Disney to cut jobs in spite of record box office sales

Despite the record-breaking success of its latest film, Pirates Of The Caribbean: Dead Man's Chest, the Walt Disney firm is to slash hundreds of jobs and drastically cut back on the number of films it makes.

Sources say the studio's workforce will be reduced by between 20 and 25 per cent and the number of films it makes will be cut from around 18 a year to eight. The drastic moves come as studios struggle with rising overheads, production budgets and marketing bills. Disney's competitors Warner Bros, MGM and Paramount have already laid off staff and cut their budgets.

Disney reportedly intends to return the studio to its roots in family films that not only have broad audience appeal but can sell merchandise and be exploited at theme parks. It ventured into darker, more adult fare in the 1990s but found family films more profitable.

Although the studio chairman Dick Cook and his boss, the Disney chief executive Robert Iger, have warned of imminent cutbacks, telling Wall Street analysts that studio operations were being reviewed, the planned cuts are greater than many people anticipated and come as the studio is enjoying one of its best summers. Pirates of the Caribbean: Dead Man's Chest had the biggest opening weekend in history. The film, a sequel to the successful 2003 film starring Johnny Depp as pirate captain Jack Sparrow, broke the opening day and weekend box office records, taking $132m (£72m) in ticket sales - well above Wall Street forecasts that ranged from $47m to $100m.

Although it cost more than £175m to produce it is expected to make the studio a big profit, having already grossed £120 in its first week. A third instalment, starring Depp and castmates Keira Knightley and Orlando Bloom, is set for release in May 2007. Since June this year Disney shares have risen by about 6 per cent, mainly in anticipation of the sequel. Shares in the studio's competitors, including Time Warner, are down over the same period.

When Cars, produced by Disney's Pixar Animation Studios, opened in the US last month, it raced straight to the top of the box office chart. Within three days the animated tale of a rookie racing car had grossed more than £35m, making it Pixar's third-most profitable picture after The Incredibles and Finding Nemo. It has since made more than £150m in the US alone.

The studio also scored last year with the blockbuster The Chronicles of Narnia: The Lion, The Witch And The Wardrobe, and sequels are already in the works.

But Disney has also had some costly flops, such as Stick It, Annapolis, Stay Alive, The Wild, The Alamo, King Arthur, Hidalgo and Home on the Range. Despite the £80m budget, the Second World War epic Pearl Harbour completely failed to dominate the US box office when it opened in 2001. It held the top spot for less than two weeks before being knocked off by Dreamworks production Shrek.

The cuts are expected to hit every major domestic and international sector of the Mouse House, as it is known in Hollywood, with only the animation operation, its Miramax film unit and its music group surviving more or less intact.

Disney executives have not commented on the planned cuts.