Disney Interactive is one of the largest entertainment groups in the world. The studios that comprise the division produce everything from mobile and console games to interactive Web experiences. It’s also not doing so well these days.

The New York Times reports that Disney has laid off 700 employees from its Game and Internet Division, more commonly known as Disney Interactive. The 700 employees being laid off this week represent 26 percent of Disney’s global staff. In short, there is some major restructuring afoot at the House of Mouse.

James A. Pitaro, president of Disney Interactive, told The Times that the layoffs are part of Disney’s move to “sustained profitability and sustainability.” In other words, making games in-house is expensive, and it’s much more cost effective for Disney to license out its properties to others.

Disney already has a history of licensing its properties out to third parties. In fact, it did it last year with the newly acquired Star Wars IP. For years, LucasFilm had made its own Star Wars games and media through its in-house LucasArts studio, After being acquired by Disney, the company shut down LucasArts and sold the game license rights to EA. Disney will still have creative control over the projects, but the monetary burden of actually producing the products falls onto others.

As for its in-house projects, Disney isn’t leaving the space entirely. It will double down on mobile while leaving behind other areas that aren’t so profitable (i.e. Web-based games). Pitaro points to its having the number one mobile app in Japan as justification for it staying in the mobile business even as it exits others.

So, what does this all mean for Disney Interactive’s output? The division will be slashing its output by half in 2014. Last year, it published two dozen games. Licensed properties are not affected so Kingdom Hearts and Star Wars Battlefront fans need not worry.

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