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Disney’s Game and Internet Division Lay Off 700 Employees
Posted on March 07, 2014 at 12:33 am IST
Disney’s struggling video game and Internet division laid off roughly 700 employees
Disney’s struggling video game and Internet division laid off roughly 700 employees on Thursday, or 26 percent of its global staff, in a major retrenchment that includes a shift in advertising strategy at Disney.com.
“These are large-scale changes as we focus not just on getting to profitability but sustained profitability and scalability,” James A. Pitaro, the president of Disney Interactive, said in an interview.
Layoffs were long expected in the unit, but not on this scale. They came as a result of Disney’s decision to combine two businesses: booming mobile games (those played on iPads and smartphones) and sagging social games (those played on websites like Facebook). In a major shift in strategy, Disney also decided to significantly scale back in-house development of games of all types. It will now rely much more on outside licensing.
Disney Interactive, which published roughly two dozen games last year, including disappointments like Where’s My Water? 2 and Stack Rabbit, will cut annual game output by as much as 50 percent.
On the Internet side of the division, Disney will close two smaller websites called BabyZone.com and Spoonful.com. It will also move Disney.com, the company’s main portal, toward sponsorship-based advertising instead of banner ads.
“We’re not exiting any businesses, and we will pursue licensing partnerships in which we retain a lot of creative input,” Mr. Pitaro said. “But this is a doubling down on mobile and an effort to focus much more intently on a core set of priorities.”
In other words, what is working. Disney Interactive, which has suffered more than $1 billion in losses in recent years, has finally turned a profit in the last two quarters largely because of Infinity, a combination video game and toy line that has sold more than three million copies worldwide since its August debut.
Disney Interactive also has a thriving mobile business in Japan, where Disney-branded mobile devices and games have recently become a minor cultural phenomenon. Tsumu Tsumu, a mobile game, has been downloaded more than eight million times since its Jan. 29 release and is the No. 1 app in Japan.
“At the same time we are reducing our focus in some areas, we are making strategic investments in others, and the Japan business is one,” Mr. Pitaro said.
What has not been working is social gaming. Thursday’s actions - the latest of several as Disney has scrambled to keep up with a fast-evolving digital media marketplace - are in some ways an admission that Disney’s $563 million acquisition of the social game company Playdom in 2010 was a bust.
At the time of the Playdom purchase, Facebook-based social games like Zynga’s FarmVille were skyrocketing in popularity. But that business has fallen off as consumers moved with greater speed than anticipated to smartphones and other mobile devices. Playdom has not had a breakout hit since Disney purchased it.
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