[Author’s Note: Only three earnings calls this week: Take-Two and Skydance today. Bandai Namco tomorrow. I have started identifying patterns across the calls. ]
Both Netflix and Disney are announcing layoffs—the former announced 1,000 job cuts (~6% of staff) last month. The latter is reported to be preparing “thousands” of additional job cuts after four previous rounds in April, July, September and October of this year.
Netflix’s model places the customer database at the heart of the engagement flywheel. Disney’s model in the streaming era has two customer databases at the heart of its famed flywheel: one for Experiences customers (parks and cruises) and the other for Entertainment subscribers (streaming).
I have argued that Netflix’s flywheel places customer satisfaction first and content second. Disney’s disadvantage has been that it has historically valued creativity as driving its flywheel—the lone exception has been its giant Experiences business ($36 billion in FY 2025). Its pursuit of streaming has put a database where that creativity once lay, resulting in “a fundamentally different corporate relationship with the consumer” than Disney has had historically.
The Netflix cuts stand out because the company is cutting the teams that build and run the database at the heart of its flywheel, while Disney plans to spend part of its savings on improving its technology. According to Bloomberg, Disney plans to “reinvest a portion of the savings into film and TV programming, technology and the theme parks and cruise ship businesses.” Disney’s story to investors is that it could adapt to a Netflix-dominated marketplace and compete—now Netflix is making cuts that suggest it is more vulnerable to competition.
In September, Disney CFO Hugh Johnston told the Goldman Sachs Communacopia + Technology Conference that his priority is “that virtuous circle of reducing costs, reinvestment in the business, driving growth, creating operating leverage, and then reducing cost again.” The cuts are the first step in that circle. Where the reinvestment goes is where the strategy shows. The implicit message of Disney’s layoffs is that it understands it “collectively needs to honor and listen to” the database at the center of its Entertainment business. Netflix appears to be rethinking the database at the center of its entire business.
The problem for both companies—as I argued in March’s “A Tale of Two Disneys”—is that whether there is one database or two at the heart of the business, it is no longer clear “what lies at the heart of the flywheel now. All we know is that it is not creativity alone driving it anymore.”
Past essays related to today’s analysis:
