Disney (DIS) is putting the brakes on spending after the company reported weak fourth-quarter earnings, which sent the stock plummeting to a new 52-week low as investors focused on the media giant’s mounting streaming losses .
In an internal memo obtained by Yahoo Finance, Disney CEO Bob Chapek told division chiefs on Friday that the company has established “a cost structure task force” to help Disney+ achieve its cost recovery goals. profitability.
“As we enter fiscal 2023, I want to communicate directly with you about the cost management efforts that Christine McCarthy and I mentioned on this week’s earnings call,” the memo reads. “”These efforts will help us both achieve the important goal of achieving profitability for Disney+ in fiscal year 2024 and make us a more efficient and agile company overall. This work is taking place against a backdrop of economic uncertainty that all businesses and our industry face.”
The task force, which includes Chapek, as well as Disney Chief Financial Officer Christine McCarthy and General Counsel Horacio Gutierrez, “will make the critical overall decisions necessary to achieve our goals.”
In an effort to cut costs, the executive revealed that the media giant has “undertaken a rigorous review of the company’s content and marketing spend” and “will limit headcount additions through a targeted staff freeze.” hires”. Layoffs are also on the table.
“We anticipate some staff reductions as part of this review,” Chapek noted in the memo, adding that the task force has already conducted a rigorous review of the company’s content and marketing spend.
“I am fully aware that this will be a difficult process for many of you and your teams,” the memo reads. “We’re going to have to make some tough and uncomfortable decisions. But that’s exactly what leadership demands, and thank you in advance for stepping in during this important time.”
Disney+, Hulu and ESPN+ lost $1.5 billion in the fourth quarter after losing $1.1 billion in the third quarter. Disney+’s average revenue per user also disappointed, falling to $3.91 (vs. estimates of $4.29) amid unfavorable currency impact and higher subscriber base.
Management said it expects streaming losses to decline by approximately $200 million in the first fiscal quarter of 2023 before profitability in fiscal 2024. The company will roll out its $7.99 level. ad-supported in December, a month after Netflix’s highly anticipated debut. possibility of announcement.
Despite mounting losses, Disney+ saw subscriber net additions reach 12 million in the fourth quarter, beating expectations of just over 9 million. The pace came after the company reported an increase in subscribers in the third quarter (14.4 million) following new market launches and a strong content roster.
The media giant has warned that it expects Disney+ subscriber growth as well as the number of Indian service Hotstar subscribers to be lower in the first quarter of next year. Content spending is expected to be in the low $30 billion range for the year 2023.
“Our company has overcome many challenges over its 100-year history, and I am confident that we will achieve our goals and create a more agile company that is better suited to the environment of tomorrow,” Chapek’s memo concluded. .
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