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Disney-ABC TV Group Braces for Large-Scale Layoffs Amid Cost-Cutting Initiative

Disney-ABC Television Group will be reducing annual costs at the unit by 10% by the close of Disney’s fiscal year next month, with a restructuring of operations that is expected to include hundreds of layoffs.

Plans for cost-cutting measures across the group, which includes the ABC television network, ABC News, ABC Studios, the ABC-owned stations division, and entertainment cable channels including Freeform and Disney Channel, are still being developed. Disney-ABC sources tell Variety that no headcount for staff reductions has formally been determined and that details of the cost-cutting effort are fluid. But it’s clear that the effort will involve major staff cuts in order to reach the 10% cost reduction target.

Sources said the restructuring is seen as a means of cutting overhead in areas that have become outmoded or less vital to the management of the channels such as traditional sales and distribution, and aspects of marketing operations for ABC and the cable channels. Sources said Disney is looking to streamline and modernize in some areas in order to free up resources to direct into content development.

The cuts are expected to hit ABC and Disney Channel hardest as they have the most extensive overhead. Both networks are also struggling with ratings declines, heightened competition and changing viewing habits. Disney-ABC TV Group is said to have been given a mandate to modernize operations. There’s been some noticeable departures of high-level executives in recent months who haven’t been replaced, suggesting that Disney-ABC has been eying cuts through attrition, including Ben Pyne, former distribution chief, and longtime ABC business affairs chief Jana Winograde.

In 2013, Disney implemented more than 150 staff cuts in the film marketing, home video and consumer products arena in a similar effort to reallocate resources from traditional job functions that had become less vital in the digital era. In 2010, ABC News shed some 400 jobs as the division was forced to come to grips with declining ratings and revenue.

ESPN in recent months has had a steady stream of departures as the sports powerhouse also grapples with ratings softness and erosion in its affiliate revenue base.

The latest initiative will inevitably revive rumors that Disney no longer views ABC as one of its long-term core brands. Disney has consistently denied speculation that it is looking to sell ABC, but the cost cuts come at a time when competitors are plowing money into TV content. Netflix earlier this month poached ABC’s highest-profile producer, Shonda Rhimes, signing her to a multi-year deal, and ending her 15-year relationship with ABC Studios that yielded hits such as “Grey’s Anatomy” and “Scandal.”

But ABC has boasted recent investments in talent and content — signing mega-producer Carlton Cuse to a four-year deal valued in its entirety in the low eight-figures, and recruiting singer Katy Perry to serve as a judge on “American Idol” for a fee of $25 million for one season.

A representative for Disney-ABC Television Group declined to comment.

The cost-cutting would not affect ESPN, which has suffered its own recent troubles but falls outside of the Disney-ABC group. While all the major U.S. broadcast networks have struggled with ratings declines in recent years as competition for viewers within and outside the traditional TV ecosystem increases, ABC has lagged behind competitors CBS and NBC. It is also the only one of the Big Four broadcasters unbuoyed by a television contract with the National Football League in an era where live pro football is the biggest driver of same-day ratings.

On the cable front, Disney-ABC’s group is comprised primarily of youth-skewing channels such as Freeform, Disney Channel, and DisneyXD, making it vulnerable to changing viewership patterns in younger demos.

The Wall Street Journal first reported news of the cost-cutting effort and staff reductions.

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