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Disney's ABC Television Group is said to be preparing for layoffs

Walt Disney Co.’s ABC Television Group plans to make substantial jobs cuts, including at the broadcast network’s Burbank headquarters, in an effort to reduce costs at a time when traditional TV networks face huge challenges.

The Disney/ABC Television Group, led by Ben Sherwood, is in the early stages of planning for the cuts, according to two people familiar with the plan who were not authorized to discuss it publicly.

Television executives have not determined how many people might lose their jobs, and they hope some of the cuts will be made through attrition.

But Disney’s television group is expected to target as much as 10% of its annual expenses at its West Coast networks, although that figure could change as the company goes through the planning process, one source said. Cutting that deep could result in the elimination of a few hundred positions.

News of the cost-cutting effort comes just two weeks after ABC’s most prominent hit-maker over the last decade, Shonda Rhimes, moved to Netflix, leaving behind her home of nearly 15 years — ABC Studios.

Although dramas that Rhimes produces for ABC, including “Grey’s Anatomy,” a planned spinoff of that hospital drama, the political drama “Scandal” and “How to Get Away with Murder,” will remain on ABC, the company now is under pressure to nurture a new generation of writer/producers — or strike deals with established producers.

ABC finished the most recent television season in third place in viewers, averaging 6.2 million viewers a night, behind CBS and NBC. But the Disney-owned network slipped to fourth place in the important demographic of viewers ages 18 to 49, behind NBC, CBS and Fox. ABC’s ratings in that demographic fell 16% compared with the previous season.

Disney’s television operations have been reeling from dramatic changes in consumer behavior. ESPN, which is based in Bristol, Conn., went through a major round of layoffs in its 2016 budget, cutting 350 employees, or 4% of its workforce. Earlier this year, the sports media giant fired about 100 reporters, analysts and commentators in a move to devote fewer resources to reported stories and commentary.

In the company’s third-quarter earnings, which were released in early August, Disney reported that its television networks revenues for the quarter declined 1% to $5.9 billion while segment operating income fell 22% to $1.8 billion. The decline in profit was attributed to ESPN, which has been hit hard by the trend of cord-cutting in the pay-TV industry.

The broadcasting unit, which includes ABC and the television stations, posted 4% higher revenue of $1.8 billion. The company is collecting higher fees for the retransmission of its TV station signals. But operating income also tumbled 22% to $253 million because of lower advertising revenue and higher programming costs.

The Disney/ABC Television Group, which includes the ABC broadcast network, the Disney Channel, Freeform channel and eight Disney-owned television stations, employs about 9,000 people.

The Wall Street Journal first reported the potential layoffs late Wednesday.

Disney shares closed down 1.6% Wednesday, or $1.65, to $101.22.

Times staff writer Stephen Battaglio contributed to this report.

meg.james@latimes.com

@MegJamesLAT

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UPDATES:

Aug. 31, 1:35 p.m.: This article was updated with additional information about Disney’s financials.

This article was originally published at 5:50 p.m. Aug. 30.

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