Otter Media laid off about 10% of its staff today in a sweeping reorganization of its digital properties intended to make these assets more competitive and profitable.

CEO Tony Goncalves sent an email to staff today outlining changes that he said would better position the digital media company to capitalize on the opportunities in a rapidly changing digital landscape.

Otter’s consumer brands would be consolidated under the Ellation division, which operates the anime-focused Crunchyroll and the subscription service VRV. Gamer-focused Rooster Teeth will be folded into the Ellation business unit, together with WarnerMedia-owned Machinima, which Deadline previously reported would become part of Otter Media on Jan 1.

Fullscreen, the one-time multi-channel network that has evolved into an influencer marketing and branded-content agency, will be divided into three independent divisions: creator services, the brand studio and brand services. Otter also will consolidate shared services like legal and human resources.

“As a result of these changes, the size of the organization has been impacted, and we had to say goodbye to valued employees,” Goncalves said in a statement to Deadline.

Otter Media employs about 1,400 people. The layoffs will impact both full-time employees as well as contractors.

Since AT&T completed its $81 billion acquisition of Time Warner, the Dallas-based telecommunications and media conglomerate has been moving rapidly to dispose of digital offerings with niche audiences, even as it lays plans for an ambitious competitor to Netflix, which is scheduled to launch next year.

The telecommunications giant began laying the groundwork for consolidating AT&T and WarnerMedia’s various digital assets last summer, when it acquired the The Chernin Group’s controlling stake in Otter Media . At the time, it said it would fold the subscription, advertising and content company the two formed in 2014 into AT&T’s WarnerMedia.

Last month, WarnerMedia announced plans to shutter cinephile streaming service FilmStruck, only to backtrack slightly after a fierce backlash led by many A-list directors and other Hollywood figures. The company ended up compromising by bringing back streaming for Criterion Collection titles, a component of FilmStruck’s offering.

WarnerMedia also shuttered DramaFever, a streaming service specializing in Korean dramas, which abruptly ceased operations on Oct. 16. Turner similarly pulled the plug on its edgy digital content and TV studio, Super Deluxe.

Founded in 2000 and long a trailblazer in original shows for gamers, Machinima was acquired in full by Warner Bros in November 2016. When the property underwent a significant rebrand early in 2018, it said its properties were attracting more than 140 million monthly views.

Russell Arons, who replaced Chad Gutstein as CEO in 2017, described an effort in 2017 “to truly take the time to evaluate what Machinima is and what our true ‘north’ is.” She told Deadline last February that the management team had ruled out any subscription models, despite a challenging environment for digital video advertising, 80% of which is controlled by Google and Facebook.

Here’s the full memo:

Team,

Today we announced some important organizational changes at Otter that were made to optimize the effectiveness of our brands, services, and teams. These changes will make our business more focused, competitive and profitable.

This past year, we invested heavily in our businesses. We acquired companies, established two new studios and launched a gaming division at Crunchyroll, set the foundation for increased programming quality at Rooster Teeth, and elevated our tech platforms and data capabilities. All this during a period of significant change, including our acquisition by WarnerMedia earlier this year. I’m very proud of what we accomplished, and I hope you are too.

The market for digital media and marketing services is dynamic and ever-changing. Because of this, we’ve made strategic, essential changes in three areas: our consumer brands, our service offerings, and our shared services:

Consumer Brands

  1. Consolidate our direct-to-consumer businesses under Ellation. Effective immediately, Rooster Teeth will operate as a brand alongside Crunchyroll and VRV, led by Tom Pickett. Changes will be minimal to ensure that we continue to maintain what’s special about both the Rooster Teeth and Crunchyroll brands and the unique capabilities of each, with the key exception that our consumer brands (including Rooster Teeth) will align all sales efforts for this special collection of brands. Leveraging the value of these important fan communities will attract more advertising and partnership opportunities with a shared and aligned sales force.
  2. We continue to work with WarnerMedia to identify opportunities that bring like brands and businesses together. As such, Machinima will join the Otter family in January 2019, amplifying our strength in super-serving the gamer community with authentic content and voices. Details on these plans will follow soon.

Service Offerings

  1. Refocus and clarify Fullscreen’s creator and brand-focused service offerings. Fullscreen will now operate as three distinct divisions: Creator Services led by Beau Bryant, Brand Studio (influencer marketing and custom content) led by Maureen Polo and Brand Services (social creative and video channel management) led by John Holdridge. These groups will be free to operate independently and to integrate when it serves our clients best, while centrally leaning on our proprietary data as a key differentiator in the market. Focusing on the businesses with higher yields and performance will be integral to overall success. These three teams will report into Andy Forssell, Otter Media COO.
  2. We have transition plans in place for the Fullscreen Direct serviceclients and team members. This will allow its 75 clients to experience as little change as possible, ensuring great ongoing service. Plans will be sharedsoon.

Shared Services

  1. Unify key shared services across all Otter Media. In our continued effort to provide the best and most supportive environment for creative media brands to thrive, we’ve established a new, centralized approach to shared services. Legal teams will report into David Ho, HR teams into Christi Karandikar at Otter, while Fullscreen’s brand marketing teams will report into Alec McNayr, and its Finance team into Jennifer Cho. Ellation will maintain dotted line reporting into Otter for Finance, Marketing and Communications.

As a result of these changes, we’ve had to make some difficult decisions related to the size of our organization and have to say goodbye to some valued colleagues. I personally ask that you keep this in mind as you learn about those impacted by these changes and show them respect and empathy as they embark on their next journeys.

In our work we are at the tip of the spear for how youth consume media and are poised to meet consumer demands, redefine markets and create something worth following. Remember this: our shows, videos, content, events and merchandise are not just “enjoyed” by fans around the world — they’re loved. That love is why we do what we do, and it’s what we’ll continue to do, together.

Thanks for all your creative work, your enthusiasm, and support of one another.

Tony