from $1.47 billion a year earlier. The company reiterated that it believes streaming will break even by next September.

ESPN’s operating income for fiscal 2023 fell 1.7% to $2.8 billion, while revenue rose 2% to $16.4 billion. Disney owns 80% of ESPN through a joint venture with Hearst, and Iger has said the company is working to transform the network into a fully direct-to-consumer platform, with live sports and other sports content streamed to consumers outside the cable bundle.

Excluding ESPN, Disney’s traditional TV networks saw revenue fall 9.1% for the quarter to $2.62 billion. Operating income from the networks was flat at $805 million.

During a CNBC interview Wednesday, Iger said the company has been considering strategic options for each of its TV networks, though “not necessarily all of them,” and has been reviewing its TV operations for opportunities to reduce costs and improve the business. This past summer, he said the legacy networks may not be core to Disney, suggesting it could sell them.