Disney Lays Off High-Profile ESPN Talent In Further Attempt To Cut Costs
Key Takeaways
- ESPN laid off 20 high-profile broadcast personalities last week, one of many cost-cutting measures happening across Disney (DIS)
- Disney stock saw its biggest decline in six months after Disney+ lost 4 million subscribers in Q2 after increasing prices
- The entertainment giant continues to bet big on original content and streaming despite uncertainty
On-air personalities impacted by the recent ESPN layoffs include Max Kellerman, Keyshawn Johnson, Jeff Van Gundy, Jalen Rose and LaPhonso Ellis, and Suzy Kolber. In a statement, ESPN said: “Given the current environment, ESPN has determined it necessary to identify some additional cost savings in the area of public-facing commentator salaries.”
ESPN has struggled to hang on to viewers and advertisers, while Disney+ is spending big money — a reported $10.5 billion in 2023 — on original streaming content. Does Disney’s corporate strategy geared toward streaming bode well for the entertainment giant? We’ll discuss below.
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What’s happening with Disney?
In May, Disney reported streaming revenue up 12% for the quarter, a slowdown from the 23% growth in Q2 FY’22. At the same time, Disney’s networks, which include ESPN and also Disney Channel, ABC, National Geographic, and FX, reported $1.8 billion in operating income, down 35 percent from a year earlier.
Disney also announced its plans to offer Hulu content on Disney+ by the end of the year as part of what CEO Bob Iger called a “one app experience.” Streamlining Hulu’s more general entertainment content with Disney+’s family focused programming is an attempt to increase digital advertising opportunity across a wider audience. Disney currently owns 67% of Hulu while Comcast owns the rest.
As of May, Disney had 231.3 million subscriptions across Disney+, Hulu and ESPN+ in the quarter, down from 234.7 million in December. The company isn’t putting much money behind marketing campaigns to acquire new subscribers right now, but is making other changes to current subscriptions, like increasing the price of an ad-free experience.
Iger has also expressed bullishness on a direct-to-consumer ESPN streaming option in the future.
What’s Wall Street’s take?
Now that streaming subscription rates are slowing, Wall Street is taking another look at the dismal state of cable and the inability for streaming to offset those losses — at least so far. Paramount, Comcast Corp., Disney and Warner Bros. Discovery will lose about $10 billion on streaming this year.
Last week, KeyBanc Capital Markets analyst Brandon Nispel downgraded Disney stock to Sector Weight from Overweight, citing stalling subscriber growth and potential difficulties in migrating ESPN to streaming among other uncertainties.
Disney’s third quarter earnings report is expected to be released on August 9.
The bottom line
Disney’s share price has dropped 23% in three years and is down 10% in about a quarter. Down, but not necessarily out. Something that’s important to remember is that the streaming business is very young. Disney+ has only been around for three years. While Disney hasn’t found firm footing yet across it’s many content offerings, it is an IP giant with a diverse portfolio, and it could still turn this (Disney cruise) ship around.
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