Disney to Take a $1.5 Billion Impairment Charge For Content Removed From Disney+ and Hulu
The Walt Disney Company’s financials have been undergoing quite an overhaul since CEO Bob Chapek was replaced by former CEO Bob Iger.
Iger created a plan to lay off 7,000 company employees in an effort to cut $5.5 billion in costs, and the nature of the layoffs pointed to a shift in streaming. Recently, Iger announced that Disney+ and Hulu content would be combined into one app, and content on Disney+ has started getting removed.
Now, in a new Securities and Exchange Commission (SEC) filing, The Walt Disney Company is giving us a different glimpse into what’s going on with their direct-to-consumer services financials.
In their SEC filing, The Walt Disney Company states that they will “record a $1.5 billion impairment charge in its fiscal third quarter financial statements” for the content recently removed from Disney+ and Hulu in May. They explain that the company is “in the process of reviewing content” in “alignment with a strategic change in approach to content curation.”
Further, they state that they anticipate more content will be removed from direct-to-consumer services (like Disney+ and Hulu). They note, “As a result, the Company currently estimates it may incur further impairment charges of up to approximately $0.4 billion related to produce content.”
We also can’t help but point out their note about terminating “certain license agreements for the right to use content on its platforms,” which would result in licensed content being removed from streaming services.
You can read the filing by clicking here or by reading below:
As previously announced, The Walt Disney Company (together with the subsidiaries through which its various businesses are actually conducted, the “Company”) is in the process of reviewing content, primarily on its direct-to-consumer (“DTC”) services, for alignment with a strategic change in approach to content curation and as a result is removing certain content from its platforms. On May 26, 2023, the Company removed certain produced content from its DTC services. As a result, the Company will record a $1.5 billion impairment charge in its fiscal third quarter financial statements to adjust the carrying value of these content assets to fair value. The Company is continuing its review and currently anticipates additional produced content will be removed from its DTC and other platforms, largely during the remainder of its third fiscal quarter. As a result, the Company currently estimates it may incur further impairment charges of up to approximately $0.4 billion related to produced content. The Company does not expect any material cash expenditures in connection with the impairment charges related to produced content. In addition, the Company may terminate certain license agreements for the right to use content on its platforms, which would result in the removal of licensed content from its platforms and lead to impairment and/or contract termination charges as well as cash payments. The Company currently expects that any such charges and payments related to licensed content would be meaningfully less than the impairment charges related to produced content.
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