Disney to axe 7,000 jobs in bid to cut costs
Around 7,000 jobs are to go at Disney – about 3.6% of the workforce – as a multi-billion dollar cost saving restructuring was announced by chief executive Bob Iger in his battle to improve the company’s finances.
It was Mr Iger’s first quarterly results announcement since he retook control of the entertainment giant in late November following a shareholder backlash over its performance.
He revealed plans to save $5.5bn in costs under a “significant transformation” to improve profitability at the company’s streaming business, which lost more than $1bn in the October-December quarter as Disney+ subscriptions fell.
An earlier $1.5bn quarterly group loss led to the departure late last year of Iger appointee, Bob Chapek.
Disney planning sequels for some of its most popular movies
Mr Iger, who had stepped down from the top job in 2020, told investors on Wednesday night: “This reorganisation will result in a more cost-effective, coordinated approach to our operations.
“We are committed to running efficiently, especially in a challenging environment.”
At the same time he revealed plans for sequels of some of the company’s biggest animated franchises such as Toy Story, Frozen and Zootopia.
While group net profits came in at $1.8bn, subscribers of the Disney+ streaming service dropped by 2.4 million, the first decline since the platform was launched, but revenues were still up and better than Wall Street forecasts as theme parks brought in operating profit of $3.1bn during the quarter.
Despite the cost of living crisis the theme park profit is a 25% increase from a year earlier, helped by strong attendance over Christmas.
As seen more generally in the streaming industry, Disney+ subscriptions fell: by the end of last year there were 161.8 million people paying to access the Disney+ service – down from 164.2 million on 1 October, Disney said in its results announcement for the first three months of its 2023 financial year.
The fall came as the cost of a monthly ad-free subscription was upped from $7.99 (£6.61) to $10.99 (£9.10) in December.
Read more
Is the magic back? Bob Iger’s return to Disney
Five ways streaming giants could change to stop Britons hitting cancel
Despite the Disney+ drop and losses, revenues overall came in ahead of analyst estimates at $23.51bn (£19.47bn).
Mr Iger said streaming remained Disney’s top priority. He said the company would “focus even more on our core brands and franchises” and “aggressively curate our general entertainment content”.
Click to subscribe to The Ian King Business Podcast
He also said he would ask the company’s board to restore the shareholder dividend by year end.
Chief Financial Officer Christine McCarthy said the initial dividend would likely be a “small fraction” of the pre-COVID level with a plan to increase it over time.
One of the world’s largest investment firms has waded into the fight over the future of Thames Water, the water utility which is racing to stay afloat.
Sky News has learnt that KKR is in talks with Thames Water and its advisers about participating in a £3bn share sale which forms part of a wider recapitalisation plan.
City sources said this weekend that KKR, which has more than $550bn of assets under management, was among a handful of parties which had accessed a data room for potential investors.
Rothschild, the investment bank, is running a process to raise around £3bn from the sale of an equity stake in Thames Water, which is grappling with a debt mountain of as much as £19bn.
Other investors which have expressed interest in acquiring newly issued shares in the water company include Carlyle and Castle Water, the latter of which is controlled by Graham Edwards, the Conservative Party treasurer.
Global Infrastructure Partners, which is owned by BlackRock, Brookfield and Isquared are also reported to have lodged an interest, although sources said that the latter two were unlikely to play any further role in the process.
The crisis at Thames Water is presenting Sir Keir Starmer’s administration with a challenge as the debt-laden company attempts to avert temporary nationalisation.
Insiders said that KKR was “a serious player” in the equity process being run by Thames Water, although its outcome hinges on a final determination by Ofwat, the industry regulator, which is due by January at the latest.
Thames Water – and other suppliers across Britain – wants to hike bills and is demanding leniency from Ofwat on fines for past transgressions.
One obstacle to KKR buying a big stake in Thames Water, which has more than 15m customers, may be its 25% holding in Northumbrian Water.
Money blog: Should you give money directly to a homeless person?
Under Ofwat’s mergers regime, the Competition and Markets Authority would need to review the deal, although there would not be an automatic prohibition.
The share sale process is being run in parallel to an attempt to raise up to £3bn in debt financing from hedge funds and other investors.
A battle has broken out between the holders of Thames Water’s class A bonds, which account for the bulk of its borrowings, and its riskier class B debt.
Both sets of bondholders have submitted proposals to the company, with the class A’s arguing that theirs is more certain and the class B’s arguing that theirs will save the company £380m or more in fees and interest over a 12-month period.
Thames Water has already endorsed the class A group’s offer, with an initial £1.5bn of funding to be delivered immediately.
The class A bondholders are now trying to secure backing for their proposal within the next fortnight.
Their group, which includes the American hedge funds Elliott Advisers and Silverpoint, would earn in the region of £650m during the first year of the financing.
One area of controversy is likely to be any incentive plan for Thames Water bosses, led by chief executive Chris Weston, as part of a deal to give the company a stay of execution.
Please use Chrome browser for a more accessible video player
September: Thames Water boss says he can ‘save’ company
Last month, the environment secretary, Steve Reed, established an independent review of the industry that will look at far-reaching reforms.
Keep up with all the latest news from the UK and around the world by following Sky News
It was unclear this weekend which of KKR’s funds was participating in the Thames Water equity-raise.
The firm owns John Laing, an infrastructure investor, which it took private in 2021.
It has also owned South Staffordshire, another water company, selling its 75% interest in 2018.
KKR declined to comment.
The business secretary will next week hold talks with dozens of private sector bosses as the government contends with a significant corporate backlash to Labour’s first fiscal event in nearly 15 years.
Sky News has learnt that executives have been invited to join a conference call on Monday with Jonathan Reynolds, in what will represent his first meaningful engagement with employers since Wednesday’s budget statement.
Rachel Reeves, the chancellor, unsettled financial markets with plans for billions of pounds in extra borrowing, and unnerved business leaders by saying she would raise an additional £25bn annually by hiking their national insurance contributions.
An increase in employer NICs had been trailed by officials in advance of the budget, but the lowering of the threshold to just £5,000 has triggered forecasts of a wave of redundancies and even insolvencies across labour-intensive industries.
Sectors such as retail and hospitality, which employ substantial numbers of part-time workers, have been particularly vocal in their condemnation of the move.
Keep up with all the latest news from the UK and around the world by following Sky News
On Friday, the Financial Times published comments made by the chief executive of Barclays in which he defended Ms Reeves.
“I think they’ve done an admirable job of balancing spending, borrowing and taxation in order to drive the fundamental objective of growth,” CS Venkatakrishnan said.
His was a rare voice among prominent business figures in backing the chancellor, however, with many questioning whether the government had a meaningful plan to grow the economy.
Mr Reynolds held a similar call with business leaders within days of general election victory, and over 100 bosses are understood to have been invited to Monday’s discussion.
A spokesman for the Department for Business and Trade declined to comment ahead of Monday’s call.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports7 months agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Environment1 year agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway