Disney has confirmed a "restructuring process" at its Interactive Media Group owner of Epic Mickey creator Junction Point and Split/Second maker Black Rock - that marks its transition from a boxed game publisher to a digital publisher.
Half of Disney Interactive Studios' 700 staff may have been cut, overnight reports suggest.
"As part of setting a strategic direction for future success in the digital media space, the Disney Interactive Media Group today began a restructuring process," Disney said in a statement issued to Variety.
According to Variety staff expected the cuts.
Last year Disney Interactive boss Steve Wadsworth left the company. He was replaced by Yahoo exec Jimmy Pitaro and John Pleasants, CEO of Playdom, the online game company Disney bought for an eye-watering $763 million in late July.
Then, in November, Disney Games boss Graham Hopper left after eight years of service.
Disney CEO Bob Iger said Pleasants would not only "focus on turning those businesses into profitability but diversifying our presence in the business, so we're not reliant on one platform that's obviously facing challenges".
Variety notes that Pirates of the Caribbean: Armada of the Damned, which Disney had invested millions of dollars in and which was far along in the development cycle, was cancelled without explanation. Propaganda, the developer behind it, was later closed.
Movie tie-in Tron: Evolution flopped and Wii-exclusive Epic Mickey, which sold 1.3 million units in December 2010 in the US, is reported to have performed below expectations.
Eurogamer has requested comment from Disney.