Update: Layoffs Hit Disney Interactive, Turok Sequel CanceledS

Disney is the latest in a long list of companies planning to pare down its workforce, with cuts and consolidations affecting Disney Interactive Studios. Layoffs are said to have already hit Turok developer Propaganda.

Sources tell us that Vancouver based Propaganda Games is in the process of laying off approximately 70 employees. That reduction in workforce is likely closely tied to the cancellation of Turok 2, a title never officially announced by Disney, but one of two projects that Propaganda was working on, we're told.

Propaganda's second project, which sources opted not to define, is still actively in development.

According to one employee at a DIS subsidiary, the parent company is also planning to consolidate a handful of its studios, including Avalanche Software and the Fall Line studio. Both development houses are responsible for creating games based on Disney properties such as Chicken Little, Hannah Montana and The Chronicles of Narnia.

Both studios are located in Salt Lake City, Utah.

Disney is planning to eliminate jobs outside of its video games business as well, with Reuters reporting that job cuts will hit television networks ABC and ESPN.

Representatives from Disney Interactive Studios did not immediately return phone calls requesting comment or confirmation. [Disney reps have since confirmed and clarified this report.]

Update: We received internal communication forwarded to remaining employees from Steve Wadsworth, President of the Walt Disney Internet Group. Wadsworth writes: "As you can imagine, given economic conditions, every industry has been impacted on a global scale. In response to this challenging business environment, we have examined ways in which we might be able to work more efficiently. We have taken measures to control costs by freezing most open positions, deferring some capital projects, reducing support from third parties, taking significant reductions in travel and entertainment expenses and eliminating other activities. The elimination of existing positions that we communicated today was a necessary step that we had hoped to avoid. In addition to all of these changes, we have also determined that Directors and above will not be receiving merit increases this year. All of these actions are part of a focused effort to ensure we are closely managing the organization through the current economic climate, balancing our need to respond to the current environment with our goal of driving significant long-term growth."