Disney Interactive slashed about 700 jobs on Thursday, more than one-quarter of its entire staff, as part of entertainment giant's continuing battle to make its video game and Internet division profitable. Although the cuts had been anticipated for some time, few expected them to run that deep.
The Playdom group, which produces social-media games, is believed to be hit hardest. Disney purchased that company in 2010 for $563 million, an investment that clearly didn't pay off.
Disney also plans to dramatically scale back in-house development of games, relying instead on outside licensing, which The New York Times characterizes as "a major shift in strategy." The newspaper reports the company, which last year released about two dozen games, will reduce its output by 50 percent, and merge Playdom with the more successful mobile games unit.
These are by no means the first cuts at Disney Interactive, but they're undoubtedly the largest to strike at one time: Since Disney's video game, online and mobile businesses were grouped together in 2008, the division has lost more than $1.4 billion, resulting in more than 500 layoffs, the closing of four game studios and numerous project cancellations.
Despite all of those problems, Disney Interactive has experienced some success, most notably with the $100 million Disney Infinity, whose planned expansions are rumored to include Marvel and Star Wars characters, and Marvel: Avengers Alliance.
“We’re not exiting any businesses, and we will pursue licensing partnerships in which we retain a lot of creative input,” Disney Interactive Preisdent James A. Pitaro told The Times. “But this is a doubling down on mobile and an effort to focus much more intently on a core set of priorities.”