The initial exuberance and relief following Bob Iger’s return as Disney CEO has been replaced by anxiety as speculation about a pending corporate restructuring is intensifying — and with it, rumors about the layoffs that are likely to follow.
Rumblings of a new org-chart unveiling are growing louder amid mounting pressure on the company (including from activist investor Nelson Peltz) to stage a rebound with Iger back at the controls. Details on the restructuring moves, which could potentially include some sort of consolidation within the company’s marketing operations as well as at Disney Television Studios, are likely to emerge soon and could coincide with the company’s next quarterly earnings report February 8, sources tell Deadline.
And then there is the future of the Disney Media and Entertainment Distribution executive ranks.
Iger didn’t waste time issuing one high-profile pink slip after replacing Bob Chapek last November; not even a full day after his restoration to the corner office, DMED chairman Kareem Daniel left the company. Iger had made no secret of his dislike of DMED, which was created by Chapek as a way of centralizing distribution decisions under Daniel, a Chapek loyalist. The division mainly succeeded in fomenting resentment and mistrust, taking decision-making power away from the company’s creative leaders and straining creative relationships.
Disney did not respond to a request for comment from Deadline.
While DMED is going to be dismantled, there are questions about how the unwinding will happen and about the fate of the remaining executives. Atop the list are Debra OConnell, president of Networks for Disney Media & Entertainment Distribution, and her top lieutenant, head of business operations Chuck Saftler, both of whom highly respected within the company and beyond.
The longest-tenured FX employee having joined the network in December 1993, Saftler was an integral part of FX Networks chairman John Landgraf’s team before he was promoted to the DMED post. Saftler has been closely involved with the networks in his current role – he is credited with the recent ratings resurgence at FXX through the programming of off-network comedies and movie acquisitions. There are different scenarios about what would happen to him, but it is conceivable he could remain part of the close-knit group of FX executives who have been together for decades.
Another area drawing a lot of speculation is Disney Television Studios, which consists of 20th Television, ABC Signature, 20th Animation and Walt Disney Television Alternative. (Additionally, there are two other separate TV production arms, FXP and Searchlight Television.)
The situation is reviving questions raised at the time of Disney’s $71.3 billion acquisition of Fox assets as to whether Disney would keep then-ABC Studios and 20th Century Fox Television separate. Ultimately, they did remain stand-alone studios with their own infrastructures, though Fox 21 Studios was folded into 20th TV, which is now run by Karey Burke. Meanwhile, 20th Television Animation was made a separate division led by Marci Proietto, and ABC Studios was rebranded as ABC Signature with Jonnie Davis at the helm.
The consolidation chatter is even stronger this time around, with various scenarios circulated about what divisions could be merged. Everything seems to be on the table.
A successful potential consolidation of 20th TV and ABC Signature will depend on melding their two very different cultures. “Can two fried eggs become an omelet?” a well-positioned observer asked. Dana Walden, who has risen to the role of chairman of Disney General Entertainment Content, does know plenty about bridging divides as the highest-ranking former Fox exec now in Burbank.
Walden just recently consolidated another area of the division she took over last summer, bringing back together publicity and communications years after they had been split. One position was eliminated as a result, with more cuts a possibility.
Deadline has heard that the movie studio, currently riding the success of Avatar: The Way of Water, is not expected to be part of the pending cuts. Any Disney layoffs out of the reorg may be smaller and more targeted than what we have seen from other Hollywood outlets in recent months, we hear. Part of that is the sprawling nature of the company. Now that some of the Chapek-era pricing issues have been addressed, and Iger has gone on a few team-building visits to Anaheim and Orlando, the ruptures at the revenue-rich Parks, Experiences and Products division seem to be starting to heal.
Reshaping the company won’t be easy, of course. Disney, like other media companies, is contending with the ongoing decline of linear television and the high cost of streaming, against the backdrop of a fragile economy and uncertain advertising climate.
At the heart of Disney’s bottom line issue, we’re told, is that sexiest of business lines: accounting.
Under the Byzantine nature of the company’s current system, the production company of a particular program or series sends a program to DMED. Then, via an inter-company transaction, DMED reimburses the production for the cost of said program or series. Most importantly to Wall Street, all losses sit on DMED’s books – which is not a good look. “How we fix that will determine in no small way, how Wall Street reacts,” said a Tinseltown dealmaker of Disney’s dilemma.
A primary focus of the cost-cutting effort is stimulating the stock price, whose decline prompted Peltz to initiate a proxy battle. Shares at the end of 2022 bottomed out at a multi-year low after Chapek presided over a disastrous quarterly report. As SEC filings after his exit made clear, he had lost the confidence of the board earlier in the year, further preventing a smooth re-emergence from the Covid cave. Peltz says he wants a seat on the company’s board of directors, a pitch that will go to a vote in March during what is apt to be the liveliest shareholder meeting since the Roy Disney-Michael Eisner affair in 2004.
Regaining the trust of the Street is Job 1 for Iger and the board. “Whatever it takes, whatever costs they have to cut, that’s what they’ll do,” one industry insider told Deadline. “Getting back in the Street’s good graces solves the Peltz and other activist investor issues, it solves shareholder grumbling, it solves everything, for now,” the insider added.
Disney stock, like many media issues at the start of this year, seems refreshed. While still well off its recent high point of $189 in early 2021, it closed Thursday up 1.5% at $108.45 and has risen 24% in 2023 to date.
Anthony D’Alessandro and Jill Goldsmith contributed to this report.