Disney announced on Wednesday that it will divide into three pieces, eliminate thousands of positions, and save expenses.
According to the massive media and entertainment company, it will now be divided into three divisions: Disney Entertainment, which includes most of its streaming and media operations; an ESPN division that includes the TV network and the ESPN+ streaming service; and a Parks, Experiences, and Products unit.
The decision represents Bob Iger's biggest step since resuming his role as CEO of the company in November. Following the release of its most recent quarterly earnings, Disney made the modifications public. The developments also come as Disney is battling activist investor Nelson Peltz and his company Trian Management over proxies.
Disney recently announced that it would be cutting 7,000 positions from its staff. According to an SEC filing, it employed about 220,000 employees as of October 1-about 166,000 of them in the United States and 54,000 abroad-which equates to about 3% of that total.
Disney also disclosed on Wednesday that it would be slashing $5.5 billion in costs, of which $3 billion will come from content, excluding sports, and the remaining $2.5 billion from non-content reductions.
According to Disney executives, cost-cutting measures worth $1 billion have already started since the previous quarter. In after-hours trading, Disney's stock increased by roughly 5%.
Media firms like Warner Bros. Discovery have been reducing their content investment in an effort to increase the profitability of their streaming businesses. The growth of subscribers has slowed due to increased competition, thus businesses have been seeking new ways to increase revenue. Some have included more affordable, ad-supported services, like Disney+ and Netflix.
Since Iger took over again as CEO of Disney, replacing his hand-picked successor Bob Chapek, the restructuring has been in progress. Top lieutenants Dana Walden and Alan Bergman, who are both viewed as potential successors to Iger in less than two years, will head the entertainment division.
While Josh D'Amaro, who is now in charge of Disney's parks, experiences, and products section, will continue in that position, ESPN Chairman Jimmy Pitaro will oversee the ESPN division.
Investors have long wondered what ESPN will become under Disney's control. Third Point, an activist investor group led by Dan Loeb, had pushed the business to spin out ESPN last year.
Disney and Third Point eventually came to an agreement after changing its mind about the future of ESPN.
Iger addressed rumors that the business would consider spinning out ESPN because the sports network is isolated into its own entity. He pointed out that even while cord-cutting has caused ESPN to struggle, the ESPN brand and programs are still strong and in high demand.
