Published - February 9, 2023 @ 11:05 AM (EET)

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Bob Iger's return as Walt Disney's (NYSE:DIS) CEO promised a reversal of the company's recent success and now potentially also a dramatic restructuring of the world's largest entertainment business.

Following an earnings beat that pushed the company's stock higher in after-hours Wednesday, Iger announced plans to reduce its workforce by 7,000 employees and cut costs by $5.5 billion.

The layoffs will affect about 3% of Disney's 220,000 employees.

The reduction plan will include no-content costs of about $2.5 billion and cost-cutting of $3 billion from its budget for movies and TV shows. 

The reform will affect all three companywide business units, including Disney Entertainment, ESPN and Disney Parks, Experiences, and Products. Iger said about $1 billion in savings are already underway in its push for efficiency and that streaming remained Disney's top priority.

EARNINGS RESULTS

In response to slowing subscriber growth and increased competition for streaming viewers, Disney became the latest media company to announce staff layoffs.

Earlier on Wednesday, the company reported its first quarterly decrease for its Disney+ streaming service, which lost more than $1 billion. Subscribers to the network declined by 1% in the quarter to 161.8 million.

While losses more than doubled from a year earlier, the results were than management had forecast three months ago.

Meanwhile, Disney reported first-quarter revenue of $23.51 billion, up 8% year-over-year, beating Street estimates of about $23.4 billion.

The direct-to-consumer business saw revenues for the quarter climb 13% to $5.3 billion. However, operating losses widened to between $0.5 billion and $1.1 billion, driven by the "higher loss at Disney+ and decreased results at Hulu."

NOW WHAT

Mr. Iger is under pressure to achieve profitability for its streaming business in fiscal 2024. The segment has lost more than $9 billion since it launched in 2019, having spent heavily on content to attract subscribers.

Thus, the new structure makes good on Iger's promise to restore decision-making to the company's creative leaders, who will determine what movies and series to make and how they will distribute and market the content.

Another significant decision Disney faces is whether and when to buy the remaining one-third stake in Hulu, owned by Comcast Corp.'s NBCUniversal whether to spin off the sports network ESPN.

However, on a conference call with analysts, Disney said it has no plans to spin off ESPN - a possibility that Iger said was studied but rejected in his absence.

Disney shares rose 4.7% to $117.22 in after-hours trading.

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