Mickey Mouse may not be destined for video game heroism after all. Walt Disney has confirmed that it has laid off hundreds of people in its game development studios as it moves from console games to casual titles.

The news is the latest sign that games are undergoing a transformation, with a lot of revenue and attention shifting from traditional console games to the new markets of Facebook and iPhone games, where the content is aimed at casual players, or those who play in short bursts in contrast to hardcore console gamers who spent hours in front of the TV.

CNBC first reported that Disney had eliminated up to 350 of the 700 jobs in the company’s game business. [update: Disney said that the actual number was about 200] Disney confirmed that it has cut a significant number of jobs but didn’t say how many. The cuts reflect a weakening of corporate resolve, as Disney had been on a five-year plan to triple its revenues in the game business and compete with the likes of Electronic Arts and Activision Blizzard.

But that vision came apart in recent months. First, social games became a hot market with companies such as Zynga making lots of money on Facebook titles. Disney jumped into the market, acquiring social game startup Playdom for up to $763.2 million. It also bought iPhone music game maker Tapulous for an disclosed price. With those deals, Disney acquired some new executives. Bart Decrem, co-founder of Tapulous, became chief of Disney’s mobile game business. And John Pleasants, former No. 2 at EA and CEO of Playdom, became the co-chief of Disney’s Interactive Media Group. Steven Wadsworth, the executive who formerly had the job Pleasants got, resigned in September from the group, which includes the game division.

Then Graham Hopper, the longtime head of Disney’s game studios, resigned in November. Hopper, who ran the game business for eight years, was determined to make Disney a player in console games. He acquired a number of prestigious game studios, including Warren Spector’s Junction Point Studios, which went on to make Disney Epic Mickey. Spector’s goal was to make Mickey Mouse into a video game hero with that game.

The Los Angeles Times reported Epic Mickey sold 1.3 million copies, despite having a late Nov. 30 start in the holiday selling season. But, given that the game took four years to make, the sales were not as spectacular as many game blockbusters and could thus be classified as a disappointment. Epic Mickey also drew complaints from reviewers that it had some bugs. That outcome was similar for many of the other titles Disney had; sales were good, but not so good Disney’s games dominated the scene.

Meanwhile, Pleasants is evidently betting that the company should focus on the fast-growing social and mobile games businesses. That means the company has to shift into a very different mindset. The casual games are cheaper to produce, so Disney can get by with far fewer people than it has in console games. But they’re also made under extreme time pressures, with titles launching and then going through immediate revision based on precise feedback and analytics data from fans.

Playdom had proven adept at making such games. But it also isn’t dominating the field. Playdom is ranked No. 6 on the top social game companies on Facebook, with 27 million monthly active users, according to market analyst AppData. That’s below Playdom’s peak in 2010. When Disney bought it last year, Playdom had 42 million users.

Disney also canceled Pirates of the Caribbean: Armada of the Damned, a big console title, without explanation. CNBC said that Disney shuttered the studio that made that game, putting 170 people out of jobs from that action alone.