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Disney-owned animation studio Pixar is expected to experience staff reductions this year, according to sources familiar with the matter and confirmed by the company. According to insiders, the company is planning to make substantial layoffs, potentially affecting up to 20% of Pixar’s workforce. This would result in a decrease from 1,300 employees to less than 1,000 in the upcoming months. However, Pixar has disputed these figures, claiming that they are exaggerated. Instead, the studio has stated that they are still in the process of determining the number of employees affected. This is due to various factors, such as production schedules and staffing for upcoming films that have been approved.
The studio emphasized that the layoffs are not imminent but will occur later this year as Pixar shifts its focus towards producing fewer projects.
Insiders have reported that the recent layoffs at Pixar involve employees who were brought on board for Disney+. Disney encouraged these hires to produce content for their streaming division, which hasn’t yet been financially successful.
In the fourth quarter, Disney+ experienced a significant increase in its subscriber base, with the addition of 7 million new users. This brings the total number of subscribers to 150.2 million, which includes Hotstar. The impressive growth surpassed the predictions of analysts, who had estimated a total of 148.15 million subscribers. The number of ad-supported customers on Disney+ increased by 2 million, bringing the total to 5.2 million. Interestingly, over half of the new customers in the United States opted for the ad-supported version of the product.
Pixar, a subsidiary of Disney, is renowned for its collection of beloved films, including “Finding Nemo,” “Monsters, Inc.,” “WALL-E,” the “Toy Story” franchise, and many more. It is currently the most recent to suffer from Disney’s cost-cutting measures. The company announced during its Q4 earnings that it would increase these measures by an additional $2 billion, aiming for a target of $7.5 billion. This decision was made due to a decrease in ad revenue from ABC and other TV stations, as well as ongoing losses within the Disney+ streaming division, although these losses have been gradually decreasing.
Disney anticipates that its streaming service will become profitable by Q4 2024 due to the company’s restructuring efforts, which have resulted in significant operational improvements, according to CEO Bob Iger’s remarks to investors during earnings. Furthermore, it has made significant progress in reducing its streaming losses. In Q4 2022, Disney+ experienced a significant loss of approximately $1.5 billion. However, in Q4 2023, the loss decreased to around $387 million.
Pixar’s “Elemental” was mentioned as one of the popular titles that debuted on the streaming platform during the quarter, along with other releases from Disney and Marvel, such as “The Little Mermaid” and “Guardians of the Galaxy Vol. 3.” “Elemental” had an impressive global box office revenue of half a billion dollars, according to Disney. It also became the most-watched film on Disney+ during the quarter. However, it was initially regarded as a disappointment at the box office and one of Pixar’s weakest openings in its 28-year history. The film gradually recovered from its lackluster opening, but it was part of a trend of other movies, such as “Lightyear” and “Onward,” that didn’t meet expectations. This prompted Disney to reevaluate its approach to releasing films.
Pixar’s “Onward,” which was released in March 2020, faced challenges as a result of the onset of the COVID pandemic. However, “Soul,” “Luca,” and “Turning Red” were directly released on Disney+.
According to Brandon Katz, an entertainment industry strategist at Parrot Analytics, Disney has successfully conditioned audiences to anticipate high-quality content from Pixar in the comfort of their own homes. “It takes time to retrain the audience and remind them of the value of the theatrical experience.”
Katz also pointed out that Pixar has faced additional challenges due to shifts in audience behavior and preferences, apart from the transition to streaming. For instance, during the 2010s, audiences showed a preference for pre-established intellectual property. This was advantageous as it necessitated fewer marketing efforts and required less convincing for consumers to buy in. Now, viewers are experiencing exhaustion from the constant stream of sequels and franchises.
“It has been challenging for all studios, including Pixar, to keep up with the rapid pendulum swing,” Katz commented. “If we examine their box office track record, ‘Coco’ from 2017 stands out as their most successful original film, grossing over $500 million worldwide.”
In the upcoming year, the animation studio has plans to release a sequel to “Inside Out” and, in 2025, a new film titled “Elio,” which follows the journey of a young boy on an intergalactic adventure. This pace could assist in maintaining Pixar’s budget, which typically stays around $200 million per film, as pointed out by Katz. Other animation houses operate with more modest budgets, such as $75-100 million at Illumination and $70-145 million at DreamWorks.
According to him, for any movie that costs over $200 million, it is crucial to generate substantial revenue at the box office in order to cover costs and make a profit.
In early 2023, Pixar made the decision to lay off 75 positions, which included two executives involved in the creation of “Lightyear.” Reuters reported this news. Among those affected were Angus MacLane, a well-known animator who worked on films like “Toy Story 4” and “Coco,” and Galyn Susman, who had been a part of Pixar since the very beginning of “Toy Story.” The report mentioned that the cuts were a strategic move by Iger to decrease the number of employees by 7,000 and cut costs by $5.5 billion.
According to Iger, one of the top opportunities for 2024 that he discussed with investors in Q4 was the potential for turning streaming into a profitable growth business.
In addition, Disney+ is set to incorporate Hulu content in the U.S. as part of its efforts to enhance its streaming business. This move follows similar consolidation strategies observed among its competitors, such as the Warner Bros. and Discovery merger, as well as the rumored Paramount merger.
At the Consumer Electronics Show this week in Las Vegas, Disney executives have been demonstrating Disney’s advanced technology that spans across its linear and streaming platforms. This comes after the introduction of ad-supported streaming on Disney+ in 2023.
