Why Did Disney Do Layoffs and When Will Disneyland Return?
You’ve already heard the news. The Walt Disney Company just laid off 28,000 cast members, nearly 13 percent of its total workforce.
You’re probably wondering what this means and why it happened. Let’s talk about the details, along with what we should expect with Disneyland.
Cause and Effect
Disney staffs almost a quarter-million people, making it one of the most important job creators in America.
At the start of 2020, the company expected a record-setting year for revenue.
Only one of its divisions, the movie one, faced any realistic possibility of a downturn.
Then, the pandemic struck and blew up the plans of most businesses.
Now, we live in a world where distillers sell hand sanitizer more than whiskey. And Disney’s one of the hardest-hit corporations.
I’ve previously discussed all the ways that the pandemic has impacted Disney’s bottom line. For most of the year, the company has tried to avoid terminating employees as a means of balancing the books.
In March, Disney chose furloughs rather than terminations, planning to bring back its park-based employees once these places reopened.
Well, Walt Disney World returned in July, but Disneyland couldn’t follow suit. California experienced an outbreak that prevented this move.
So, Disney has had a gaping financial shortfall from its West Coast theme park, which still hasn’t reopened.
Yesterday, the clock struck midnight, as Disney executives were no longer willing to pay expensive benefits for cast members who are unlikely to return soon.
For this reason, Disney has terminated the employment of 28,000 employees.
Why Did Disney Do This?
How did this happen? In truth, we received our first indicator with The Grand Floridian Society Orchestra.
When the band went public with its termination, we knew something was up. Disney has since said good-bye to Yehaa Bob Jackson, too.’
No company would alienate fans with decisions like these unless it faced hard choices.
For Disney, these changes were the first of 28,000 layoffs.
The company has confirmed that two-thirds of them involve part-time workers.
That’s a polite way of saying that Disney has let go of people it didn’t value enough to hire full-time. The rest are ones whose benefits costs look worrisome on a spreadsheet in a boardroom somewhere.
Since I think cast members are legitimately some of the best workers on the planet, this news depresses and infuriates me.
I say this even though I saw the writing on the wall months ago.
Disney recently restored executive pay, which seems questionable at best in combination with this announcement.
Anyone with any business knowledge would argue that executives are much more valuable than those who sell Churros.
Personally, I believe strongly in Disney’s Every Role a Starring Role mantra. So, the latest news feels like a mixed message.
From a financial perspective, I’m confident Disney wouldn’t do this unless it had no other options.
The company waited as long as it could. Even when it made this announcement, Disney went down swinging.
About the Message
Here’s the tweet from Josh D’Amaro, Chairman, Disney Parks, Resorts and Experiences.
— Disney Parks News (@DisneyParksNews) September 29, 2020
D’Amaro lists the following factors as critical contributors to the mass layoffs:
- Prolonged impact of COVID-19
- Limited capacity due to physical distancing requirements
- Continued uncertainty regarding the duration of the pandemic
- California’s unwillingness to lift restrictions that would allow Disneyland to reopen
D’Amaro, who is still very new in the job, does throw out a breadcrumb of hope that Disney may re-hire some of these employees later.
I’m not going to sugarcoat it, though. If I didn’t know better, I’d think that Josh D’Amaro just announced he was running for Governor of California.
I’m kidding (I think), but the announcement absolutely threw the current holder of that position, Gavin Newsom, under the bus.
Until now, Disney’s enjoyed a strong working relationship with Newsom. Unfortunately, the elected official has split from Disney on the best approach to the pandemic.
In recent weeks, Disney has applied political pressure on California elected officials, requesting the publishing of reopening guidelines.
Other theme parks have joined Disney, as Universal Studios and Six Flags feel the brunt of the current closures, too.
Even the mayors of the greater Orange County, California, area have petitioned the Governor on behalf of their cities.
As a tourist mecca, Anaheim thrives on the revenue that comes from outsiders. The lack of theme parks has absolutely crushed the city.
So, Newsom’s decision, admittedly based on healthcare officials’ advice, has damaged the local economy.
As a last-ditch effort, Disney had rallied the troops with some friendly State Senators in California. These officials also called for the publication of theme park reopening guidelines.
Disney’s done everything it can to pressure the Governor politically, yet he has refused to relent.
The Disney Dilemma
Everyone needs Disney to open from a financial perspective. However, the Governor must consider the health risks associated with the theme parks.
In fact, I watched some CNBC analysis of Disney’s announcement. Even the business-focused evaluators on this channel understood the situation.
One specifically mentioned that keeping a theme park closed makes sense to him.
I’ve watched CNBC often during the pandemic. Their analysts rarely side on the public welfare side instead of the making money side.
So, that eye-opening statement indicates that even some money-focused people believe that theme parks cause public health concerns.
Then again, the counterpoint involves Walt Disney World, which has run smoothly for nearly three months.
Disney Springs opened even earlier on May 20th. In that time, health officials have tracked NO outbreaks.
For that matter, neither SeaWorld Orlando nor Universal Orlando Resort has suffered an outbreak, either. Also, let’s be blunt that SeaWorld’s health measures are nowhere near Disney’s.
Disney may argue with complete sincerity that it’s done more for public safety than the overwhelming majority of companies.
To wit, I haven’t dined inside a restaurant since early March. I’ve booked Table Service restaurants at Walt Disney World in four weeks.
Disney’s reliable enough that it can be trusted to self-manage, something I don’t believe is true of most corporations.
What Will Happen with Disneyland?
Bob Chapek and his people obviously believe that their safety precautions work.
The Governor of California disagrees enough to keep the place closed.
Disney has used this stalemate to justify the termination of 13 percent of its staff. Is that accurate, or is Disney making Newsom the fall guy?
Knowing what I do about Disney’s finances, I recognize that some changes were inevitable.
Disney probably had to do some layoffs no matter what. Most tourism-based businesses face harsh times over the next year.
We’ll learn more about how much of the blame involves Disneyland once we know the breakdown of the layoffs.
If most of them occur in California, it’s probably true. If they don’t, Disney’s used the current situation as an excuse and an elected official as a fall guy.
Of course, the most pressing question is what happens at Disneyland.
At this point, the conclusion I draw is that Newsom’s decision-making includes a political component.
As such, I’m no longer preparing for Disneyland to reopen before Election Day in November. I don’t think Disney is, either.
However, the company just applied all the political pressure it has.
If Newsom suddenly flips and publishes theme park reopening plans, he may save some jobs in California.
I suspect that if he were going to cede on this point, he would have done so already. I presume Disney alerted the Governor to the layoffs and gave him a chance to do something.
Since that didn’t happen, it’s unlikely to change soon. Sadly, I don’t think we’ll witness the return of the Happiest Place on Earth anytime soon.
If that’s not a metaphor for 2020, I don’t know what is.
Feature Image: Disney