Disney splits business into three core segments – Entertainment, ESPN and Parks

Walt Disney Company has unveiled a vast restructuring scheme amid thousands of job cuts and the announcement that CEO Robert ‘Bob’ Iger will step down in the next two years.

The embattled entertainment company will be organized into three core collaborative business segments: Disney Entertainment, ESPN and Disney Parks, Experiences and Products.

The move marks the most significant action since Iger returned to the company as CEO in November, and was revealed just minutes after it posted its most recent quarterly earnings.

During a call with investors, Disney also announced it would be cutting $5.5 billion in costs, which will be made up of $3 billion from content, excluding sports, and the remaining $2.5 billion from non-content cuts.

Walt Disney Company has unveiled a vast restructuring scheme amid thousands of job cuts and the announcement that CEO Robert ‘Bob’ Iger will step down in the next two years

Disney executives said about $1 billion in cost cutting was already underway since last quarter.

Disney also said it would be cutting 7,000 jobs from its workforce which is about 3 percent of the roughly 220,000 people employed. That equates to roughly 166,000 in the U.S. and about 54,000 internationally.

The reorganization has been in the works since Iger returned to the helm, replacing his successor Bob Chapek.

‘For nearly 100 years, storytelling and creativity have fueled The Walt Disney Company, with virtually every interaction we have with our consumers emanating from something creative,’ said Iger in a statement to Business Wire.

‘I am committed to positioning this company for a new era of growth. Our strategic restructuring will return creativity to the center of the company, increase accountability, improve results, and ensure the quality of our content and experiences.’

Disney Entertainment will be co-chaired by Alan Bergman and Dana Walden who will be responsible for the company’s full portfolio of entertainment media and content businesses globally, including streaming.

ESPN will include ESPN networks and ESPN+ and will be led by Jimmy Pitaro who will will also be responsible for the management and supervision of the company’s sports content.

The streaming business remains a top priority for the company. 

‘Every day, I am reminded of what incredible talent we have leading the many facets of this company,’ Iger said. 

Disney also said it would be cutting 7,000 jobs from its workforce which is about 3 percent of the roughly 220,000 people employed. That equates to roughly 166,000 in the U.S. and about 54,000 internationally

‘Thanks to my management team and our exceptional business leaders, who have acted quickly and strategically on the important changes we are undertaking today, I am as encouraged as ever by what the future holds for The Walt Disney Company.’

Outside of North America, the company’s media, entertainment, and sports content will continue to be managed regionally by Asia Pacific President, Luke Kang, EMEA President, Jan Koeppen, LATAM President, Diego Lerner and India President K Madhavan.

They will report to Bergman, Walden, and Pitaro as part of their global responsibilities.

Meanwhile, Disney Parks, Experiences and Products which includes the company’s theme parks, cruise line, resort destinations will continue under the leadership of Chairman Josh D’Amaro.

The organizational changes are expected to take effect immediately with results expected to be reported by the end of the fiscal year.

The announcement comes after activist investor billionaire Nelson Peltz declared his proxy fight with Disney over after the entertainment giant revealed it would cut billions of dollars in costs along with 7,000 jobs.

Accompanying Peltz’s announcement was a statement from current CEO Bob Iger, 71, that he will step down in two years.

Peltz, 80, told CNBC’s ‘Squawk on the Street’ that ‘Disney plans to do everything we wanted them to do,’ calling the ending of his activist battle a ‘great win.’

Last month, Trian launched a proxy fight with Disney, pushing for Peltz to gain a seat on the company’s board of directors.

At the time, the firm said it owned about 9.4million shares valued at about $900million, which it accumulated several months prior.

The announcement comes after activist investor billionaire Nelson Peltz declared his proxy fight with Disney over after the entertainment giant revealed it would cut billions of dollars in costs along with 7,000 jobs

Peltz had previously taken a critical stance against Disney’s $71billion acquisition of Fox in 2019, as well as its failed succession planning that resulted in the ousting of Chapek and second reign of Iger.

During the remainder of Iger’s tenure, he will be responsible for crafting a more solid succession plan than the one which left Chapek in place only to oversee a period of turbulence for the company.

‘We thought we made the right decision when we chose Bob [Chapek] in 2020. The board decided in November he wasn’t the right person for the job and made a change,’ Iger said, declining to comment further.

He added that a major focus of the company at the moment is profitability for the company’s streaming division – one aspect of what Peltz’s campaign was based upon.

The 7,000 job cuts are designed to save the company as much as $5.5 billion.

‘We’re still losing money on streaming,’ Iger said Thursday. ‘We need to turn that around.’ He is hoping for profitability by 2024.

The company’s recent streaming service price hike likely led to the loss of about 2.4 million Disney+ customers.

Iger also said the company will focus on leaning into fan-favorite franchises that have been massive commercial successes, like Frozen and Toy Story, for which sequels are in the pipeline.

Investors have been largely pleased to see Iger’s return following a short-lived retirement from his role as CEO with company stock up more than 20 percent since his November return.

Iger was critical of Peltz’s play, saying that the investor – worth roughly $1.4billion –  ‘has not articulated either a vision, or even ideas, that are of particular value to us.’

Peltz waged a ‘Restore the Magic’ campaign for a seat on the board after claiming that the company had wasted funds in the last several years battling a super woke reputation that is unappealing to families, and in the process costing shareholders $120 billion.

‘For a company with so many advantages – unparalleled consumer loyalty and access, valuable intellectual property, renowned brands, an enviable library of content and a talented and engaged workforce – it is disappointing and simply unacceptable that shareholders have suffered so much,’ Peltz said in a letter to Disney shareholders last week.

Peltz has explained that is generally turned off by virtue-signaling and culture-shaping efforts from companies and that he’s more interested in operations and cash.