Disney laid off more than 25% employees of its global video game and Internet division, Disney Interactive, on Thursday. The decision is part of a major restructuring and a shift in the company’s advertisement strategy. The total number of laid off employees is close to 700.
The layoffs were a result of Disney’s decision to combine its mobile games and social games units. Disney has also decided to cut down on in house development of games and would license necessaries from outside providers.
James A. Pitaro, president of Disney Interactive, said in an interview, “We’re not exiting any businesses, and we will pursue licensing partnerships in which we retain a lot of creative input” reported New York Times.
Pitaro also said that smaller web-based businesses like BabyZone.com and Spoonful.com will be shut down and Disney Online will largely abandon display advertising in favor of advertising sponsorships, and on promoting Disney brand merchandise. He said recent deals with Google and Rosetta Stone convinced him that “the sponsorship model is more in alignment with the experience we want to offer.”
While most Disney ventures are booming, the games and web division has lost more than $1.3 billion since 2008. Disney Interactive was able to make a profit last quarter because of Disney Infinity, a platform which combines video games and toy lines.
For Disney, mobile games are working, but games for social platforms are not, and the $563 million acquisition made in 2010 of the social game company Playdom has proved ineffective. The former CEO of Playdom, who was co-president of Disney Interactive, resigned last November.
Pitaro confirmed in the media interview, “These are large-scale changes as we focus not just on getting to profitability but sustained profitability and scalability.”