Disney to Begin Layoffs

Cuts are expected across divisions following a company-wide review of operations.

Employees at the Walt Disney Co. are bracing for layoffs that are expected in the coming weeks as part of a reorganization of key operations, according to a report by Variety.

It is believed that the company’s movie studio will be hardest hit, particularly in the areas of home entertainment, production and marketing, according to the report.

The exact number of staff reductions are still being determined, as Disney chiefs conclude a company-wide review process that tasked each division with ensuring that staff levels are in line with the company’s needs in a changing marketplace, particularly in divisions affected by shifts in new media and technologies. The internal audit was ordered late last year by Disney chief executive Bob Iger and chief financial officer Jay Rasulo to identify areas of redundancy and departments that need revamping amid changing business models.

Many at the studio expect that the cuts and restructuring will occur before the release of Disney’s second quarter earnings on May 7. Top executives have emphasized that the reorganization is aimed at better positioning the studio for future growth.

Staffers have been nervously awaiting the results of the review and the impending layoffs. In the home video division, as the sales of physical discs continues to decline and as the studio embraces more digital distribution platforms, fewer individuals are needed to manage that business. Iger believes digital deals with companies like Netflix and Apple’s iTunes are more profitable ways to offer up Disney’s library of films and TV shows.

On the movie production side, the studio is increasingly relying on titles from its various labels -- Marvel, Pixar and its recently acquired Lucasfilm -- to fill its annual slate of eight to 11 releases a year. Along with features coming from its distribution deal with DreamWorks, the number of Disney initiated projects that studio executives develop has been drastically reduced.

As a result, Disney no longer needs the number of development executives it once did.

This year, Disney only has three homegrown pictures, Oz The Great and Powerful, this summer’s The Lone Ranger, and Saving Mr. Banks, a Tom Hanks film about Walt Disney and Mary Poppins author P.L. Travers, out later this year. Last year, it was The Odd Life of Timothy Green.

The studio’s 2015 release schedule so far includes a fifth Pirates of the Caribbean, Lucasfilm’s Star Wars: Episode VII, Marvel’s The Avengers 2 and Ant-Man, and Pixar’s Finding Nemo sequel, Finding Dory.

On Wednesday, LucasArts, the interactive division of Lucasfilm, let go around 150 people as it exits the videogame production business. It will now focus on licensing Star Wars games to third-party developers. As it looks to finally operate in the black, Disney Interactive has eschewed the traditional console business and is creating games for mobile and social media platforms. Its next high-profile release, Disney Infinity, blends toys with games, much like Activision’s Skylanders franchise.

Disney Interactive already dismissed 50 employees last year and others when it shuttered Austin, Texas-based game studio Junction Point, behind Epic Mickey. Another 200 were let go in 2011.

Iger is focused on Disney’s bottom line after several years of heavy investment in the company’s theme parks, cruise lines and acquisitions such as the $4.06 billion purchase of Lucasfilm.

While Disney is coming off one of its best years — profits were up 18 percent to $5.7 billion in fiscal 2012, which ended September 29 — Iger still believes there are more ways to run Disney more efficiently.

The company has increasingly been asked to emulate Marvel’s more cost-effective, streamlined approach to operating its own divisions, including consumer products division and licensing, and is pushing for a similar strategy now that Disney is overseeing Star Wars.

The film studio may be one of the least profitable operations, but it’s also one of its most important, launching new franchisees that can boost the company’s other businesses, from theme parks to websites.

Pixar’s characters have been integrated into the parks worldwide, with the opening of “Cars Land” significantly upping attendance at California Adventure.

And much of the characters from Disney’s library of animated and live action films -- including Pirates of the Caribbean, Monsters University and Cars -- will be featured in the launch of the Disney Infinity game, in August.

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