The Cost Cutting Rolls On

The networks side of Disney Company today announced continued restructuring at ABC in a move that’s widely being seen as a continuation of cost control.  Both Bloomberg and other websites reported that ABC has decided to combine its programming and studios divisions into one unit.

Previously the two had been separate, which allowed the studios side to produce programming that was available to any potential market player (i.e. other channels, like NBC or cable operators).  The articles don’t say whether that will still be possible. Given however that there are less than 40 people reported to be affected, I suspect that somebody thinks producing more of their own shows will allow them more flexibility.  Things like lowering the production costs and/or being able to amortize those costs over a longer time frame since ABC will own all of the rights to the programming in question. 

If they buy their programming from another production house, then ABC only ends up with a distribution deal, and probably only for limited outlets.  The creator/producer could still retain the rights to distribute under other forms of media like iTunes, etc. denying ABC that ‘tail’ of revenue over time.

It’s a different cost cutting measure than the 400 people they laid off back in January.  My read is that it means they are going after structural costs, which are often harder to get too and take time to pay back.  Layoffs on the other hand tend to be a one time drop in costs you get from letting people go.  

We’ll get our next real insight as we approach the end of June when we near the end of Disney’s 3rd quarter.  If anything is going to happen short term to try and make numbers, it’ll come in the next 6 days or so.  Otherwise, we won’t find out much until the earnings call scheduled for the end of July.