Disney Interactive Restructures, Lays Off 200 - InformationWeek

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1/26/2011
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Disney Interactive Restructures, Lays Off 200

The company has tapped Electronic Arts executive Adam Sussman to lead the operation, which will refocus on social media and mobile games.

Disney Interactive -- the Walt Disney division that focuses on console, handheld, online, and mobile games -- on Tuesday confirmed it had laid off 200 employees and hired a former Electronic Arts executive as part of a sweeping restructuring of the money-losing business unit.

Going forward, Disney will concentrate on increasingly popular social media and mobile games, moving away from console games which are losing popularity and are more costly and time-consuming to develop.

"As part of setting a strategic direction for future success in the digital media space, the Disney Interactive Media Group yesterday began a restructuring process," said Disney co-presidents John Pleasants and James Pitaro in an email sent to employees. "Reorganizations require very difficult decisions and this one is no different. We must continuously evaluate our structure and organization and its needs in order to make Disney's digital content and businesses even more robust and successful."

Before the layoffs, Disney Interactive had about 700 employees. There could be additional job cuts throughout the year, as the company further reorganizes and adjusts to its newly honed focus on Facebook, other social media sites, and the explosive mobile market, according to several published reports. In fact, the division's headcount could be halved, several reports said.

Helping to lead that charge is Adam Sussman, formerly Electronic Arts' VP of worldwide publishing for mobile, who is returning to Disney as senior VP of publishing for Disney Games. In this role, he'll oversee areas such as sales, marketing, and franchise planning. Sussman worked at Disney between 1999 and 2005, and was responsible for negotiating a long-term contract between Electronic Arts and ESPN, he said in his LinkedIn profile.

"[I] collaborated with senior corporate and business unit executives to identify, evaluate, and implement business development deals, new business initiatives, company strategies, and M&A opportunities," the profile said.

In 2010, Disney's total revenue increased 5% to $38.1 billion. Revenue for the interactive division grew to $761 million in 2010 from $712 million in 2009, according to Disney. However, it operated in the red, losing $234 million in 2010, $295 million in 2009, and $258 million in 2008 -- the only division spending more than it made, the company reported.

Over the past three fiscal years, the digital media group's losses have added up to revenue of $2.2 billion and a net loss of $787 million.

Looking to stem the flow of dollars, the company closed Propaganda Games, developer of poorly received Tron: Evolution, earlier this month.

The restructuring is not Disney Interactive's first foray into online and mobile gaming. In July, the company acquired Playdom, developer of online games such as Mobsters, Social City, and Market Street, as well as developer of iPhone game Tapulous.

"This acquisition furthers our strategy of allocating capital to high-growth businesses that can benefit from our many characters, stories, and brands, delivering them in a creatively compelling way to a new generation of fans on the platforms they prefer," said Robert Iger, president and CEO, in a release at the time.

After all, online games overtook personal email to become the second most heavily used activity behind social networks, according to a Nielsen study, released in August 2010.

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