Josh D'Amaro has faced a bruising first week as CEO of Walt Disney Company, marked by strategic setbacks in key partnerships. Disney announced a $1.5 billion investment in Epic Games two years ago with the intent of creating a persistent digital universe populated by Disney characters, a deal that Bloomberg reported was a cornerstone of D'Amaro's strategy given his background overseeing Disney's theme parks and gaming sectors. However, the status of that investment and the planned digital universe remains unclear. Separately, OpenAI announced the closure of Sora, its artificial intelligence video generator, effectively ending a partnership that would have seen Disney make a $1 billion equity investment in OpenAI. Disney had intended to use Sora to allow fans to generate social media content using approximately 200 characters from the Star Wars and Marvel franchises.
Epic Games announced the layoff of 1,000 employees on Tuesday, with founder Tim Sweeney telling staff in a memo that $500 million in cost cuts would prepare the company for major launches later this year. Epic Games is struggling with a downturn in engagement, leading to a disconnect with its fan base. Sweeney did not specifically address the status of the Disney project in the memo, adding to the uncertainty surrounding the partnership.
In response to the AI partnership collapse, Disney described the AI field as 'nascent' and noted that change in the sector occurred rapidly, adding that it would continue to engage with other AI platforms. The specific AI platforms Disney will engage with have not been disclosed.
Internally, Walt Disney is set to eliminate approximately 1,000 positions across various departments as part of an ongoing effort to streamline operations. CEO Josh D'Amaro announced the job cuts in an email to employees, citing the need for a more agile and technologically-enabled workforce. The layoffs will impact the marketing group, studio and television businesses, ESPN, product and technology divisions, and certain corporate functions. How these layoffs will specifically affect ongoing projects and future technological initiatives is not yet known. The company previously undertook a significant round of layoffs in 2023, cutting 7,000 jobs in a bid to save $5.5 billion.
The release of the video was part of a 'destructive campaign' by her former partner and lacked proper context.
This move comes as Hollywood studios face new economic realities, including a declining television market, shrinking box office revenues, and intensified competition.
In a separate development, ABC, the Disney-owned network, recently took the unprecedented step of cancelling the upcoming season of The Bachelorette. The decision followed the leak of a 2023 video involving the season's intended lead, Taylor Frankie Paul, which appeared to show a violent domestic incident. Disney stated that in light of the footage, it would not move forward with the season, citing a need to support the families involved. The full context and authenticity of the leaked video have not been independently verified.
Representatives for Taylor Frankie Paul told Variety that the release of the video was part of a 'destructive campaign' by her former partner and lacked proper context.
Markets reacted unfavorably to the announcements, with Disney shares closing down 1.6 percent on Tuesday, falling again on Wednesday.