Tag Archives: Layoffs

Activision Blizzard – Famine in the Midst of Plenty

I already had a post queued up for today, one about EverQuest and the anniversary progression servers they just announced. But events have overtaken that, so it has been pushed off until tomorrow.  It can wait.  Instead there is a fresh turd in the punch bowl calling attention to itself and which I can’t seem to ignore.

Let’s talk about Activision Blizzard for a moment.

There are few things that can raise the ire against capitalism than a company declaring record revenue and announcing layoffs on the same day.  And yet that was yesterday for Activision Blizzard.

Unless this blog is literally the only video game site you read… in which case I am sorry… you have probably seen the news of yesterday’s earnings call spread around.

Bobby Kotick led the investor call yesterday and was able to declare that Activision Blizzard had its best year ever, earning $2.38 billion in revenue.  However, it wasn’t as good as he had previously promised.  Wall Street was led to believe that the numbers would be closer to $3 billion.  Furthermore, there was expected to be some decline from this earnings summit, with 2019 being described as a “transition year.”

To appease Wall Street for this it was announced that the company would be laying off 8% of its staff, adding up to roughly 800 people.  In my mind I see the scene from The Fifth Element where Jean-Baptiste Emmanuel Zorg callously approves a layoff, though that probably flatters the Activision.

The company was quick to follow that with a statement that these layoffs would not be hitting the actual game developers and that “in aggregate” it was expected that game development staffing across the company and its many titles was expected to grow 20% over the course of the year.  What “in aggregate” means is left to the imagination, since I doubt that we’ll every see any follow on indicating if or how this came to pass.  In aggregate some more developers at NetEase working on mobile games for Blizzard might count.

But this ritual sacrifice apparently worked for the moment as ACTI stock has been up a bit today, though the share price is still almost half of what it was back in October before BlizzCon.  I’m not saying that BlizzCon tanked the stock completely.  The price was already down to 65 before then.  But the week following BlizzCon it was down to 50, after which it fell into the 40s during the tough December for the market, finally dropping to its recent nadir in anticipation of the overall company not meeting its estimates.

And so it goes with public companies, where stock price and margins are everything.

When I was younger, back in college, there used to be concern about the dividends that stocks paid.  That was a key factor in their valuation.  It was, you know, an actual investment.  There were programs from companies like Coca-Cola that would allow you to buy some of their stock and then use the regular dividends to buy more so that over time you might have an investment that provided a decent income, something to help you later on in life.

That changed, largely because of Silicon Valley, with the trend in the late 80s that companies would deliver value in the form of growing stock prices.  Companies like Apple and Microsoft pay dividends rarely and very reluctantly. [Edit: Okay, those two do now, but they fought doing that for ages, and a lot of tech companies do not.]  Thus the stock market became became much more about speculation.  What was important was not how consistent a company had been in paying dividends in the past but how much the stock would be worth in the future.  You didn’t buy stock to hold but to sell.

So stock price became all important, and margins became the key measure by which Wall Street valued stock.  Margins, the ratio of expenses to revenue, as the Wall Street obsession has its own distorting effect.  You can boost margins easily by laying people off, or at least look like you’re attempt to boost margins.  You can also boost margins by buying other companies for their products rather than building your own.  Activision spending $5.9 billion to develop a mobile games library?  A huge hit to margins.  Activision buying King for $5.9 billion?  No hit to margins at all since it is assumed in all such transactions that what you bought was worth what you paid for it.  Want to know why EA buys so many studios?  That’s why.

Anyway, that is all based on my experience over the last 30 years in Silicon Valley, where the CEO, the board of directors, and the major investors all care primarily about stock prices if your company is public, and about setting up an optimum structure for going public if you are not already.  I don’t like it.  But if I attempted to avoid companies that behaved that way, which is almost every publicly held company and most larger privately held companies looking to go public, I’m not sure how I would get by.  Go read this series about what it takes to avoid the big five tech giants.

More interesting I suppose is what all this will mean for Blizzard, the one part of the company I actually care about.

On that front things do not look good.  On slide six from the investor call presentation the Blizzard portion stands out in its tepidness.

Activision Blizzard Q4 2018 Financial Results Presentation – Slide 6

You may have to click on that to view it full size for it to be legible.

Both Q4 and in 2018 overall Blizzard was third place in margins and second place in revenue, with King running close behind on that front.

Meanwhile the highlights listed are pretty stark.  Activision had a huge Q4 because that is when the release the latest Call of Duty every year, so you expect that to be huge for them.  But this year it set records.

King also showed quarter over quarter and year over year growth and was recognized for having a leading entry in the mobile games market.

And Blizzard?  I don’t think “sequential stability” is a winning phrase on Wall Street.  Signing a renewal with NetEase is nice, but I don’t think that was a surprise after BlizzCon, where we found out that they were building Diablo Immortal.

And World of Warcraft seeing “expected declines” post expansion already is downright depressing.  That used to be what happen at least a year after an expansion launched, then maybe something that was referenced six to nine months down the road.  But Battle for Azeroth launched in August, in the middle of Q3, and we’re being told that the “expected declines” hit in Q4?  That’s not good, not good at all.  I’m tempted to double down on my “early launch for WoW Classic” prediction from the beginning of the year.

I’ve already seen somebody suggest that this means that Blizzard will abandon WoW, which is ludicrous.  It doesn’t track logically at all because Blizzard doesn’t have anything else to fall back on.  Heroes of the Storm getting set aside was easy, it wasn’t a key revenue generator.  WoW is practically the company’s right leg, and the left leg, Overwatch, hasn’t been doing so well recently either.

And, on top of all of that, it has come out that Blizzard has no major “frontline” releases slated for 2019.   I am assuming that WoW Classic doesn’t count towards that and, as I have said, I expect it will do well.  But reviving the WoW subscriber base for the months that WoW Classic with be hot doesn’t sound like it will be enough.  A remaster Warcraft III isn’t going to be a big enough draw either.  And you can only have so many Hearthstone expansions in a single year.  That doesn’t leave much.

So I expect 2019 will become the year that is marked as the one that Blizzard became something else.  The departure of Mike Morhaime, the Diablo Immortal fiasco at BlizzCon, the rumors and leaks that Activision is getting more and more into the daily operation of the division to make it more like the rest of the company… a company run by a man who said he wanted to take the fun out of game development… and less like the Blizzard that could take the time to hone and polish a product before launch.

Anyway, we shall see what happens.  But I do not think it bodes well.

Other posts on this topic:

VR Development Dead and Layoffs at CCP

One of those “note the time and date” posts, Massively OP reported earlier today that CCP was backing away from development of Virtual Reality games, closing their Atlanta office and selling off the studio in Newcastle responsible for now VR-optional Oculus Rift launch title EVE: Valkyrie.  This will mean a job loss for as many as 100 CCP employees world wide, including 30 in Iceland.

EVE: Valkyrie in stasis

CCP says that they will continue to support their VR products but will no longer be investing time into new development for EVE: Valkyrie, EVE Gunjack, or the recently launched Sparc.  That sounds nice, but once you cut the development team restarting on a VR project won’t be easy.

Hello VR captain’s quarters?

In addition to a renewed focus on EVE Online… because what else is making them any money… CCP will continue with development of the shooter known as Project Nova as well as the EVE Universe themed mobile game Project Aurora, which was demoed at EVE Vegas earlier this month.

CCP Falcon had the following to say on Reddit:

With regards to EVE, it’s kind of bittersweet that this puts us in a more solid position going forward, as a lot more focus is back on EVE Online, its services and all the technology and support around it.

The EVE Online development team was not impacted at all by these changes, and remains the same size, working toward the same goals and features that have already been announced.

While that may be so, one of the losses with the Atlanta office is CCP Manifest who was the PR and social media lead who paid a lot of attention to the EVE Online community.  Likewise CCP Logibro who minded the fansites and worked with the CSM appears to be on the list.   They will be missed.

We shall see what this means in the longer term.  EVE Online remains the only money making video game for the company.

Other coverage:

Shot at Daybreak – First Casualties of the Acquisition

Today we learned that Linda “Brasse” Carlson has been let go as head of the community management team for the company formerly known as Sony Online Entertainment.

Brasse with beer and axe

Brasse with beer and axe

According to the post over at EQ2 Wire, she has been part of the community team at SOE for six years at this point, though it hardly seems like that much time could have passed.  It seems like only recently that her map of the Old Forest in Lord of the Rings Online, posted up on her site, was saving my ass from being completely lost.  But that must have been years ago at this point, as the game has had a built in map for that zone for a while now.

Anyway, her maps made their way into a number of official guides for Dark Age of Camelot, Vanguard: Saga of Heroes, and of course, EverQuest and EverQuest II, in addition to all those LOTRO maps that have helped me over the years. (I used her hedge maze map last time I was playing in Middle-earth.  Still worth its weight in pixels.)

So she has had an impact on the community, both before as well as during her tenure.

A community team, by its very nature, can become the public face of a company.  So a departure of a prominent member of the community team can alter the relationship people have with a company.  I remember no small amount of wailing and gnashing of teeth (and a bit of cheering) when Greg Street, Ghostcrawler, announced he was leaving Blizzard.  That changed the community dynamic.  The same could be said for the departure of Rick “Sapience” Heaton from the LOTRO team.  Whether the change was good or bad is subjective, but things changed.

Things were different when Alan “Brenlo” Crosby was running the community team for SOE, things will be different when the next person steps up to run it under the Daybreak banner.  How different and how it will affect people… well, we shall see.

The real surprise here is how soon this move came.  I know there had been some doom and gloom regarding the whole acquisition, from myself included.   Bad news was expected by many.  But Daybreak Gaming Company doesn’t even have a new logo yet (though they were quick to pull down the old one), but already they are letting people go from jobs that I think are unlikely to be considered redundant.  Then again, they don’t need anybody running the SOE Live event this year, since that has been cancelled.  Maybe Smed, who has been out in the front lines engaging with the community… at least on Reddit, the new official SOE community home… will be the sole face of the company for now.  We will see how secure his job is.

Anyway, I hope Brasse will find another job waiting for her.

Somebody out there must need a proper dwarf.

Addendum:  It wasn’t just Brasse.  I wrote a post about her just in time for more bad news to seep out.  Dave Georgeson is out as well and there are reports of more people being given their pink slip today.  Good luck to all those affected.

Follow up: MMORPG.com has a list of those laid off posted.