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Disney overhauls Web, gaming unit

GLENDALE, Calif. — Walt Disney Co.’s struggling video game and Internet division Thursday laid off roughly 700 employees, or 26 percent of its global staff, in a major retrenchment that includes a shift in advertising strategy at Disney.com.

“These are large-scale changes as we focus not just on getting to profitability but sustained profitability and scalability,” James A. Pitaro, the president of Disney Interactive, said in an interview.

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Layoffs were long expected in the unit, but not on this scale. They came as a result of Disney’s decision to combine two businesses: booming mobile games (those played on iPads and smartphones) and sagging social games (those played on websites like Facebook).

In a major shift in strategy, Disney also decided to dramatically scale back in-house development of games of all types. It will now rely much more on outside licensing.

Disney Interactive, which published roughly two dozen games last year, including disappointments like “Where’s My Water? 2’’ and “Stack Rabbit,’’ will cut annual game output by as much as 50 percent.

On the Internet side of the division, Disney will close two smaller websites called BabyZone.com and Spoonful.com.

It will also transition Disney.com, the company’s main portal, to sponsorship-based advertising instead of banner ads.

“We’re not exiting any businesses, and we will pursue licensing partnerships in which we retain a lot of creative input,” Pitaro said. “But this is a doubling down on mobile and an effort to focus much more intently on a core set of priorities.”

In other words, what’s working. Disney Interactive, which has suffered more than $1 billion in losses in recent years, has finally turned a profit in the last two quarters largely because of “Infinity,” a combination video game and toy line that has sold more than 3 million copies worldwide since its August debut.

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