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Disney Staffers Brace for Layoffs Amid Planned Reorg (EXCLUSIVE)

Cuts expected after conclusion of company-wide review of operations

Employees at the Walt Disney Co. are bracing for layoffs that are expected in the coming weeks as part of a reorganization of key operations.

It is believed that the company’s movie studio will be hardest hit, particularly in the areas of home entertainment, production and marketing, according to multiple sources familiar with matter.

The exact number of reductions are still being determined, as Disney brass conclude a company-wide review process that tasked each division with ensuring that staff levels are in line with the company’s needs in a changing marketplace, particularly in divisions affected by shifts in new media and technologies. The internal audit was ordered late last year by Disney chief executive Bob Iger and chief financial officer Jay Rasulo to identify areas of redundancy and departments that need revamping amid changing business models.

Many at the studio expect that the cuts and restructuring will occur before the release of Disney’s second quarter earnings on May 7. Top execs have emphasized that the reorg is aimed at better positioning the Mouse House for future growth.

Staffers have been nervously awaiting the results of the review and the impending layoffs. In the homevideo division, as the sales of physical discs continues to decline and as the studio embraces more digital distribution platforms, fewer individuals are needed to manage that business. Iger believes digital deals with companies like Netflix and Apple’s iTunes are more profitable ways to offer up Disney’s library of films and TV shows.

See Also: LucasArts Lays Off Staff, Halts Game Production

On the movie production side, the studio is increasingly relying on titles from its various labels ‑ Marvel, Pixar and its recently acquired Lucasfilm ‑to fill its annual slate of eight to 11 releases a year. Along with pics flowing from its distribution deal with DreamWorks, the number of Disney initiated projects that studio executives develop has been drastically reduced.

As a result, Disney no longer needs the number of development executives it once did.

This year, Disney only has three homegrown pictures, “Oz The Great and Powerful,” already a hit, this summer’s “The Lone Ranger,” starring Johnny Depp and “Saving Mr. Banks,” a Tom Hanks vehicle about Walt Disney and “Mary Poppins” author P.L. Travers, out later this year. Last year, it was “The Odd Life of Timothy Green.”

The studio’s 2015 release sked so far includes a fifth “Pirates of the Caribbean,” Lucasfilm’s “Star Wars: Episode VII,” Marvel’s “The Avengers 2” and “Ant-Man,” Pixar’s “Finding Dory,” a sequel to “Finding Nemo.”

The studio is still feeling the pain from a round of cutbacks in 2011 and is wincing at what’s about to come.

“The previous layoffs cut away the muscle. These will cut us to the bone,” said one person inside the studio with knowledge of the coming cuts, which were described as “not insignificant,” when it comes to headcount.

Disney has already been sending staff packing.

On Wednesday, LucasArts, the interactive division of Lucasfilm, let go around 150 people as it exits the videogame production biz. It will now focus on licensing “Star Wars” games to third-party developers. As it looks to finally operate in the black, Disney Interactive has eschewed the traditional console business and is creating games for mobile and social media platforms. Its next high-profile release, “Disney Infinity,” blends toys with games, to tap into the successful “Skylanders” franchise, launched by Activision.

See Also: LucasArts Shutdown Triggers Layoffs at ILM

Disney Interactive already dismissed 50 employees last year and others when it shuttered Austin, Texas-based game studio Junction Point, behind “Epic Mickey.” Another 200 were let go in 2011.

The company also has been in consolidation mode, especially at divisions like consumer products, with a smaller staff overseeing products based on Pixar’s toons, Marvel’s superheroes and now “Star Wars.”

Iger is focused on Disney’s bottom line after several years of heavy investment in the company’s theme parks, cruise lines and acquisitions like the $4.06 billion purchase of Lucasfilm.

While Disney is coming off one of its best years — profits were up 18% to $5.7 billion in fiscal 2012, which ended Sept. 29 — Iger still believes there are more ways to run Disney more efficiently.

Company has increasingly been asked to emulate Marvel’s more cost-effective, streamlined approach to operating its own divisions, including consumer products division and licensing, for example, and is pushing for a similar strategy now that Disney is overseeing “Star Wars.”

The film studio may be one of the least profitable operations, but it’s also one of its most important, launching new franchisees that can boost the company’s other businesses, from theme parks to websites.

Pixar’s characters have been integrated into the parks worldwide, with the opening of “Cars Land” significantly upping attendance at California Adventure.

And much of the characters from Disney’s library of animated and live action films — including “Pirates of the Caribbean,” “Monsters University” and “Cars” — will be featured in the launch of the “Disney Infinity” game, in August.

(Dave McNary and Rachel Abrams contributed to this report.)

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