It’s not just Disney: Hollywood slashes jobs as streaming bubble pops
Walt Disney Co. Chief Executive Bob Iger said last week that the Burbank company will be slashing 7,000 jobs as the firm’s streaming efforts continue to lose money and the wider economy wallows through a downturn.
But the House of Mouse isn’t alone in tightening its belt. Across the media and entertainment industry, companies are shedding staff, winnowing budgets and looking to shore up cash on hand as they steer out of the pandemic and into an uncertain future.
Warner Bros. Discovery cut hundreds of jobs over the last year, including at CNN; Netflix followed a similar tack. Now United Talent Agency, NBCUniversal and Paramount Global are laying off employees too, as are tech companies — a sector that’s increasingly entangled with media and entertainment interests. Meanwhile, Regal Cinemas is shuttering theaters across the country.
“It sure is one of the largest sets of cuts,” said Steve Ross, a USC history professor who has written books about labor and class in Hollywood. “And I think we’re going to see more cuts.”
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The recent downturn is the most severe since the COVID-19 pandemic shut down huge swaths of the entertainment industry in 2020, including movie theaters and film and TV shoots. Layoffs swept through studios, networks, theme parks and talent agencies. Disney furloughed about 100,000 workers, including park and cruise line employees, though the vast majority eventually were brought back.
Hollywood has seen troubled times before. The Great Recession of the late aughts, for example, resulted in job cuts at Viacom, Warner Bros., Lionsgate, NBCUniversal, CBS and Disney, pile-driving an industry that was already suffering the aftereffects of a prolonged Hollywood writers’ strike.
As with previous slowdowns, the latest layoffs represent a blow to the economy of California — especially Los Angeles County — where film and television production is a huge engine of activity.
In 2021, entertainment directly accounted for more than 1.1 million jobs in the state, including 367,000 jobs in Los Angeles County, according to a 2023 Otis College report on the creative economy. What’s more, cuts within the entertainment industry probably will trickle down to other parts of the economy. Including indirect effects, the entertainment sector supports about 4 million California jobs, according to the Otis report.
“Consider all the money ... they can’t spend [at] local stores, local merchants,” Ross said. “It has a huge impact.”
The factors driving this layoff cycle include investor pressure and the drying up of traditional TV revenue thanks to cord-cutters and frugal advertisers. But the key to understanding the entertainment industry’s newfound focus on austerity, experts say, is the streaming revolution and its failure to live up to the hopes of both executives and Wall Street.
Legacy media companies spent billions of dollars making and marketing content for streaming services in order to compete with Netflix, cannibalizing established and profitable businesses such as pay-TV channels. Investors rewarded that aggressive audience growth strategy despite massive losses from streaming — but now they’re demanding actual profits.
The retrenchment in Hollywood mirrors some of the cost-cutting that has hit tech giants (such as Meta and Amazon) as well as news media enterprises (including News Corp., Vox Media and the Washington Post).
Disney is emblematic of that reckoning. For a while, the entertainment giant was eager to throw seemingly unlimited sums of money at Disney+, its marquee streaming service, filling the platform with everything from classic animated princess movies to trendy series such as Lucasfilm’s “The Mandalorian” and Marvel’s “WandaVision” — all for only $6.99 a month.
“Disney+ was generating a lot of activity,” said Kevin Klowden, chief global strategist at the Milken Institute, a think tank based in Santa Monica. “But one of the real issues with all the streaming companies is that they were constantly operating on the old tech bubble growth model: As long as you’re growing, nobody cares what the real numbers are.”
Now those chickens have come home to roost. Disney’s streaming efforts, which include Hulu and ESPN+, are losing money — $1.1 billion during the most recent quarter — and investors have become more eager to see returns. Disney has promised investors that Disney+ will be profitable by the end of fiscal 2024. Cue last week’s layoff announcement — among the most severe in the company’s history and part of a broader effort to rustle up $5.5 billion in savings, including $3 billion in content costs.
“While this is necessary to address the challenges we’re facing today, I do not make this decision lightly,” Iger said in a call with analysts on Feb. 8. Disney declined to comment for this story.
The earnings report came as Walt Disney Co. faces a challenge from an outsider, billionaire investor Nelson Peltz, who is seeking election to join the board.
The pain for the broader entertainment workforce probably won’t abate any time soon. Dan Ives, a tech analyst and managing director at Wedbush Securities, estimates that the industry will ultimately cut costs and jobs by 7% to 10%.
“It’s a content arms race, but now there’s a focus on costs and it starts at the top — so when Disney and Netflix are curtailing spending, that sends a ripple effect across the industry,” Ives said.
Other measures aimed at boosting profits (or reducing losses) could result in consumers paying more for less. Netflix, for example, is trying to crack down on password sharing. Last week, the Los Gatos, Calif.-based streaming giant announced the rollout in Canada, New Zealand, Portugal and Spain of new policies aimed at restricting how many people can use a given account. Such policies had already been tested in parts of Latin America and may soon find their way to the United States. The company also recently launched an ad-supported streaming option at a lower price.
Meanwhile, in a bid to reduce its profit-sharing obligations, Warner Bros. Discovery has removed dozens of series and movies from its streaming service HBO Max.
The economic troubles and job losses will add another layer of complications to upcoming Hollywood labor negotiations. Unions, including the Writers Guild of America, are expected to push hard against the studios for greater financial participation in streaming shows. Layoffs may add to the urgency of the unions’ demands. However, the souring jobs outlook could give studios leverage.
The sports media unit remains profitable and part of Disney. But expect the company to keep a close eye on its financial performance.
It’s not just entertainment firms that are hunkering down. Cuts also are happening across the tech industry — a space that, as streaming grows more popular and social media continue to hold the attention of younger viewers, overlaps more and more with the entertainment world.
Amazon, Microsoft, Google, Meta, Pinterest, Twitter and Snap have all laid off staff in recent months, as have smaller tech firms. Some of tech’s struggles have been prompted by factors that mimic what’s happening in media. A slowdown in the advertising industry has affected social networks, including Meta’s Facebook and Instagram platforms, but also old-school media companies such as Disney, said Dave Heger, a senior analyst for equity research at the financial services firm Edward Jones.
“Investors are focused on streaming businesses becoming profitable,” Heger said, and “with the ad spending environment looking weaker, there’s also some focus [on] making sure that they’re not overspending.”
Much of Hollywood still sees streaming as the industry’s future — but if the current wave of cuts is any indication, that utopia remains a long way off.
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