The decline in home entertainment revenue has been particularly problematic… (Brian Vander Brug, Los Angeles…)
Walt Disney Studios plans to cut as much as 5% of its worldwide workforce as early as next week, according to people familiar with the matter.
The movie studio would eliminate as many as 250 jobs from its staff of about 5,000 people globally, said the people, who did not want to be identified because they had not been authorized to discuss the matter. Several Disney insiders say the bulk of the cuts will be in Burbank. The reductions are expected to hit hardest in the studio's distribution operation, reflecting fundamental changes in the movie business.
A constellation of factors are squeezing the industry, including falling DVD sales, flat theater attendance and concerns that one of the biggest technological boons to hit the megaplex, 3-D, may have peaked. Meanwhile, new forms of digital distribution, including Amazon.com's video streaming service and Apple Inc.'s iTunes download store, have yet to contribute significantly to the studios' bottom lines.
The decline in home entertainment revenue has been particularly problematic for the studios, prompting industrywide layoffs. Sales of DVDs, Blu-ray discs and digital movies fell 18% in the first quarter compared with a year earlier, according to industry trade organization Digital Entertainment Group. Disney, for the three months that ended April 2, reported a 14% drop in home entertainment revenue.
"When you see these kinds of trends, frankly, you don't need as many people in the companies," longtime media analyst Harold Vogel said.
Walt Disney Co. Chief Executive Robert A. Iger has lead a restructuring of the studio to reflect these new business realities, scaling back the number of movies it produces and releases. Disney sold off its Miramax Films specialty movie label last year and consolidated the Burbank studio's marketing and distribution operations.
Helping lower its risk on the production side, the studio now relies more heavily on movies supplied by Steven Spielberg's DreamWorks Studios, which pays Disney a fee for releasing its films, and Marvel Entertainment, which it acquired two years ago for $4 billion.
Disney also gets a steady stream of big family movies from its Pixar Animation Studios unit, which it bought for $7.4 billion in 2006.
Since he was named to the post in 2009, Disney Studios chief Rich Ross has been reorganizing and streamlining the studio's marketing and distribution operations in response to falling DVD sales amid changing consumer habits.
Last November, he consolidated the distribution units of theatrical, home entertainment and pay television into a single group headed by Bob Chapek, the studio's former executive in charge of home entertainment.
Disney isn't alone in making staff reductions in response to the tougher business climate. Sony Pictures laid off 450 people last year, citing changing consumption patterns. More recently, Santa Monica-based independent studio Lionsgate laid off 17 people in its home entertainment division, though it hired several in its digital division. Paramount Pictures also is expected to cut costs in its home entertainment division.