Disney has cut roughly 700 employees from its struggling gaming and internet division, leading to a major change in philosophy and focus.

The layoffs, which amount to roughly 26 percent of Disney's global staff, came as the company sought to combine its successful mobile games division with its struggling social games.

Unsurprisingly, Disney also decided to scale back the in-house development of games and will rely more heavily on licensing moving forward.

Not a fairy tale ending

James A. Pitaro - the president of Disney Interactive - viewed the move as a necessary strategy and stressed that Disney would lean on mobile to help buttress its games division moving forward.

"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."

"These are large-scale changes as we focus not just on getting to profitability but sustained profitability and scalability," Pitaro concluded.

Despite the rocky performance of Disney Interactive over the past few years - including its $563 million acquisition of Playdom in 2010 - the sector finally turned a profit in the last two quarters thanks in part to the breakout success of Disney Infinity and its thriving Japanese mobile games market.

[source: New York Times]