The company will close its Salt Lake City game studio and cut around 300 jobs.
Disney announced the decision Tuesday as part of an announcement about its second quarter earnings, saying it incurred a $147m charge for severance costs, and to write off its investment in the business.
Furthermore, Disney will no longer by developing games on its own, and will rely on licensees such as Electronic Arts Inc, which makes Star Wars games.
The company’s second quarter missed analysts estimates, with Disney shares falling 4.7% to $101.62 in extended trading. Profit from consumer products fell 8% to $357m, as the strong dollar cut earnings on the Star Wars merchandise and Infinity results shrank. Analysts expected $452m.