Disney to Cut 4,000 Jobs, as Many as 250 in Anaheim

In its single biggest job cut ever, Walt Disney Co. disclosed plans Tuesday to slash 4,000 full-time jobs in response to the nation’s weakening economy.

Disney officials said the bulk of the cuts will come from the company’s theme-park division, where as many as 1,650 jobs have been targeted. That includes as many as 250 in Anaheim, home of Disneyland and the newly opened Disney’s California Adventure, and as many as 1,400 at the company’s four theme parks and other attractions in Florida. Disney has a total of 77,000 theme-park employees.

The cuts will start as a voluntary severance program but will evolve into firings if the 4,000-employee target isn’t met.

Disney’s action, affecting more than 3% of the company’s 120,000 workers, reflects a widening series of layoffs among the nation’s largest media conglomerates in an advertising market that is quickly softening.

The announcement is sobering for an industry that for decades has been relatively immune to economic downturns as consumers could be counted on to continue spending freely on entertainment. Hollywood has been one of the main engines powering Southern California’s economy in the last 10 years amid the growing global demand for TV shows and movies.

Disney’s news comes a little more than a month before the first of two strike deadlines by Hollywood writers and actors that threaten to shut down the entire entertainment industry. Studios are expected to put the brakes on productions soon if projects can’t be finished before contracts expire.

Disney President Robert Iger has been especially vocal in questioning whether the contract demands by Hollywood’s labor guilds are realistic given the worsening economic outlook. And the head of one top entertainment company, who asked to remain anonymous, said the Disney news “underlines the fragility of the economic structure and should give pause to whether a work stoppage is a good thing at this point.”

Disney is not the only studio feeling the effects of a slowdown.

“In a less than robust economy, it puts more of a focus on running your business as efficiently as possible,” said Warner Bros. Chairman Barry Meyer.

The Disney job reductions follow earlier ones at General Electric’s NBC network, affecting 5% to 10% of the work force, and at the newly merged AOL Time Warner Inc., affecting 2,000 workers. AOL Time Warner also said it might cut as many as 3,800 jobs tied to its retail stores. At Rupert Murdoch’s News Corp., a hiring freeze has eliminated through attrition more than 1,000 jobs, according to company sources.

Since January, Disney has laid off 535 workers from its Disney Internet group.

Tuesday’s news at Disney was delivered to employees just after 1 p.m. in an e-mail addressed “Dear Fellow Cast Members” that was signed by Chairman Michael D. Eisner and Iger. Eisner and Iger said that “the economy has been more challenging in recent months” and that “we need to face up to the increasingly pressing challenges of the softening economic environment.”

Several analysts suggested that Disney needs to cut fat anyway and that the worsening economic reports provide the company cover.

“Disney is using the current market as an opportunity to streamline and position the company for a weakening operating environment,” said Christopher Dixon, an analyst at investment bank UBS Warburg.

Among entertainment companies, Disney in particular is vulnerable to any softening in tourism that the economic slowdown brings because so much of its health is tied to its theme parks, which generate nearly $3 of every $10 in operating profit. Disney spokesman John Dreyer said advance bookings for spring and summer are softer than projected at the theme parks, but the company still expects results to grow for the year.

In Anaheim, the reductions would affect salaried employees as well as office and technical staff, such as receptionists, phone operators, accounting clerks, secretaries and administrative assistants, spokesman Ray Gomez said.

In Orlando, Disney World spokesman Bill Warren said the job trims will include a wide range of workers, from telephone operators to professionals, including lawyers, public relations officials, managers, executives and administrative support.

“This is pretty much the behind-the-scenes workers, not the hourly front-line workers that you see,” Warren said.

Analysts are not convinced that the rest of the theme-park industry faces similar cuts.

“Travel hasn’t slowed down; hotel occupancies are going strong,” said Bruce Baltin, senior vice president of tourism specialist PKF Consulting in Los Angeles. “I think [Disney’s] been beefing up with the new park here and the new parks overseas, and it’s time to pull back. These things are cyclical.”

Officials at Knott’s Berry Farm in Buena Park said they do not sense the “softening economic environment” referred to in the letter to Disney employees.

“The slowdown everybody’s talking about isn’t materializing for us, at least not yet,” said Knott’s spokeswoman Dana Hammontree.

The biggest job cut at Disney previously came during the gasoline shortages in 1974, when Disney laid off 1,700 people at Disney World. Although smaller than Tuesday’s number, at the time it represented 20% of the company’s work force.

Disney’s decision follows meetings during the last two weeks involving top division heads. Outside of detailing the theme-park numbers, Disney was cryptic about where the cuts would come, saying only that they were expected to be across the board.

But one top source in Disney’s studio unit said the operation, which has 3,000 to 4,000 employees, has marching orders to cut 10% of that work force. Employees are expected to receive the voluntary severance offers within the next 10 days and have about three weeks to decide.

Disney sent the e-mail one minute after the stock market closed, so Disney shares didn’t reflect the news. The company’s shares rose $1.28 to $29.20 on the New York Stock Exchange. Although Disney’s stock has been lackluster compared with other media stocks during the last few years, the company’s shares have held firm amid the latest market slide. Disney’s shares are up 1% this year, whereas the average U.S. blue-chip stock has fallen more than 10%.

Disney said that the action will result in savings of as much as $400 million annually, and that it will take a $250-million charge against its earnings spread over the final two quarters of its fiscal year, which ends Sept. 30. Disney already has been making cuts at its ABC network. ABC News, for example, is trimming about $15 million to $20 million from its budget.

Times staff writers Meg James, Bonnie Harris and Elizabeth Jensen contributed to this report.