Disney is used to dominating with successful headlines after successful headlines, however, the tide is starting to turn and the company has found itself in treacherous waters. Because the brand has suffered an extreme loss of revenue, top executives such as Bob Iger and Bob Chapek will take pay reductions. Iger, former head of the company and now creative executive will take a 100% pay reduction and Chapek, current CEO of Disney will take a 50% pay reduction. For other executives, the company will reduce their pay by either 20%, 25%, or 30% depending on their position, according to The Hollywood Reporter.
Iger has been one of the top paid executives in entertainment earning $47.5 million in 2019, down from his $65.6 million in 2018. Bob Chapek earns around $2.5 million as CEO, with a target bonus of $7.5 million and a grant of $15 million. The pay reduction only applies to his base salary. So while this may be sad for Iger and Chapek, they can dry their tears with plenty of cash. Now while Disney is starting at the top for P.R reasons, if the company keeps losing revenue, pay reductions could potentially occur for lower-level employees.
Now some of you may be asking if Disney is such a powerful and successful company, how is it possible they are suffering this badly? Well, in just a matter of days, Disney has lost multiple huge sources of revenue for the company. In just the last couple of days they have lost their theme parks, their hotels, their cruise line, their domestic and international box office, their Broadway productions and their Disney stores, as well as their film and TV productions being halted and their ESPN channel having nothing to air. That really only leaves online orders, which have likely suffered a decrease lately, and advertising on their channels which will also dry up eventually as many other companies have been hurt as well.
However another more reliable source of revenue for Disney is video-on-demand sales. VOD sales for movies like Onward and Call of the Wild have brought in a good amount of money for the company. Because of this, Disney could release movies that were supposed to be released in theaters straight to VOD, simply because the company needs money and VOD sales are one of Disney’s few sources of revenue left.
Other studios such as Universal and Warner Bros. are owned by cable companies like Comcast and AT&T, so when people go to pay their cable bills those companies will receive a lot of money. However, Disney does not have a parent company and will not receive a source of revenue like that, which is a big problem for them.
Now as for Disney+, the service is not generating any money right now and was reported previously that it would take around 5 years for that service to become profitable. This is why movies like Black Widow and Mulan will never release straight to Disney Plus because Disney would not get any money from that. However, when it does become profitable, it will become very profitable.
So why does Disney need money? After all, they earned a record $13 billion at the box office last year. Well, not all of that money goes to the studio, it is reported that studios only get around 50% of the foreign box office and some money goes to the theaters. Even the money that does go to the studio, a large amount of that has to be put back into the company for operating expenses. Just because Disney movies made $13 billion last year, does not mean Disney profited $13 billion.
Another reason Disney needs money is that they are in a huge amount of debt. Disney is still working on paying off their massive 20th Century Fox acquisition. Also, Disney has been pouring a lot of additional money into its theme parks lately with tons of new rides: Pandora, Toy Story Land, Galaxy’s Edge, Avengers Campus, and they are giving Epcot pretty much a complete revamp. Theme park rides and lands cost a large amount of money which has just added to Disney’s debt.
Finally, Disney is still paying its’ theme park employees even though the parks are closed, which means they are losing money. So not only is Disney in a large amount of debt, but they have lost most of their revenue streams making it very hard for them to pay it off.
Now, this is where the conversation gets even more interesting. Because Disney is a public company and it has shareholders, and since its shareholders are probably not thrilled with all of this, there’s potential that another company could buy Disney. There have been long-running rumors that Disney could get bought out, and this could be the situation that finally makes it happen. The moment shareholders start to lose faith in the company and sell their stock, Disney is in big trouble. That’s why Disney is desperately searching for ways to save and earn money. And while they are starting with the top executives, it is likely they will work their way down.
How does all of this sound to you? What are your thoughts on everything currently going on with Disney and the pandemic sweeping the world? Let us know in the comments section of our website or on our Twitter and Instagram, and don’t forget to download the Kernel app.