Success with streaming not enough to prevent layoffs at Disney

The front entrance of Disneyland. (Photo courtesy Wikimedia Commons/Graphic by The Desk)

Weeks after announcing a major re-structuring of its business, the Walt Disney Company said this week it intend to lay off 32,000 people by March 2021.

The job cuts increase those announced in late September by 4,000, according to company executives, with most of the layoffs coming from Disney’s theme parks that have taken a financial hit since the start of the ongoing global coronavirus health crisis.

The layoffs are necessary to curb steep financial losses during the pandemic: The same week Disney’s blockbuster streaming service Disney Plus turned one year old, executives revealed the company had suffered its second consecutive quarter loss — and that trend is unlikely to reverse anytime soon, they warned.

Disney’s theme parks spread across three continents have long been considered a reliable generator of revenue, but the ongoing coronavirus pandemic that has shuttered live entertainment and impacted other businesses has cut deep at the company.

Disney’s Florida-based theme park is operating at reduced capacity. It’s flagship park in California, Disneyland, is located in an area that has seen a severe spike in coronavirus infections over the last few weeks and is not expected to re-open at all until later next year.

Theme park and live entertainment staffers make up more than three-quarters of Disney’s 200,000 employees, according to figures cited by the Wall Street Journal newspaper.  Hundreds have already been furloughed or laid off since the start of the pandemic, and many more are expected to lose their jobs in the coming weeks.

Earlier this month, Disney’s executives said they were now pumping more investment into their direct-to-consumer streaming businesses as a way to generate revenue and potentially offset some of their losses, with Disney’s chief executive Robert Chapek referring to streaming media as “the right bright spot” of the company.

Even before the pandemic hit, Disney’s flagship streaming service Disney Plus was considered a runaway success: The company racked up millions of subscribers domestically (some thanks in part to a partnership with Verizon in which the phone company’s customers get Disney Plus for free), then focused its attention on launching the service in other countries, including the United Kingdom, Canada, Mexico, Germany, Spain, Japan, Portugal and Australia.

As of early November, Disney Plus had nearly 74 million paying and partner subscribers.

Following its success, Disney Plus became the gauge by which other startup streaming services were measured, including Comcast’s Peacock (more than 22 million subscribers across three free and premium tiers), AT&T WarnerMedia’s HBO Max (9 million account activations out of more than 33 million subscribers to HBO) and the now-shuttered Quibi.

In addition to Disney Plus, the company has more than 36 million paying subscribers to its adult-oriented streaming service Hulu and another 10 million subscribers paying for its companion sports service ESPN Plus. Some customers receive all three services as part of a streaming bundle that is offered at a discount.

Disney’s success in streaming television prompted company executives to do two things during the pandemic: Release its live-action reboot of “Mulan” directly to consumers for a one-time fee of $30 and re-organize its entire company around direct-to-consumer relationship with a heavy emphasis on streaming.

“Maybe, given everything that’s happening in the world, this is the perfect time for us to do such a re-organization,” Chapek told investors earlier this month. “I’m 100 percent confident that this is going to play out exactly as we had intended. It’s going extremely well, and despite the disruption in everyone’s roles, I think we have 100 percent buy in.”

But the disruption has hit Disney’s bottom line hard in a way that won’t be quickly reversed by a sudden re-organization.

“With our parks business sort of…having an anchor on it, if you will, that we can’t properly operate our parks business like we’d like to, we have to be a little bit more careful today than we might have to be in the future,” Chapek said.