March 6 (Bloomberg) -- Walt Disney Co. is cutting 700 jobs, a quarter of the employees at its interactive unit, in a realignment of its video-game and Internet advertising businesses.
Future games for consoles such as Sony Corp.’s PlayStation and Microsoft Corp.’s Xbox will be licensed, James Pitaro, president of Disney Interactive, said today in an interview. Burbank, California-based Disney is also paring its online ad sales team to focus on “fewer and bigger partners.”
The company will continue to invest in interactive, including the Infinity game system and the upcoming “Fantasia” title, mobile game development in Japan and short-form videos on the Web. It’s also extending the Club Penguin online virtual world to iPhone and Android platforms. The cuts announced today are part of an effort to make the division profitable on a consistent basis.
The interactive division lost $87 million on sales of $1.06 billion in the year ended Sept. 28. While the unit made a profit of $55 million in this year’s first quarter ended in December, Chief Financial Officer Jay Rasulo said in February results this period would be comparable to the $54 million loss in the second quarter of 2013.
The division had one of the top 10 video games of 2013 with its Infinity system, according to researcher NPD Group Inc. Mobile traffic on its websites has about doubled since a redesign two years ago, according to data from ComScore Inc.
Selling ads based on the mobile traffic has been challenging, Pitaro said, explaining why the company is shifting to more extensive sponsorships from display ads.
Playdom, a maker of games for social media that Disney acquired for $563 million in 2010, has also struggled to come up with hits as the business shifted to mobile and customers balked at paying even 99 cents for games, Pitaro said.
“The industry has shifted from social games to mobile games,” Pitaro said. “Our focus is now mobile first.”
Pitaro became sole president of interactive in November. He previously shared that title with former Playdom Chief Executive Officer John Pleasants, who left at that time.
Disney rose less than 1 percent to $83.34 at the close in New York. The stock has advanced 9.1 percent this year.
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