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Disney Announces Reorg That Will See It Lay Off 7,000 Employees, and an Avatar Attraction That’s Coming to Disneyland; ESPN Not for Sale

Major changes are coming to Disney, whose recently returned CEO Bob Iger announced a complete reorganization that separates the company into three core business segments — Disney Entertainment (which includes Disney’s DTC business) run by co-chairs Dana Walden and Alan Bergman; ESPN (including ESPN+), led by Jimmy Pitaro; and Disney Parks, Experiences, and Products, headed by Josh D’Amaro.

The move returns creative authority to Disney’s “world-class creative team” after former CEO Bob Chapek had given the final say over content decisions to execs in Disney’s Media & Entertainment Distribution division (run by Kareem Daniel), which has since been dismantled.

Unfortunately, as a result of this reorg, Disney will be eliminating 7,000 jobs in a bid to cut costs. That represents 3.2 percent of Disney’s approximately 220,000 employees worldwide.

Disney CFO Christine McCarthy said the cuts will lead to $5.5 in cost savings — $3 billion in non-sports content costs, and the other $2.5 billion associated with costs tied to that content — marketing (50 percent), labor (30 percent), and technology, procurement, and other expenses (20 percent). Apparently, $1 billion of those targeted cost-reductions are already underway, according to Iger, who said he didn’t take the need for layoffs lightly.

ESPN logo

“I have enormous respect and appreciation for the dedication of our employees worldwide,” said Iger, who noted that content has simply become more expensive.

ESPN remains a valuable business to Disney, though it will operate independently from the rest of Disney’s linear TV networks, which have their own corporate structure. While Disney did explore the possibility of spinning off ESPN during Chapek’s tenure due to the challenges currently facing linear TV, that isn’t part of Iger’s plan, though he did acknowledge Disney’s struggle to better monetize the ESPN brand, which remains the worldwide leader in sporting news.

Activist investor Daniel Loeb had previously called for Disney to spin off ESPN, though he later changed his mind, as he came to see its potential as a standalone business unit — one that Iger made clear is not for sale. Iger said he feels it’s inevitable that ESPN will become a streaming-first business, seeing as how that’s where the entire business is headed, but that Disney isn’t quite ready to make that shift.

They may want to wait for the NBA’s rights contract to lapse after the 2024-2025 season, when the league will be seeking a massive pay increase from TV networks. The NBA’s last rights contract was valued at over $2 billion, but with deep-pocketed streamers like Amazon embracing live sports, there’s more competition for those rights than ever before.

Avatar: The Way of Water
Avatar: The Way of Water image via 20th Century Studios

Iger suggested that while Disney is ready to pay top dollar for the most popular pro sports, ESPN chief Pitaro might have to be more selective about sports deals going forward. Indeed, it seems that everyone in Hollywood, including Disney, is preparing to tighten their belts as a recession looms.

Though Disney beat Wall Street’s estimate for Q4 of 2022, it acknowledged that Disney+ suffered its first-ever decline in subscribers, losing 2.4 million subscribers, a figure driven by losses at Disney+ Hotstar. On the other hand, ESPN+ announced it has 24.9 million paid subs, which is up 2 percent from last year’s tally of 24.3 million. That streaming service is offered both on its own and in a reasonably-priced bundle with Disney+ and Hulu.

As for Disney’s Parks and Experiences division, business is still booming thanks to profits of over $3 billion, and it should get a further boost when a new attraction based Avatar and the world of Pandora debuts as part of Disneyland, though Iger didn’t give any timeframe on that front. Disney’s Animal Kingdom theme park in Orlando currently features an area dedicated to Avatar that is designed like Pandora and includes two rides — Avatar Flight of Passage and Na’vi River Journey.

James Cameron‘s original film debuted in 2009 and its sequel, The Way of Water, has grossed nearly $2.2 billion worldwide thus far. Disney has three more sequels scheduled for December 2024, 2026, and 2028. It’s hardly the only franchise that Disney values, however, as Iger announced a trio of animated sequels — one each in the beloved Frozen, Toy Story, and Zootopia franchises — though he didn’t offer any creative details about any of those projects.

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