The Strategist

Walt Disney announced layoffs due to financial difficulties

09/15/2016 - 14:30

American company Walt Disney announced downsizing in one of its units due to weak financial performance, according to The New York Times. The layoffs are related to Digital Media and Consumer Products Department. The company fired 250 employees in total, which is 5% of the entire labor force employed in these areas. This is not the first personnel reduction at Walt Disney in recent months. In May 2016, the studio dismissed more than 300 people from Video Games Department. Disney theme parks also held a number of staff layoffs.

Digital Media and Consumer Products Department of Walt Disney has had financial difficulties in recent months, the newspaper said. For the third fiscal quarter of this year, its revenues amounted to about $ 324 million, 7% less compared with the same period a year ago. 

In January this year, the company was sued by former employees, who accused the studio in violation of immigration and labor laws. The lawsuit alleged that the company, together with two major consulting groups HCl and Cognizant, entered into a criminal conspiracy with an aim of attracting foreign labor, knowing full well that employment of immigrants will be paired with dismissal of American workers.

Earlier in August, Walt Disney has increased its share on the US film market to record levels. On 21 August 2016, the company's market share reached a record high - 26.9 percent.

The company is doing even better outside North America. ‘Star Wars: Episode VII The Force Awakens’ earned more than a billion dollars in the international box office, and ‘Zootopia’ brought about 700 million. The latter became the most successful animated film in the history of China, and made 235 million dollars across the country.

In general, the brand of Walt Disney in 2016 produced four projects, which have earned more than 340 million dollars on the domestic market. The most successful of them was ‘Finding Dory’, collected nearly 500 million dollars in North America. 

Walt Disney achieved such impressive results even despite a few failures. Thus, ‘Alice Through the Looking Glass’, production of which is estimated at $ 170 million, earned only 77 million in domestic box office and about 300 in the world as a whole. The same fate befell ‘The BFG’, which has collected only $ 140 million with a comparable budget.

Despite the 7% fall, the company remains one of the strongest players, and here's why:

• The corporation is well diversified and actively developed. It includes television holdings, studio business, theme parks and hotels. Walt Disney owns universally recognized brands, and creates original content.

• The studio has expanded into China, where it opened the country’s Disney park on June 16. Given the growing middle class in China, these steps will help to increase Disney’s income. Since 2011, average growth of the company's revenue in the segment of parks etc. was 8.3% per year.

• Advances of the studio business. Over the past decade, Disney has acquired some well-known media brands such as Pixar, Marvel and Lucasfilm. This year, the studio released such blockbusters as ‘Zootopia’, ‘The Jungle Book’, ‘Captain America: Civil War’, ‘Finding Dory’. Other successful franchises such as ‘Star Wars’ and ‘Frozen’ also make a great contribution.