Do these companies really believe that they were carrying dead weight as charity but didn't mind, until the “challenging economic environment.”?
Or did they believe that those workers were building something valuable, but interest rates or whatever made their work no longer forecast as profitable, even after sunk cost?
I genuinely believe the broader ecosystem (maybe not Disney in particular, I don't know enough about them to have an opinion) is doing it as a power play to shake down any worker leverage folks had built up. "Don't want to return to an office? Don't want to work a traditional 5-40 schedule (or beyond)? Cool. Go be homeless lest you find someone else, maybe funded or owned by our same investors, who will hire you then."
Or figure out why they, and all other streaming services, are unable to retain subscribers.[1] (Like, say, people subscribing to a service to watch some content, then unsubscribing and joining another service. Or the ripple effect of one subscription raising prices and people suddenly reassessing their subscription spend.)
So of course the response to rational behavior anyone not in a boardroom can easily understand, is to lay off some of the people who aren't in the boardroom.
>Like, say, people subscribing to a service to watch some content, then unsubscribing and joining another service. Or the ripple effect of one subscription raising prices and people suddenly reassessing their subscription spend.
Or people getting their black ships out of storage, hoisting the sails, and returning to sailing the high seas.
It doesn't matter how much better your business math is than theirs, none of the real high-rollers are going to pay attention unless you yourself actually have more money & power than they have stumbled onto.
The modern executive does not need to know how to build a company for future generations since nobody's doing that any more anyway. That skill went out of style a long time ago, no longer a prerequisite.
There's always been easy money taking a company someone else already built, and making it smaller, because of the simple surplus that arises. The only reason it wasn't more common in earlier decades is because real businessmen will take the same company and make way more money by growing it further even though none of it is easy. That's just the way they used to do it. By giving customers their money's worth and sticking to their word. When people say there were a lot fewer MBAs back then, I remind them that doesn't tell the whole story. There was almost nothing like there is now.
There's millions of ordinary people who would make better executives from that standpoint, and we've reached the point where the average person now retains more of the will to build things to last further into the future than so many so-called "leaders".
You know what I mean sometimes it's so obvious when a certain leader is so far below average, almost any sensible person could walk in and do a better job. I don't mean the Disney people exactly since I'm considering the extreme end of the spectrum, but that has gotten worse for a while. And these below-average forces have been somewhat of an influence on all decision-making positions to an extent and it affects us all.
In prosperous times any company can tolerate having more non-leaders in leadership positions than would be normal.
With such low interest rates for so many years it was so prosperous for some companies they even ended up with all non-leaders eventually and shareholders were still quite satisfied the whole time.
You can't really expect many excellent leaders to grow a company like normal when economics turn badly downward, but one of the things that makes them excellent is when they can weather the storm without getting any smaller. In ways where the non-leader executive type craters badly.
A few times I have compared tech layoffs to oil companies'. Now oil companies have intentionally shrunken during times of extended low demand, and can maintain their dividend accordingly. At any price per barrel, or number of barrels per day, this can be balanced most of the time, but every now and then some employees are jettisoned like ballast. The company is not at risk, just the dividend. They retain the natural resources to meet twice the demand if it surges in the future, but realistically they'll be just fine with a permanently smaller company as they can prepare for fossil fuels to decline in demand forever sooner or later. A smaller company really does mean lower shareholder value overall if the whole company were to be liquidated, but that's not going to happen except during a merger, which is only going to take place when investors are paying a premium. If people aren't going to sell the shares anyway it doesn't matter so much if the price does go down to reflect ownership in a smaller company, as long as the same dividend is still coming in there is no short-term difference in cash flow. When you do the math, the same dividend from a lower-priced share is a higher perecentage of return. People are not the greatest asset here to begin with, there's still lots of proven reserves even if the staff is cut back too far to explore for any more.
With software/tech-based company shares usually paying no dividend, it's supposed to be better for the company to reinvest in itself for maximum growth so the share value goes up. People are the greatest asset here to begin with but their relative importance does fade eventually if a milestone is reached which can act as a cash cow, it's like the oil companies having more proven reserves. Companies like that can afford to get permanently smaller too, and may not want or need the wherewithal to struggle for additional cash cattle any more. So they can lay off the growth and it's not so bad since they don't have to keep a dividend flowing to shareholders.
Now for Disney they haven't had a dividend in a while, but this layoff is expected to surface enough cash so they plan to reinstate one before the end of the year. That may not be enough, especially if it turns out to be too much of a down year, but they could always make further adjustments to staff. When you think about it they've got a lot of income-producing properties and don't relly need to be able to explore for more themselves.
People in the future aren't going to need any more technology or entertainment than they're getting now, just like fossil fuel. "What future generation?" /s
So divest the greatest assets to extract the most cash at a faster rate than selling to more customers anyway. While you have the chance, if you don't do it someone greedier will come along soon enough.
Now that interest rates are rising, dividends need to rise in order to keep up. That's inflation at work. If you haven't got a truly astute financial approach, the most likely recourse for many is to pawn something.
Just like Buffet says, when the tide goes out that's when you see who's doesn't have their bottom covered. Strummin' my 6-string, on my front porch swing.
They are not dumb, no. They are in role that selects for people to maximize risk where upside is high. Generally, whenever people who work really hard look flat-out dumb, one should start from a prior that one’s perspective is limited. Use curiosity.
Or did they believe that those workers were building something valuable, but interest rates or whatever made their work no longer forecast as profitable, even after sunk cost?