Disney to axe 7,000 jobs

This is an audio transcript of the FT News Briefing podcast episode: ‘Disney to axe 7,000 jobs’

Marc Filippino
Good morning from the Financial Times. Today is Thursday, February 9th, and this is your FT News Briefing.

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Disney is the latest company to announce mass lay-offs. UK regulators threw a wrench in Microsoft’s plan to buy a major video game developer. And a European banking dynasty is taking its company private. I’m Marc Filippino, and here’s the news you need to start your day.

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Disney reported fourth-quarter earnings yesterday and it was Bob Iger’s first earnings call since coming back as CEO. Disney’s revenue rose 8 per cent year on year at the end of 2022, but the company will cut about 7,000 workers as part of cost reduction measures. Iger said the job cuts will save Disney around five and a half billion dollars. Disney shares jumped 9 per cent in after-hours trading following the announcement. The FT’s Chris Grimes has more.

Christopher Grimes
In the previous quarter, they lost a billion and a half dollars in the streaming business, and that was just too much for investors who had really lost patience with, you know, these kind of never ending, escalating bills for streaming content with no path to profitability in sight. So I think Iger knew when he came back to the company that he had to make a really big move to reassure people that he had a plan to get all of this under control. Bear in mind also that Iger, after he got back, is now under attack from an activist investor named Nelson Peltz. And Peltz has criticised them, saying that there’s, the costs are out of control and so forth.

Marc Filippino
Yeah, I’m glad you brought up Peltz. Do we have a sense of what’s going on there?

Christopher Grimes
To catch everybody up on this, Peltz has as launched an activist attack, and what he’s seeking is a board seat. He also says he wants the dividend back that Disney suspended during the pandemic. From Iger, we heard some pushback on a few things. First of all, Iger said, well, we suspended the dividend during the pandemic ‘cause we had to, but we’re gonna, I’m gonna talk to the board and we’re gonna try to reinstate the dividend, although probably at a modest level by the end of the year and then build it as things get better. So he didn’t mention him by name, but there are some clear arrows aimed at Peltz.

Marc Filippino
Chris Grimes is the FT’s Los Angeles bureau chief.

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Microsoft is still pushing through with its $75bn acquisition of the video game developer Activision Blizzard. But yesterday, UK regulators threw cold water on the deal. The Competition and Markets Authority said the merger would result in, quote, “higher prices, fewer choices or less innovation for UK gamers.” The CMA also proposed that Activision sell off the blockbuster Call of Duty franchise, heard here.

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Marc Filippino
To find out more, I’m joined by the FT’s Andrew Edgecliffe-Johnson. Hey, Edge.

Andrew Edgecliffe-Johnson
Hi, Marc.

Marc Filippino
All right. So Edge, you actually, before this news, just interviewed Activision CEO Bobby Kotick, and he did not mince words about UK regulators. He suggested they’re ideologues who aren’t using independent thought. He called the UK government fragile, not exactly making friends here. What game is he trying to play?

Andrew Edgecliffe-Johnson
I think Activision’s strategy in the UK is to try to persuade politicians to set this in a broader context, to see this as a question of: Where can the UK be competitive? What are the industries it should be trying to encourage rather than to rein in? And that is a question both of: Where is the talent? Where are the potential jobs that politicians should be chasing right now in the UK and in a tough economic climate? And it’s also asking those politicians to look over their shoulder, look at what’s happening in other countries and say, if the UK does not build up a strong and growing video games business, which he is implying combined Microsoft and Activision could deliver, then somebody else is gonna steal that industry and it’s probably going to be China, Japan and the US.

Marc Filippino
So he’s pushing back a lot here. What role do the insults play in that strategy?

Andrew Edgecliffe-Johnson
Well, I don’t know for sure, but I strongly suspect that somebody advised Bobby Kotick when he sat down with us on Tuesday that the CMA would be coming out with this negative initial verdict quite soon. And so I think he, this is a relatively aggressive strategy for a deal like this, but it’s certainly one that’s likely to catch the attention of senior British politicians. He mentioned Rishi Sunak quite positively. He said he’s a man who understands business. He’s a smart guy. I think he may be trying to get the attention of the prime minister with this kind of strategy.

Marc Filippino
Does the message from the UK regulator, the CMA, yesterday indicate that this is the end of the deal?

Andrew Edgecliffe-Johnson
The people I’ve spoken to about the CMA initial ruling are saying this is not the last word. There is a process here where Microsoft and Activision can still make their case. They can still argue the case for some sort of behavioural remedies as they’re known, which essentially in this case means we will agree, we will license popular games like Call of Duty, to platforms like Sony’s PlayStation or Nintendo Switch, rather than the more structural remedies of forcing us to dispose of a game like Call of Duty, which is one of the ideas CMA floated with this initial set of findings.

Marc Filippino
Andrew Edgecliffe-Johnson is the FT’s US business editor. Thank you, Edge.

Andrew Edgecliffe-Johnson
Thank you, Marc.

Marc Filippino
One of the most renowned names in investment banking, Rothschild, is going private. The Rothschild family has been debating this for years, and now 42-year-old Alexandre de Rothschild has launched a €3.7bn deal to take the institution off the public market. Here to explain is the FT’s Harriet Agnew. Hi, Harriet.

Harriet Agnew
Hi, Marc.

Marc Filippino
So for people not familiar with the Rothschild name, why is this story significant?

Harriet Agnew
So the Rothschilds are one of the most famous dynastic families and one of the most hallowed names in global finance and they command this certain mystique. It was a dynasty that started in the Frankfurt Jewish ghetto in the 18th century, and today covers everything from financial services to real estate and philanthropy.

Marc Filippino
So, Harriet, why does the family want to take the investment bank private?

Harriet Agnew
Look, this is something that they’ve debated internally for years and years. There was a sense that the public listing gave them no real benefit. I think its three businesses — global advisory, wealth management and merchant banking — none of these needed access to capital from the public markets. And this is also a company that essentially behaves much more like a private company than a public one. The family owns over half the shares and has two-thirds of the voting rights, and so exercises almost complete control over it. As Alexandre de Rothschild described it as “you can’t be half pregnant”. So he felt that they’d reached the limit and full potential of the listing and their DNA was much better suited to being a private company.

Marc Filippino
So Rothschild wants to go private at a time when other smaller boutique investment banks are going in the opposite direction, they’re going into the public market. Does the Rothschild family know something that other boutiques don’t?

Harriet Agnew
No, not exactly. I think it’s more that Rothchild is a bit of a different model. One of their great selling points is the fact that it’s a private partnership. So when you’re invited to join this illustrious group, you get a share of the profits and ultimately the bank. Its DNA is one of caution. So while it tries to be entrepreneurial, you’re not going to see it do big splashy acquisitions that it needs public currency for. And in fact, in the years leading up to the financial crisis, when they were in their M&A heyday, Alexandre’s father, David de Rothschild, turned down an offer to merge with Lehman Brothers, which with hindsight proved to be rather a sensible move.

Marc Filippino
Dodged a bullet there, didn’t they?

Harriet Agnew
He certainly did. Yeah.

Marc Filippino
I guess this, is this move to go private a done deal or will they come across any opposition?

Harriet Agnew
The family holding company needs to get to 90 per cent of the shares in order to be able to what’s called squeeze out the rest of the minority shareholders. They’ve already got 55 per cent of the share capital and two-thirds of the voting rights. And they’re also talking to other like-minded families with long-term investment horizons about bringing them into the share capital. And of course, there’s a lot of talk about the price and whether this is an opportunistic bid by the Rothschild family that’s getting it at a rather nice price for them and a less nice price for the minority investors. So there will be some minority investors who believe that the price is too cheap, but ultimately they’re going to hold limited sway. And really, who wants to take a stand against one of the most powerful families in Europe for the sake of a little bit more cash?

Marc Filippino
Harriet Agnew is the FT’s asset management editor. Thank you. Harriet.

Harriet Agnew
Thank you.

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Marc Filippino
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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