Shares of Walt Disney Co. (DIS) are trading down about 1.4% at $101.44 mid-day Thursday after news broke that the media giant is planning to make significant budget cuts. (See also: Three Reasons Why Disney Doesn't Need Netflix.)
The Burbank, Calif.-based global entertainment company is reportedly considering slashing its workforce at its ABC TV unit by 10% as the network and many of Disney’s other major cable channels struggle to find new hit shows against competition from the likes of Netflix and Amazon.
The majority of the cost cuts at Disney are expected to take place at its ABC broadcast network, its television production studio, ABC News and local television stations. Sources close to the matter told The Wall Street Journal that cable networks Disney Channel and Freeform are also likely to see staff reductions. The cost cuts and restructurings should be identified by the end of September and are expected to amount to $300 million of the unit’s annual costs. An approximate 300 positions could be eliminated through layoffs and attrition in the segment which employs 10,000 people.
Facing off Against Netflix
The move is in line with ABC’s President Ben Sherwood’s promise to Disney Chief Executive Bob Iger to turn the network into a “21st century broadcaster” and learn to “do more with less.” Last season, ABC finished behind CBS and NBC in viewers, down 11% in the adult category, its most important for advertising revenue. A mix of lower advertising revenue and rising operating costs have attributed to ABC’s revenue dip of 22% in the nine-month period ended June. Over the same period, operating income rose 6%.
The news comes as Disney’s struggling cable-sports unit, ESPN, grappling with its own declining ratings and dwindling subscriber base, follows through with employee reductions in 2017. Earlier this year, Disney cut ties with Netflix Inc. (NFLX) as it plans to roll out its own direct-to-consumer streaming service. (See also: Netflix Steals Hitmaker Shonda Rhimes From Disney and ABC.)