Walt Disney Co (NYSE: DIS) stock traded 2 percent higher Wednesday after ESPN announced another 150 job cuts as part of its ongoing cost-cutting initiative.
In a memo to employees, ESPN president John Skipper says 150 ESPN employees, or about 2 percent of the company’s remaining workforce, have been fired.
“The majority of the jobs eliminated are in studio production, digital content, and technology and they generally reflect decisions to do less in certain instances and re-direct resources,” Skipper says in the memo.
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ESPN has been a major drag on Disney’s overall financial performance as cord-cutting subscribers have abandoned the service in droves. ESPN has lost more than 10 million subscribers in the past several years.
The latest round of firings comes after ESPN cut 100 on-air performers and staff members earlier this year and 300 employees in 2015.
Parent company Disney is gearing up to take a new approach to sports by launching an ESPN streaming service in 2018. Disney is also working on launching a separate TV and movie streaming service to compete with Netflix ( NFLX) the following year. Disney will be pulling its content from Netflix’s platform in 2019, and CEO Bob Iger recently said that Disney’s new subscription service will be priced “substantially below Netflix.”
The company has given no indication of potential pricing for the ESPN service, but the Disney generates an estimated value of $7.50 per month per current ESPN subscriber. Given Iger’s recent comments, it’s likely Disney will aim for a relatively low initial price point for its ESPN streaming service as it focuses on building its subscriber base rather than maximizing profitability.
In the meantime, Nomura analyst Anthony DiClemente says investors shouldn’t be surprised by more cost-cutting.
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“Given the sizable NBA rights fee step-up for ESPN in the current fiscal year, we are not surprised that ESPN would be offsetting this margin pressure with cost-cutting initiatives,” DiClemente said earlier this year.
ESPN’s struggles and the uncertainty surrounding Disney’s streaming future have weighed on the stock in 2017. Despite a strong overall U.S. market, Disney shares are up just 1.4 percent year-to-date.
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Walt Disney Co (DIS) Cuts Another 150 Jobs at ESPN originally appeared on usnews.com
