Understanding Strategic Restructuring – The Successful Case of the Walt Disney Company.

In my last article I explored the concept of strategic restructuring through a case study of luxury brand of Burberry and their upcoming plans for corporate strategic restructuring in attempts to save themselves from a crumbling reputation and share price. This article looks towards an example of what a successful strategic restructuring looks like through exploring the recent Walt Disney Company restructuring.

Why did Disney look to restructure in the first place?

Early last year, Disney announced their third restructuring in the past five years, with CEO Bob Iger stating that the decision to undergo strategic restructuring was in the companies attempts to “refocus the organisation on creativity, empower creative leaders and ensure they are accountable for all aspects of their business globally, and put the company’s streaming business on a path to sustained growth and profitability”[1]. So, it can be understood that the restructuring process started in response to the following key factors:

Financial Challenges

Disney has been facing significant financial pressures, there has been a consistent decline in profitability for their direct-to-consumer (DTC) services such as Disney+, with a $1.5 billion loss being reported in the fourth quarter of 2022. Although, Disney’s subscriber count continued to rise, the losses can be associated with the high cost of producing original content creation, investments in new technology and consistent attempts to expand the platform.

Changing Consumer Demands

After Covid-19 there was an increase in demand for streaming services like Netflix, challenging Disney’s traditional business model of media production in TV and film. In order to generate profit and challenge businesses such as Netflix, the restructuring looked to create a new business model to retain the long-standing production houses relevance.

Refocus on Creativity

Disney has faced growing criticism in recent years for relying heavily on remakes, reboots, and sequels of their classic films and TV shows, rather than pursuing more original storytelling. Critics argue that this trend suggests a creative stagnation, with the company favouring safe, familiar content over bold, innovative ideas. Disney has also faced internal challenges regarding the creative direction of several projects. Reports of "creative differences" between executives and creative teams have often led to the departure or replacement of key directors and writers, resulting in high-profile exists and reshuffles impacting the development and continuity of various projects. These tensions highlight the challenges Disney faces under its previous model and therefore the need for a structural change.

General need for Growth

Restructuring processes are generally undertaken with the goal of either stabilizing a company during challenging times or positioning it for future growth and strength. Through this restructuring, Disney sought to place themselves in a position for long-term growth by adapting to changes in the media industry, turning a profit in their streaming sector and cutting operational costs – all things that will place them in a better position to remain a competitive force in the entertainment sector. [OO1] 

How Disney Addressed These Issues

In the last article, I looked at; cost-cutting, change in leadership and suspension of dividends as key components to strategic restructuring. Disney have taken on a number of these actions to address the issues they were facing mentioned above, specifically cost cutting and implementing changes in leadership, alongside taking on a new corporate structure.

Disney’s New Corporate Structure

Disney has taken on a new tripartite structure, dividing the organisation into three segments; ‘Disney Entertainment’ (TV, film and streaming division), ‘ESPN’ (sports related content division), and ‘Disney Parks, Experiences and Products’ (theme park and consumer product division). The corporation has taken on this new structure to streamline and facilitate sector management under new leaders in the hope that with a more focused structure – the process for change is better facilitated and will result in returning industry relevance and generation of profit. 

Changes in Leadership

Alongside the new structure comes new leaders. Bob Iger himself represents a change in leadership upon his reinstatement as CEO. Iger announced that the two of the new sectors will be receiving new leaders implemented to “have full operational control and financial responsibility [of the sector] and will be accountable for driving business efficiencies globally”[2]. It is also hoped, particularly in regard to Disney Entertainment, that the new leadership will place an emphasis more on fuelling creativity and innovation rather than solely profit.

Disney Entertainment will be co-chaired by Alan Bergman and Dana Walden

ESPN will be led by Jimmy Pitaro

Disney Parks, Experiences and Products will continue to be chaired by Josh D’Amaro

Cost-Cutting

Although placed under the apathetic title of ‘cost-cutting’, Disney’s decision to take on restructuring has had a great human impact in the name of ‘cost-cutting’ or ‘management of resources’. It is estimated that the restructuring led to the loss of 7,000 jobs were lost, affecting around 3.2% of Disney’s global workforce in attempts to save $5.5 billion and generate a profit in the streaming sector. Disney continues to initiate redundancies with just last month a further 300 employees have lost their jobs. This highlights the human cost that often comes with corporate restructuring and attaining the goal of lowering operational costs.

Has all of this worked??

Given that the restructuring process only began last year there is no concrete answer to whether or not the restructuring has completely attained its goals. However, the restructuring has begun to bear sweet fruit. In the third quarter of 2024 Disney’s DTC sector reported a smaller loss of $19million in comparison to the $505 million loss reported in the third quarter of 2023. However, despite the improvement seen in the entertainment sector the organisation still faces challenges in other areas such as their traditional television network facing a decline in revenue as well as a failure to properly address the issues surrounding creativity resulting in continuing internal tensions despite the adoption of a new structure.

So, as has been explored there exists success as a consequence of Disney’s restructuring, it cannot be said that the process has been wholly effective and is likely that the full impact of the restructuring will most likely need more time to come to fruition across all divisions.