Layoffs are coming to Walt Disney Company, according to sources that spoke to the Hollywood Reporter. They are expected as part of a reorganization of key operations.
The company's movie studio is expected to be hit hardest, according to sources, who expect the areas of home entertainment, production and marketing to be particularly bad.
The number of layoffs is still unknown as Disney executives conduct a company-wide review process that tasks each division with ensuring that staff levels match company needs, especially in light of a changing marketplace that's evolving with the shifts in new media and technologies.
The internal audit was ordered by Disney chief executive Bob Iger and chief financial officer Jay Rasulo last year, to identify any areas of redundancy and departments that need to be redesigned to meet the changing business models.
The cuts and restructuring are expected to occur before Disney releases its second quarter earnings on May 7. Executives have emphasized the reorganization is intended to better position the studio for future growth.
The staff has been nervously waiting for the review determinations and resulting layoffs. In the home video division, which is suffering with the decline of physical disc purchases and increase in distribution of material through digital platforms, fewer workers are expected to be necessary. Iger believes digital deals with companies such as Netflix and Apple's iTunes are a better and more profitable way to distribute Disney's extensive library of films and television shows.
On the production aspect of the company's business, the studio has been increasingly relying on titles from its own various libraries, such as Marvel, Pixar and the recently acquired LucasFilm, which has announced the production of additional "Star Wars" films, to fill its annual slate of eight to 11 releases a year.
In addition to the films from a distribution deal with DreamWorks, the number of projects that are initiated at Disney has dramatically decreased. As a result, the number of development executives required is less as well.
This year, Disney only has three films developed in house, "Oz the Great and Powerful," "The Lone Ranger," which is being released this summer, and "Saving Mr. Banks," a film starring Tom Hanks that is about Walt Disney and "Mary Poppins" author P.L. Travers, which will be released later this year. Last year, the only in-house release was "The Odd Life of Timothy Green."
The studio's schedule for 2015 so far only includes a fifth "Pirates of the Caribbean" film, the aforementioned "Star Wars: Episode VII," Marvel's "The Avenger's 2" and "Ant-Man," as well as Pixar's "Finding Dory," a sequel to "Finding Nemo."
The layoffs follow previous layoffs in 2011.
"The previous layoffs cut away the muscle," said one person inside the studio with knowledge of the impending cuts. "These will cut us to the bone."
They have been described as "not significant" when it comes to the headcount.
Some staff have already been let go. LucasArts, which is the interactive division of LucasFilm, laid off about 150 people on Wednesday as it leaves the videogame production business. They now plan to focus exclusively on licensing "Star Wars" games to third party developers.
Additionally, Disney laid off 50 employees last year when it closed Junction Point in Austin, Texas, and another 200 were let go in 2011.
Iger is heavily focused on the finances after several years of large investments in company theme parks, cruise lines and acquisitions like the purchase of LucasFilm, which cost $4.06 billion.
The film studio is one of the least profitable aspects of company operation, but it is also one of the most important, as it launches new franchises that can boost the company's other businesses, from the theme parks to websites.
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