July 21, 2024

Disney Cancels Metaverse & Prime Program Plans While Laying Off 7,000 Employees

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In a memo to employees, Bob Iger shared more details about the layoffs and workforce reductions at the Walt Disney Company. This post details where layoffs will and won't occur, including new details about the

In a memo to employees, Bob Iger shared more details about the layoffs and workforce reductions at the Walt Disney Company. This post details where layoffs will and won’t occur, including new details about the future (or lack thereof) of Disney’s metaverse and membership program initiatives.

Let’s start with the layoffs. This has been an ongoing topic that we’ve addressed repeatedly, but, for some reason, remains ongoing. A new memo sent to employees by CEO Bob Iger, indicates that the Walt Disney Company will begin layoffs this week with leaders communicating the news directly to the first group of impacted employees over the next few days.

A second, larger round of layoffs will happen in April 2023 with several thousand more staff reductions. Iger expects to commence the final round of layoffs before the beginning of Summer 2023 to reach the company’s 7,000-job target. As a reminder, these layoffs were announced at the beginning of February, and hinted at as far back as last holiday season.

“We have made the difficult decision to reduce our overall workforce by approximately 7,000 jobs as part of a strategic realignment of the company, including important cost-saving measures necessary for creating a more effective, coordinated and streamlined approach to our business,” Iger shared in the memo. “Over the past few months, senior leaders have been working closely with HR to assess their operational needs, and I want to give you an update on those efforts.”

“The difficult reality of many colleagues and friends leaving Disney is not something we take lightly. This company is home to the most talented and dedicated employees in the world, and so many of you bring a lifelong passion for Disney to your work here,” Iger continued.

“That’s part of what makes working at Disney so special. It also makes it all the more difficult to say goodbye to wonderful people we care about. I want to offer my sincere thanks and appreciation to every departing employee for your numerous contributions and your devotion to this beloved company.”

“For our employees who aren’t impacted, I want to acknowledge that there will no doubt be challenges ahead as we continue building the structures and functions that will enable us to be successful moving forward. I ask for your continued understanding and collaboration during this time.”

There’s been a lot of independent reporting about specific executives departing Disney as part of the layoffs, including high-level leaders at Marvel, Disney TV Studios, Hulu, Freeform, FX, and other divisions. Only yesterday, Disney laid off its head of D23 and VP of corporate communications, a move that surprised fans.

However, the most notable of all departures has been Isaac Perlmutter, the Marvel Entertainment chairman (essentially the consumer products side, and not to be confused with Marvel Studios). You might recall that Perlmutter as the catalyst for Nelson Putz’s called-off proxy fight and the “Restore the Magic” campaign.

You might also recall that Perlmutter had wanted to fire Kevin Feiger in 2015 (at the height of the MCU’s success!), and Iger had intervened to prevent that, which caught Ike’s ire. Perlmutter’s strained relationship with Iger and other high-ranking leaders at Disney is hardly any secret. And even if it were, it would’ve been laid bare by the proxy fight.

Perlmutter managed to stick around given his status as a significant shareholder resulting from the sale of Marvel to Disney, but presumably the calculus on that changed when he instigated (and failed at) the proxy fight. I don’t normally take joy in others losing their employment, but Perlmutter will not be missed. (The New York Times’ reporting on Ike’s ouster provides more illuminating color commentary, for those who are curious.)

Additionally, Disney has eliminated its next-generation storytelling and consumer experiences unit, the small division that was developing metaverse strategies, according to the Wall Street Journal. All 50 or so employees of this division have been laid off as part of Disney’s cuts.

Along with this, Disney has abandoned its Amazon Prime-inspired membership initiative that would supposedly integrate customer data across multiple Disney platforms, including streaming service Disney+, online retail, and theme parks.

If you’re interested in my contemporaneous thoughts on the Disney’s Prime-Style Membership Program back when it was announced, they’re here. Same deal with the metaverse, here. I’ll save you a click: “I think NFTs are stupid and the metaverse is big tech ‘trying to make fetch happen.’”

With regard to the Prime program, I expressed much more ‘cautious curiosity’ before ultimately concluding: “I just don’t see Disney as a tech or hospitality company, which is probably what it would take for Disney Prime to deliver in a meaningful way (for me).”

In terms of today’s commentary, my thoughts on the metaverse and Disney Prime program haven’t really changed. I still think there’s theoretical promise in Disney offering a membership or loyalty program, but I’m highly skeptical that whatever they envisioned would align with what fans actually want.

More likely, it would’ve been a hamfisted datamining operation that wasn’t actually even all that good at datamining. We’ve been down this road before, and mainstream commentators consistently overestimate Disney’s tech prowess. As much as its executives might like it to be, Disney is not a tech company.

Even if Disney were a tech company, pursuing the metaverse would be foolish. Mark Zuckerberg is burning over one billion dollars per month on the metaverse as the parent company of Facebook has gone all-in on that. In total, Meta has spent over $40 billion on the concept and has virtually nothing to show for it. Well, that’s not true. Investors have “rewarded” their efforts by analysts downgrading the stock, costing it another $500 billion in market cap as a result.

Zuckerberg’s initial bullishness on the metaverse undoubtedly pushed other companies to pursue similar strategies for fear of being left behind on the “next big thing.” The same thing happened elsewhere with NFTs as their evangelists convinced others that the undeniably stupid idea somehow had some merit. Even Bob Iger was duped. As Zuckerberg’s “vision” of the metaverse starts coming into clearer, legless view, it’s becoming increasingly obvious that this, too, is an awful idea. Zuck now serves as a cautionary tale.

Unlike NFTs, which have no redeeming quality and will become a punchline as the digital equivalent of Beanie Babies a decade from now, there is a future in the metaverse. I don’t think Zuckerberg will be the one to find it, and I certainly wouldn’t expect anything visionary from Disney. (See above about it not being a tech company.)

More likely, a video game company (perhaps Epic or Roblox) will figure it out, and these expensive forays by big tech will go down as ZIRP phenomenons. And honestly, I think that could probably describe a good amount of the cost-cutting and layoffs about to hit Disney.

News is already starting to trickle out about this week’s layoffs, with the Disney Television Studios broadly being one of the impacted divisions. This involves a consolidation of production operations across Disney TV Studios, Hulu, Freeform, and FX and the shutdown of the studio operation’s Creative Acquisitions Department, per Deadline.

Streaming and sports are expected to be other major areas of layoffs. ESPN’s cuts will have “no sacred cows,” according to a report in the New York Post, meaning that everybody from top on-air talent to executives are being scrutinized. One of ESPN’s biggest names, “First Take” host Stephen A. Smith, speculated that even he could be among the layoffs, but added that “no one knows.”

It’s already certain that the restructuring will effectively eliminate the controversial Disney Media and Entertainment Distribution (DMED) unit, which was created by Chapek and vocally opposed by Iger. The day following his return, Iger announced the “reorganization” of this unit. As part of that, Kareem Daniel, chairman of Disney Media and Entertainment Distribution and protege of Bob Chapek, was fired.

One of Iger’s key initiatives is to reduce the losses at Disney’s streaming division, which are currently hemorrhaging about one billion dollars per quarter. So it’s safe to say that more cuts will come at Disney+, ESPN+, Hulu, etc.

With that said, our focus here is Walt Disney World and Disneyland. Parks Chairman Josh D’Amaro sent a letter to Cast Members last month, and essentially thanked and praised Cast Members for their hard work and in helping to make the magic and deliver an exceptional guest experience.

D’Amaro concluded: “Finally, as was shared on the earnings call, the company is targeting significant savings across all businesses and the reorganization will result in necessary reductions to our overall workforce. While our teams have made great progress in contributing to cost savings, these measures affect every segment and organization — including ours — and are vital as we implement more cost-effective, coordinated, and streamlined operations.”

“As we determine our approach on achieving these savings, we will remain focused on delivering the best guest and consumer experiences, and do not expect this to affect our hourly frontline Operations roles. (Emphasis added.) I know how difficult this is to hear and understand the anxiety that comes with this kind of uncertainty. We will do everything we can to be transparent as things progress, and most importantly, we will act with respect and care every step of the way.”

This is not to say there won’t be layoffs at Walt Disney World or Disneyland. To the contrary, there almost certainly will be in salaried and white collar roles. However, they will not impact frontline Cast Members. In other words, the Cast Members who guests see and interact with in the parks are not subject to layoffs. (This came up several times on social media in response to the Cast Member Unions and Walt Disney World reaching a contract agreement. Contrary to some claims, those pay wages will NOT be offset by layoffs.)

Honestly, I’d be willing to bet that there will be more frontline Cast Members as of October 2023 than there were one year earlier. Both coasts have resolved staffing shortages to varying degrees, but they’re still not at 100% as compared to pre-closure or fully normal operations. Walt Disney World in particular has had tremendous difficulty filling certain key roles, and turnover is incredibly high–even as Disney hires aggressively, it has been losing employees almost as quickly as it can onboard them.

As a result of this, Disney has left money on the table–because it has literally been unable to fill tables at restaurants, offer a full slate of upcharge offerings, and increase park capacity. In a nutshell, this is why the layoffs won’t impact many, if any, frontline Cast Members. This is why Walt Disney World has continued to host job fairs and keeps posting new positions even after the layoffs announcement. This is not an oversight–Walt Disney World will almost certainly continue to hire even amid the layoffs.

Frankly, it’s also why Walt Disney World gave the unions so many concessions and virtually everything sought by Cast Members. I know cynicism is par for the course with this company, but there’s no “catch” here. Walt Disney World agreed to those terms because the competitive Central Florida labor market necessitated it. Bluntly, the company did so not out of corporate benevolence, but out of necessity and self-interest. It’s a rare situation where everyone wins.

Of course, that’s not the case with these layoffs as a whole, which are closer to lose-lose than it is win-win. There’s likely some degree of bloat as many companies (especially ones fancying themselves as “tech” oriented) went on hiring sprees coming out of the pandemic. There’s also a clear business case for needing to reduce costs in money-losing divisions. That still doesn’t make this any easy for the impacted employees. Our hearts go out to them and all employees of the Walt Disney Company as they have to endure this agonizing process.

To that point, I think there’s something perverse about this. I wrote that back at the beginning of last month when the layoffs were first announced but not implemented until a TBD date in the future. Those words are even more true today, as Iger has indicated that the layoffs start this week and will stretch out for another three months or so. Making the announcement in early February and dragging the process out until summer is incongruous with sentiment about its employees being the heart of the company, and supposed goal of creating a “supportive and smooth process every step of the way.”

Bluntly, layoffs are a fact of life and business. They are unfortunate and unpleasant…but they happen. Obviously, that doesn’t make them any easier or excuse companies for being overly aggressive with cost-cutting. However, there is a good way and a bad way to accomplish unpleasant tasks. There’s a humane way to conduct layoffs, and one that makes soon-to-be-former employees feel valued even on the way out.

Even assuming the most onerous notice standards under federal and California law, the Walt Disney Company is dragging out the layoffs. The whole process is being unnecessarily prolonged, and it feels as if the announcement was made prematurely on the last earnings call, for the sake of assuaging weary investors prior to an actionable plan being formulated.

This lengthy delay only introduces anxiety and uncertainty, including among frontline Cast Members who are at next to no risk of losing their jobs. This is precisely what the company would be trying to avoid if they were truly acting “with respect and care every step of the way.” The hit to morale and unintended losses as talented employees (even those who would’ve been safe!) voluntarily leave will be another cost that Disney pays for this.

Planning a Walt Disney World trip? Learn about hotels on our Walt Disney World Hotels Reviews page. For where to eat, read our Walt Disney World Restaurant Reviews. To save money on tickets or determine which type to buy, read our Tips for Saving Money on Walt Disney World Tickets post. Our What to Pack for Disney Trips post takes a unique look at clever items to take. For what to do and when to do it, our Walt Disney World Ride Guides will help. For comprehensive advice, the best place to start is our Walt Disney World Trip Planning Guide for everything you need to know!

YOUR THOUGHTS

Thoughts on Disney cancelling its metaverse or Prime program plans? What about the company’s decision to reduce its workforce by 7,000 jobs? Expect there to be a guest-facing impact at Walt Disney World or Disneyland? Do you think Disney is going about these layoffs in the right or wrong way? How are you feeling about the future of Walt Disney World, Disneyland, or the company in general now that Iger is back at the helm? Do you agree or disagree with our assessment? Any questions we can help you answer? Hearing your feedback–even when you disagree with us–is both interesting to us and helpful to other readers, so please share your thoughts below in the comments!

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