The Walt Disney Company will cease paying more than 100,000 Cast Members this week, nearly half of its workforce, as the world’s biggest entertainment company tries to weather the coronavirus pandemic lockdown.
Suspending pay for thousands of Cast Members will save Disney up to $500 million a month across its theme parks and hotels, which have been shut in Europe and the USA for almost five weeks.
Disney is slashing its fixed costs in a much more severe way than other theme-park operators such as NBCUniversal and Warner Media. The move has raised significant reputational risks for the century-old empire behind Mickey Mouse.
The decision leaves Disney Cast Members reliant on state benefits — public support that could run to hundreds of millions of dollars over coming months — even as the company protects executive bonus schemes.
The company has yet to comment on its 2020 dividend plan but in recent years has made semi-annual payments typically worth $1.5 billion.
By contrast some big multinationals, including L’Oréal and Total in France, have vowed to forgo state aid in a show of solidarity with taxpayers.
Disney over the past month has raised debt and signed new credit facilities, leaving the company with about $20 billion in fresh cash to draw upon for a downturn. “They could afford [not furloughing staff],” said Rich Greenfield, analyst at Lightshed Partners.
However, Greenfield cautions that Disney is probably braced for a “very prolonged shutdown”. Disney made nearly $7 billion in operating income from its theme parks, experiences and products business last year, making up nearly half of all operating profits.
Shares in The Walt Disney Company have fallen by a quarter since the outbreak of the COVID-19 virus. “With labour accounting for approximately 45% of operating expenses and 33% of total expenses, we assume notable savings,” said JPMorgan’s Alexia Quadrani, who estimates the furloughs, alongside other cost cuts, will save The Walt Disney Company around $500 million a month.
Disney will provide full healthcare benefits for its American Cast Members placed on unpaid leave. From April 2020 onwards, Disney urged Cast Members to apply for the extra $600 a week of US federal support available through the $2 trillion Coronavirus Stimulus Package.
In Orlando, home to more than 70,000 Disney Cast Members, Florida offers unemployment payments of up to $275 a week for 12 weeks — among the lowest rates in the US.
Salary payments will also be stopped for most of the 17,000 Cast Members at Disneyland Paris, who will be placed on France’s “Partial Activity Scheme”. This allows companies to reduce staff hours or furlough workers while the French government covers up to 84% of their net salary.
Some Union Representatives have assailed Euro Disney SCA for failing to top up the French government’s support.
“Will we have Disney+ ?” asked the CFDT Union, noting Executives were “no doubt much more comfortable in confinement than most of the company’s Cast Members”.
Djamila Ouaz, a CFDT Union Representative, did acknowledge the relatively better position of Cast Members at Disneyland Paris. “We are in France, so we have Unions and legal rights to defend ourselves,” she said. “In the US it’s a catastrophe.” Top Disney Executives have made salary sacrifices to “better enable the company to weather the extraordinary business challenges”.
Bob Iger, Executive Chairman, gave up the remainder of his $3 million salary for this year, while Bob Chapek, who recently replaced Mr Iger as Chief Executive, will forgo half his $2.5 million base salary.
Disney has protected the incentive schemes, which account for most of the executives’ remuneration.
Mr Iger earned $65.6 million in 2018 and $47 million last year, The latest package is more than 900 times that of the median Disney Cast Members earnings, which stands at about $52,000.
Mr Chapek could potentially earn an annual bonus “of not less than 300%” of salary, in addition to a long-term incentive award of “not less than $15 million”.
Speaking at Disney’s annual shareholder meeting in March 2020, Mr Chapek said: “Our ability to do good in the world starts with our Cast Members . . . who create magic every day. Our commitment to them will always be our top priority.”