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Disney Interactive Lays Off 700 Employees

Disney Interactive is eliminating 700 jobs, about 26% of its total workforce, as the Mouse House’s games and Internet division struggles to achieve profitability.

The cuts were expected, and were anticipated to mostly affect Disney’s Playdom group, which produces games for social-media platforms. A Disney rep said the layoffs will occur across the board in the business unit.

With the restructuring, Disney Interactive will develop “significantly fewer” mobile and social games in-house, and other games will be licensed from development partners, according to a rep.

Disney Interactive has consolidated several lines of business as part of an effort to focus the division on a streamlined suite of high-quality digital products,” the company said in a statement. “As a result of this restructuring, we have undergone a reduction in workforce. These actions were difficult but necessary given our long-term strategy focused on sustainable profitability and innovation.”

The layoffs come amid the success of “Disney Infinity,” which combines physical figures and videogames to let players create their own virtual worlds. The company has sold more than 3 million copies since “Disney Infinity” debuted in August 2013.

Disney Interactive is headed by prexy Jimmy Pitaro. Last fall, John Pleasants stepped down as co-president, after leading the launch of “Disney Infinity.”

Disney Interactive also runs Disney.com and other websites. With the restructuring, Disney will shut down BabyZone, a blog site for new moms, and Spoonful, a blog about food and crafts. In addition, it will pull the plug on Playdom games Sorority Life and Alice in Wonderland. The unit’s mobile games include “Where’s My Water?” and “Where’s My Mickey?”; its Tap Tap Revenge mobile games will be eliminated.

Disney purchased Playdom in 2010 for $563 million. The company has struggled to establish successful social games franchises since then, although “Marvel: Avengers Alliance” has performed well with 3.9 million fans on Facebook.

Financial results of Disney Interactive have been improving. For the Mouse House’s fiscal quarter ended Dec. 28, 2013, the Interactive unit posted revenue of $408 million (up 38% from the year prior) and operating income of $55 million versus $9 million a year earlier. For the fiscal year ended in September, Disney Interactive generated revenue $1.1 billion, up 26%, with an operating loss of $87 million compared with an operating loss of $216 million for fiscal 2012.

Along with the layoffs, Disney Interactive will close offices in Chicago, New Jersey, Colorado, South Korea and Hyderabad, India.

In 2012, Disney Interactive laid off 50 employees when it shut down Austin, Texas-based game studio Junction Point, which created “Epic Mickey.” That came after 200 employees were let go in January 2011.

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