ESPN, Disney Laying Off Staff Amid "Unprecedented Disruption"

"The speed at which change is occurring requires great urgency, and we must now deliver on serving sports fans in a myriad of new ways," chairman of ESPN and sports content Jimmy Pitaro wrote to staff Thursday.

ESPN will lay off 300 employees and leave 200 open positions unfilled, citing the "tremendous disruption in how fans consume sports" and a need to invest in direct-to-consumer and digital offerings.

"Prior to the pandemic, we had been deeply engaged in strategizing how best to position ESPN for future success amidst tremendous disruption in how fans consume sports," chairman of ESPN and sports content Jimmy Pitaro wrote Thursday morning in a memo to staff that was obtained by The Hollywood Reporter. "The pandemic’s significant impact on our business clearly accelerated those forward-looking discussions."

Along with ESPN, sister companies Walt Disney Studio and Searchlight Pictures were also impacted by layoffs. Six individuals at the specialty studio label were let go, while a number of staffers across Disney divisions that include the studio’s marketing team and theatrical group, which handles live staged performances, were affected.

The organizational change comes just a few weeks after The Walt Disney Co., unveiled a sweeping organizational change to focus on direct-to-consumer and streaming initiatives. The company's live events and theme park business has been hit particularly hard due to the pandemic, and the studio's theatrical releases have had to be pushed or moved onto the company streaming service. Like ESPN, Disney is expected to leave open positions unfilled.

"Together, we have overcome tremendous challenges and adversity over these past several months and please know that the decisions and plans executed today were not made lightly," Pitaro wrote in his memo. "They are, however, necessary and I am convinced that we will move forward and effectively navigate this unprecedented disruption."

Pitaro also suggested that the company plans to shift its investment to align with Disney's overall strategic vision.

"In the short term, we enacted various steps like executive and talent salary reductions, furloughs and budget cuts, and we implemented innovative operations and production approaches, all in an effort to weather the COVID storm. We have, however, reached an inflection point," Pitaro added. "The speed at which change is occurring requires great urgency, and we must now deliver on serving sports fans in a myriad of new ways. Placing resources in support of our direct-to-consumer business strategy, digital, and, of course, continued innovative television experiences, is more critical than ever."

ESPN is unique in Disney's portfolio, having long been the cash cow of the company's cable TV division, owing to its wide distribution and industry-leading carriage fees. But as the number of pay-TV subscribers declines while sports rights remain just as expensive as ever, ESPN is trying to forge a new path forward that keeps its existing business alive, while preparing for what's next.

“We really like the direct-to-consumer model that we have got, but at the same time we have got relationships, we have tremendous cash flows generated from our traditional legacy media businesses, so we are not going to just walk away from those,” Disney CEO Bob Chapek told CNBC when asked about ESPN following the reorg.

ESPN's ESPN+ streaming platform has more than 2.4 million subscribers as of August, and has been adding premium content such as UFC pay-per-view events to bolster its revenue and reach. More recently, ESPN has shifted some audio and written content behind the ESPN paywall, trying to create a paid sports product that includes all types of media.