What Mass Furloughs Imply For Disney's Kingdom

This week, Walt Disney Corporation DIS announced that approximately 28,000 domestic employees will be laid off. Although about 67% of this figure is made up of part-time workers, this still represents about 25% of its  Parks, Experiences and Products workforce.

The ongoing COVID-19 pandemic and continued closures of some of Disney's parks and resorts pushed the entertainment giant into a $2 billion loss for the segment in its third quarter. In the announcement, the company stated that this was the only feasible option due to the security-imposed measures that limited the capacity of parks and the continued uncertainty regarding the duration of the pandemic.

In addition to its main theme parks, the Parks, Experiences and Products division also includes other segments such as Resort & Spa in Hawaii, Disney Vacation Club, Disney Cruise Line, and Adventures by Disney, Walt Disney Imagineering, and Disney Consumer Products, Games and Publishing. In addition to the less-than-expected attendance at its Florida park, the Disneyland Resort in California has not even been allowed to reopen since its March closure. It employs 32,000 people across the two theme parks, a shopping and dining district, and three Disney-owned hotels.

The governor has been reluctant to give any guidance when it comes the reopening date, yet tourism is one of the biggest sources of income for all those who call Anaheim their home. Without the Disneyland Resort being allowed to reopen, locals are struggling to make a living, even if they are not employed by Disney itself. According to Mike Lyster, the Anaheim Chief Communications Officer, the city is in for a $100 million budget deficit that will be felt by people throughout the city with an unemployment rate at 15%, higher than it was during the Great Recession.

During the first month of the pandemic and related closures, Disney already undertook drastic pay cuts. As of April 5, all VPs had their salaries reduced by 20%, SVPs by 25%, EVPs and above by 30%. CEO Bob Chapek's pay was cut in half, whereas former CEO and current Executive Chairman Bob Iger gave up his entire salary.

Outlook

It will be a while before normalcy returns to Disney's Parks kingdom, and the new normal may look drastically different than the one we had pre-pandemic. COVID-19 has shown that no matter how big and seemingly indestructible a company might seem, life has a way to make even the strongest companies tumble. Only one thing is certain: regardless of the outcome – Disney will not be the same company it was before COVID-19. Its kingdom was perfectly exposed to the pandemic and the once unbeatable entertainment giant is now more vulnerable than ever. 

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