Disney will announce a significant restructuring in which it will eliminate 7,000 jobs and save $5.5 billion.

Disney had previously stated that it intended to restructure into three segments while also laying off thousands of employees and reducing expenses.

According to the massive media and entertainment company, it will now be divided into three divisions:

The decision represents Bob Iger’s biggest move since rejoining the organization as CEO in November. Immediately following the release of its most recent quarterly earnings, Disney announced the changes. The announcements also come as Disney and activist investor Nelson Peltz’s company Trian Management are engaged in a proxy battle.

“We are pleased that Disney is listening,” a Trian spokesperson said Wednesday.

Disney also disclosed on Wednesday that it would be cutting $5.5 billion in costs, of which $3 billion will come from content, excluding sports, and the remaining $2.5 billion from non-content reductions. According to Disney executives, cost-cutting measures worth $1 billion have already started since the previous quarter.

Disney also announced that it would be cutting 7,000 positions from its staff. According to an SEC filing, it employed about 220,000 people as of October 1—about 166,000 of them in the United States and 54,000 abroad—which equates to about 3% of that total.

Warner Bros. Discovery and other media companies have been reducing their content spending in an effort to turn their streaming businesses profitable.

The growth of subscribers has slowed due to increased competition, so businesses have been looking for new ways to increase revenue. Some have included more affordable, ad-supported options, like Disney+ and Netflix.

“We will take a very hard look at the cost of everything we make across television and film,” Iger said on a call with investors Wednesday.

Since Iger took over again as CEO of Disney, replacing his hand-picked successor Bob Chapek, the restructuring has been in progress.

Top lieutenants Dana Walden and Alan Bergman, who are both viewed as potential successors to Iger in less than two years, will head the entertainment division. While Josh D’Amaro, who is currently in charge of Disney’s parks, experiences, and products segment, will continue in that position, ESPN Chairman Jimmy Pitaro will oversee the ESPN division.

Investors have long wondered what ESPN will become under Disney’s ownership. Third Point, an activist investor group led by Dan Loeb, had pushed the business to spin out ESPN last year.

Disney and Third Point eventually came to an agreement after changing its mind about what would happen to ESPN.

Iger addressed rumors that the business might consider spinning out ESPN because the sports network is isolated into its own unit. He pointed out that even though cord-cutting has caused ESPN to struggle, the ESPN brand and programming are still strong and in high demand.

“We’re not engaged in any conversations or considering a spinoff of ESPN,” Iger said on Wednesday. He said the move was considered “in my absence,” and was concluded it wasn’t the right move for Disney.

Given the upcoming negotiations for NBA rights, Iger did mention that he and Pitaro would be more selective about how much money the company spent on sports rights.

Chapek was fired shortly after Disney released its fiscal fourth quarter earnings, which had disappointing results in terms of profit and some important revenue segments. Disney’s strong streaming numbers would eventually wane, according to Chapek. Shortly after that, he had also informed the staff that layoffs, hiring freezes, and other cost-cutting measures would be implemented by Disney.

Iger informed staff that the company would be reorganized, especially the Disney Media and Entertainment division, in a memo sent shortly after his return.

The reorganization resulted in the immediate departure of Kareem Daniel, the previous head of the company’s media and entertainment unit and Chapek’s right hand.

Iger had said he would put more “decision-making back in the hands of our creative teams and rationalize costs” at the time. CNBC reported that the goal would be to have a new structure in place within the next few months, with elements of DMED remaining. During a town hall, he added that he would not lift the company’s hiring freeze until he reviewed Disney’s cost structure.

On Wednesday, Iger reiterated his remarks about giving back control to the company’s creative minds.

“Our company is fueled by storytelling and creativity, and virtually every dollar we earn, every transaction, every interaction with our consumers, emanates from something creative,” Iger said Wednesday. “I have always believed that the best way to spur great creativity is to make sure the people who are managing the creative processes feel empowered.”

(Adapted from MoneyControl.com)

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