Disney (DIS) to Reduce Workforce by 200 at TV Network Unit

Per media reports, media behemoth The Walt Disney Company DIS is preparing to lay off nearly 200 jobs at ABC and cable networks. Per the sources, the company is trying to reduce the annual cost at the division by 10%.

Notably, both ABC Television Group and Disney Channel have been witnessing rating decline and stiff competition of late. The layoff will hamper ABC Entertainment, ABC Studios, Disney Channel, Disney XD, Disney Junior as well as Freeform teams.

In September, The New York Times reported that Disney had reduced headcount at its animation division by 250. Notably, Disney’s ESPN, which is grappling with subscriber loss and higher programming cost, had witnessed similar retrenchment previously.

Direct-to-Consumer Streaming Service

Most of the broadcast and cable networks providers have been under immense pressure as the Pay-TV landscape continues to change owing to migration of subscribers to online TV. To counter this change Disney recently stated that it will come up with its own streaming service in the future.

Disney stated that it will terminate distribution agreement with Netflix for subscription streaming of the new movies starting in 2019. Instead, the company will have its own streaming services — one for Disney and Pixar brands and another for ESPN followers. Disney will start online streaming services for ESPN sports in early 2018 and its branded direct-to-consumer streaming service airing Disney movies as well as TV shows in 2019. The ESPN-branded multi-sport streaming service will give an option to enjoy 10,000 live international, national and regional games every year. Tournaments like Major League Baseball, National Hockey League, Major League Soccer, Grand Slam Tennis, and college sports will be live streamed.

Meanwhile, through the fresh Disney-branded service subscribers can view both Disney’s and Pixar’s latest live action and animated movies, starting with the 2019 theatrical slate. Movies like Toy Story 4, the sequel to Frozen and The Lion King can also be streamed. This step gives an indication that Disney is confident about distributing content itself without relying on Netflix or any other companies.

Where is the Stock Heading?

Despite the fabulous run of its movies, the company’s shares have declined 14.4% in the past six months, wider than the industry’s fall of 11.4%. Meanwhile, shares of World Wrestling Entertainment, Inc. WWE, Time Warner Inc. TWX and Lions Gate Entertainment Corp. LGF.A have gained 6.8%, 1.6% and 5.8%, respectively.

The success of movie business is crucial for Disney as the loss of subscribers at ESPN and decline in rating at the company’s youth-focused Disney Channel has been a major concern for investors. Disney currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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