UPDATED: Activision Blizzard is laying off approximately 775 people — 8% of its 9,600-person staff — as it refocuses its efforts on its Call of Duty, Candy Crush, Overwatch, Warcraft, Hearthstone and Diablo franchises.
Activision called the move a de-prioritizing of initiatives that didn’t meet expectations. CEO Bobby Kotick said that the cuts would come from support staff while the company consolidates its commercial operations and reorganizes its marketing initiatives. Activision will be instead investing more in live services, Battle.net, eSports, and advertising efforts.
The company added it would be increasing development resources by 20 percent in 2019 on those franchises it is now focusing on. “The company will fund this greater investment by de-prioritizing initiatives that are not meeting expectations and reducing certain non-development and administrative-related costs across the business,” the publisher said in its earnings release.”
“While our financial results for 2018 were the best in our history, we didn’t realize our full potential,” Bobby Kotick, Chief Executive Officer of Activision Blizzard said in an earnings report statement. “To help us reach our full potential, we have made a number of important leadership changes. These changes should enable us to achieve the many opportunities our industry affords us, especially with our powerful owned franchises, our strong commercial capabilities, our direct digital connections to hundreds of millions of players, and our extraordinarily talented employees.”
Net revenue for the quarter was $2.38 billion, beating outlook of $2.24 billion. Net income for the year was $1.8 billion compared to $273 million for 2017. Activision exceeded last year’s net revenue with $7.5 billion against $7.02 billion in 2017.
Activision Blizzard stock took a hit on Monday after rumors surfaced of the layoffs. Share value has been climbing throughout the day and continues to climb slowly in after-hours trading. It’s not uncommon for investors to react favorably to layoffs, which signal a company taking steps to increase value for shareholders.
A sword has been dangling over Activision Blizzard employees since Friday, when Bloomberg reported that the company would be laying off hundreds of employees. In advance of the publisher’s full-year earnings report for 2018, those layoffs are now reality.
Activision Blizzard has been signaling a massive restructuring and realignment in recent months. It began innocuously in May 2017, when Bungie and Activision announced that “Destiny 2” would be launching exclusively on Battle.net for PC players. It was the first time that Activision had overtly dipped its foot in Blizzard’s pool.
The two companies had functioned largely independently under former Blizzard president Mike Morhaime’s leadership. In March 2018, corporate parent Activision Blizzard seemed to exert more control, installing Amrita Ahuja (former Activision Blizzard senior vice president of investor relations) as Blizzard CFO. A second Activision Publishing title, “Call of Duty: Black Ops 4” was announced as a Battle.net exclusive on PC, signaling that the lines between the two branches was starting to become permeable.
“Call of Duty: Black Ops 4” benefitted from the move, outselling “Call of Duty: Black Ops 3” in its opening quarter on PC. Sales of Treyarch’s latest entry in the franchise were soft at retail, though.
Morhaime, a company co-founder, announced his departure in October 2018, signaling the end of a 27-year run. A month later, Blizzard enraged die-hard “Diablo” players by announcing a mobile-only game in partnership with NetEase as a key piece of its Blizzcon keynote.
As the new fiscal year began for the publisher in January, it suffered the loss of two chief financial officers, Spencer Neumann (who handled finances for Activision Blizzard), and Ahuja. Dennis Durkin, former CFO and chief corporate officer, was tapped to return to his financial role and also take on leadership of the company’s emerging business division. The reinstatement netted him a $3.75 million signing bonus and $11.3 million in performance-based stock grants.
Blizzard also splurged on a recent company outing to Disneyland. The company rented the entire park for its employees use. Restructurings take time, and depending on perspective, this was either a lovely send off for employees the company knew would be leaving just a month later or a waste of money that could have been used to retain a few more of those laid off.
On the Activision Publishing side, the portfolio has been shrinking. With Toys to Life essentially dead, the Skylanders franchise has gone dormant. Guitar Hero Live has been entirely sunset, with Activision offering refunds for those that purchased the game recently. That left the company with two tentpole franchises (“Call of Duty” and “Destiny”), remasters (“Spyro Reignited Trilogy” and “Crash Bandicoot N. Sane Trilogy”), and the upcoming “Sekiro: Shadows Die Twice” by From Software.
In January, right before the company’s legally mandated quiet period, Activision Blizzard and Bungie parted ways. The “Destiny” publishing rights held by Activision Blizzard were acquired by the studio, leaving Activision Publishing with a thin lineup.
Blizzard experienced similar layoffs in 2012, cutting 600 jobs. At the time, “World of Warcraft” was in sharp decline. Only 10 percent of the cuts were developers, with the rest of the losses coming from other functions that support the company’s creative efforts. These layoffs mirror the approach taken seven years ago.
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