Disney Reduces Interactive Group Group

An unspecified number of employees have been let go from the Interactive Media Group at The Walt Disney Co. in an effort to the steer the struggling business unit toward profitability. The Burbank-based company notified 99 employees that cuts would be effective Nov. 5, according to a Worker Adjustment and Retraining notice filed with the state. The company offered new positions to some of those notified, so fewer employees than announced are expected to be affected by the layoffs, a company spokesman said. The Interactive Media Group develops video games and online websites based on Disney content. The layoffs impacted the division’s online segment which oversees Disney.com and the Moms and Families properties websites. The video and mobile games segment was untouched. The restructuring is being done in an “effort to be competitive and nimble in the marketplace,” the company said. The Interactive business has not been a financial winner for the media and entertainment conglomerate. The division ended the 2009, 2010 and 2011 fiscal years with operating losses. In the third quarter for fiscal 2012, Disney reported that Interactive had revenue of $196 million, the lowest of the five business divisions, and a 22 percent decrease from the $251 million in revenue for the same period in the prior year. For the third quarter, Interactive has an operating loss of $42 million. The latest staffing cuts follow others at the Interactive division. In January 2011, the video games segment was hit with layoffs that significantly reduced its workforce of 700 people, with media reports putting the reduction at about 200 workers. In March 2011, the online unit shed 80 employees; Disney said the move as aimed at positioning the division for future success in digital media. Disney is not alone in making the challenging transition to digital delivery of its content. All game publishers are struggling to develop new business models that will appeal across all platforms, said Brad Carraway, vice president of brand strategy at Mile 9, a Calabasas marketing firm. “It is high risk and less reward on the product,” Carraway said. “Everywhere you turn there is fragmentation and it is difficult to get revenue streams to build a business around.” Disney Chairman and CEO Robert Iger has remained positive about the company’s online and video games business. “It is not a huge business for us, but it is one that we are going to continue to be in,” Iger told analysts during an August conference call to discuss third-quarter earnings. The company has made modest investments in the segment. The division had released about 10 games as of August, many of them based on the Disney characters and stories. This year, the company’s big gaming title is “Epic Mickey 2: The Power of Two” coming in November. In February 2011, Interactive Media Group Co-Presidents John Pleasants and Jimmy Pitaro outlined their turnaround strategy for the division at an investor’s conference in Anaheim. Pleasants oversees the video, mobile and social gaming side of the Interactive group, while Pitaro handles the Disney-branded websites. Pitaro said the goals for the division were to achieve profitability in the 2013 fiscal year — which began Oct. 1, 2012 — as well as to make the Interactive Media Group a growth business, and to deliver asset value to Disney. This will require entertaining people with the right mix of games, sites and videos that push the boundaries of technology on all platforms and devices, he said. “Quite simply, we want our games and our sites to be to our gamers and our Internet users what Pixar is to movie-goers,” Pitaro told conference attendees. Pleasants outlined a strategy that included focusing on four-to-six major franchises, getting content onto emerging platforms, taking advantage of revenue streams, and creating better game development tools and analytic systems to start offering live gaming services. The online unit, Pitaro said, is rethinking the entire user experience for the Disney.com site and the Moms and Families sites that include family.com, Kaboose, BabyZone, and familyfun.com. The sites will deliver hyper-personalized and customizable experiences that weave in social networking capabilities, he said. Disney heritage of investing in content and creativity will continue, Pleasants said. “We intend to completely uphold that (heritage) and add to it new capabilities around technologies and platforms take that content to the next levels.”