With Activision's Influence Growing, Blizzard Is Cutting Costs

Blizzard’s main campus in Irvine, California (Photo: Blizzard)

Blizzard has spent the year taking big measures to cut costs as it prepares for a lean 2019. Those measures, as conveyed by people who work or have worked for the iconic studio, include employee buyouts in which workers are offered money to leave, a broadening of the finance department, and the limitation of budgets for any team at the company that isn’t directly making video games.

Much of Blizzard’s cost-cutting has gone unreported until recently, but it’s been a consistent theme throughout 2018 at the Irvine, California-based studio behind mega-hits like Overwatch and World of Warcraft. One Blizzard program, for example, is called Career Crossroads. It offers healthy severance packages to people who voluntarily take buyouts and choose to leave the company.

At first, Career Crossroads was designed for veteran customer service representatives who had been at Blizzard for more than five years, but this year, it opened up to QA and IT, according to one person familiar with the program. Blizzard has also lowered the number of years required to take a buyout, opening up Career Crossroads to even more employees, likely in hopes of increasing those numbers.

“Over the course of the last year, Blizzard has been trying very actively to find creative ways to cut costs that won’t draw negative press attention,” said a former employee.

When asked for comment, Blizzard declined to address other items in this report but did send over a statement about Career Crossroads:

We have had a completely voluntary and long-standing program in various locations around the world that gives eligible staff the option to make the most of incentives while proactively pursuing other career opportunities. No one is required or encouraged to participate in the program, but for those who do, we work hard to make it generous. We’ve been offering it for many years—initially to some of our customer service teams, and we expanded it for a short period of time to a few other departments recently, given that it has proven to be a good way to help people who have been thinking about a career change or going back to school to get a head start on that path if that’s what they want to do. While fewer than 10 people in the departments we recently expanded the program to have taken advantage of it, the general idea is that in addition to providing them with that opportunity, it also helps us give more advancement opportunities to other employees on the team when possible.

At the same time, Blizzard is actively hiring for its game development teams, as it continues to work on new games in franchises like Diablo and Overwatch. There’s no way to know what the results of this cost-cutting might look like in the coming years, but it’s clear that the direction from the top is to release more games, which could ultimately benefit fans of Blizzard. The big question, as expressed by those who work and have worked at the company, is what kind of impact these cultural shifts will have on one of the most legendary studios in gaming, one that is regularly ranked among the best video game companies to work. And what kind of impact will it have on Blizzard’s games?

Last month, a Kotaku investigation revealed that Blizzard’s staff have been told to reduce expenses while at the same time produce more games. There are likely several reasons for this shift in priorities, including a lack of consistent output, a weak year for Activision-Blizzard overall, and Activision’s increasing influence on Blizzard, which has traditionally been an autonomous company but has been overseen by Activision’s CEO, Bobby Kotick, since the two companies merged in 2008. That influence has grown this year in many ways both blatant and subtle.

For November’s report, we talked to 11 current and former Blizzard employees. Since then, we’ve heard from even more current and former Blizzard staff about the company’s cost-cutting measures and how they’ve materialised. The Career Crossroads program is one example. Another, according to three Blizzard staff who all left recently, is a power shift that has seen the finance department cultivate influence that it had never had in the past.

“Finance in general in Blizzard has been one of these invisible functions that’s there, but doesn’t have a say,” said one veteran employee who left recently and asked not to be named because they were not authorised to talk to press. “Now they’re suddenly in meetings.”

Said a second, who also asked not to be named: “A lot of decisions now are being driven by business folks, marketing and finance folks. There’s a real struggle now between developers and the business people… Strategic decisions are being driven by the finance group.”

These decisions could range from major (Which technology should we use for this new incubation project?) to minor (How much do we spend on BlizzCon goodie boxes this year?). It’s a major cultural shift, one driven by top executives at the company including Armin Zerza, who was chief financial officer (CFO) at the studio before he became chief operating officer (COO) in late 2017. Under Zerza, Blizzard has brought in a number of business-minded employees both from Activision and the consulting company McKinsey, many of whom might have different priorities than longtime Blizzard staff or those with development backgrounds.

Earlier this year, new Blizzard CFO Amrita Ahuja, who also came over from Activision, told employees during an all-hands meeting that it was time to start reining in their spending. That was a common theme at many of Blizzard’s departments this year, according to those who were there. “That speech from Amrita about cutting costs, that wasn’t a one time thing,” said one person who worked on a non-development team. “We were told to cut costs on a monthly basis.”

So far, the cost-cutting has mostly taken place in non-gaming departments, with one big exception. Last week, Blizzard announced plans to reduce the staff of Heroes of the Storm and eliminate its esports program. It was a surprising move to those who made their careers off Heroes, but among Blizzard games, this was the weakest link—Heroes of the Storm had always struggled to find as much financial success as Blizzard’s other big hits.

There have been other big moves as well. Today, the British website Eurogamer reported that over 100 people have accepted buyouts at Blizzard’s customer service office in Cork, Ireland. We’ve also heard that Blizzard’s publishing department has put an extra step into the hiring process, with prospective employees having to get approved by Zerza before they can be officially on-boarded.

And among Blizzard staff and close observers, rumours have circulated about potential layoffs in the new year. The game development teams are seen as safe—the mandate is to make more games, after all—but those at other departments are worried about what might be coming when 2019 arrives.

To look at Activision and Blizzard is to see two companies that, for over a decade, have followed connected but very different models. Under Bobby Kotick, Activision has found success through annual releases of games like Call of Duty and, until recently, Skylanders. Meanwhile, under co-founder and longtime CEO Mike Morhaime, Blizzard has marched at its own pace, sticking with old games for the long haul and releasing new ones whenever the company felt like they were ready. Blizzard has gone years without releasing a brand new game, while Activision hasn’t let a fall go by without a new Call of Duty since 2004.

Now, Morhaime is gone, and Activision appears to have more influence on Blizzard than it ever has. Will Blizzard’s games-as-a-service, release-it-when-it’s-ready approach to development survive these new changes? It might take years before we know the answers, but some Blizzard employees—and many fans—are concerned about what they might be. The influences of a major corporation can be subtle and sometimes impossible to discern.

“Blizzard is a special place,” said one former employee. “A lot of people are worried about the future of Blizzard—if the Activision method seeps in more, what that’s going to become.”


Comments

    Oh dear... we've seen this before. Hopefully this isn't the beginning of the death knell for Blizz :(

      Hate to be negative, but it pretty much is. Next step is for Activision to officially absorb the Blizzard brand and studio, going back to just being Activision. Eventually games like Overwatch, Starcraft and Diablo will become a rare release, leaving only those with micro transactions (Hearthstone) and subscriptions (World of Warcraft) as the only games from the company.

      Enjoy the Warcraft 3 update, it’s the last Blizzard passion project we’re going to get

        It's not being negative, it's just saying it how it is unfortunately :(

        I think you're wrong. I think they'll become annual releases but the quality will go to shit because they'll be rushed and they'll be designed to make money. So expect micro-transactions, loot boxes, purchable DLC etc. Activisions goal appears to be "hook the suckers on an annual franchise they'll buy regardless of how crap it is".

        This quote pretty much sums it up:

        Last month, a Kotaku investigation revealed that Blizzard’s staff have been told to reduce expenses while at the same time produce more games.

        The thing is there's a project methodology called the "quality triangle". Basically it's summed up as having three constraints, time, cost and quality. But you can only have two. So it you want a high quality product sooner it's going to cost more.

        The problem with Blizact is they're now pushing for sooner and cheaper, which means the third axis of quality is going to suffer :(

      What do you mean beginning? The second Activision bought them out they were done, despite what PR flacks were telling the press. They may have had a long leash, but it was a leash nonetheless, and it was always going to get shorter.

      *edit* I'm an idiot before coffee.

      Last edited 22/12/18 3:26 pm

        Dragon Age Origins isn't a blizzard game... but i agree with the rest. They have been put on a leash and there are corporate pressures from Activision that have become somewhat more obvious every year since they were acquired.

        It's been 10 years this year since Acti partnered with Blizzard originally (it occurred in 2008). It's been a long time now, many companies have come and gone, infact, that's over a third of Blizzards life, given they started in 1991. So they haven't been intending on killing them off over the entire 10 years. However, once weakness or lack of immense profit was shown, you can bet Activision jumped on that killswitch like noone else (maybe EA...) would.

    Will Blizzard’s games-as-a-service, release-it-when-it’s-ready approach to development survive these new changes? It might take years before we know the answers
    Don't need years, the answer is a clear 'no' already. They admitted at Blizzcon that they shipped BfA with tons of bugs because they didn't want the majority to wait for issues that would only be seen by a minority.

    As pointed out on Reddit recently, the most telling part is that unlike Morhaime was (founder, President and CEO), J. Allen Brack is only the President of Blizzard. They no longer have a CEO, presumably because Activision makes the decisions now...

      It's a shame, because Brack is a good guy and would be a solid successor to Morhaime if he were given the same amount of power.

        Yeah I've seen a lot of hate for him online over the last few weeks but personally, while I get the reasons people hate him, I've still always thought he was a decent guy who clearly has passion for the games he's working on - even if I don't agree with some of his opinions/choices.

        Everyone is far, far too quick to blame Activision.

        J Allen Brack is quite possibly the most out-of-touch person at Blizzard.

        Both him and Ion are directly responsible for the analytics-driven nonsense WoW has become.

          Also.... yes. Activision is the devil. But Blizzard is no better anymore. We just remember when they were better, because it wasn't so long ago.

          Couldn't disagree more. I was and always will be a main tank in WoW (even though I'm not raiding these days), we were world top 30 through vanilla and into TBC and I've done every raid up to early Legion. Raid content went through its worst slump through TBC and Wrath except for ICC and Ulduar, both of which Ion Hazzikostas led the design for. Most raid content since then has been a lot more engaging and more interesting mechanical design. He was also a driving force behind expanding the end-game to include things other than raiding, which revitalised a lot of people's interest.

          Brack has a similarly positive history with WoW. He was a major driver behind the quest design part of Cataclysm, easily its standout best element (and yeah, I too think the rest of the expansion sucked), and he was also the driver behind the push for the more immersive narrative storytelling that properly began in Mists of Pandaria and was exemplified in Legion.

          Like sabre, I don't agree with every decision Hazzikostas and Brack have made, but they're both good people with a passion for their work and a genuine interest in delivering good experiences for the fans. I know you don't like the way WoW went after vanilla and that's fine, the game has millions of fans and it's silly to think they'd satisfy every single one with every passing expansion. I just don't believe that because they took the game in a direction that wasn't for you, that that makes them bad at their job.

            I'm not sure how you can include Wrath in your "slump" comment and then say except the two biggest raids (with the most content) from Wrath. And to be fair Naxx revisted was a great idea since a ton of guilds had never seen it, or at best only one or two bosses. The only raid I thought was "lazy" was ToC since you're basically in one room and they just throw fresh bosses at you. But even that was kinda cool since it was different.

            Even the sanctum bosses and wintergrasp bosses were kinda cool since they were slightly different approaches.

            The biggest problem I had with TBC, Wrath and onwards was their changing approach to raid sizes and lockouts. Going from 40 - 20 man raids for TBC killed a bunch of guilds, splitting them apart. And the 10 or 20 man raids in Wrath were ok to start, since you could basically run two ten man teams then join them for a 20 man run in the same guild in the same week. Until they decided that they'd share a lockout between 10/20 man runs.

            Then they made that worse by making 10 man and 20 gear the same for Cata. So again guilds died when they were split apart. After all it's easier to find 10 people consistently than 20. Then they messed with it again when they added back mythic raiding since suddenly you needed 20 people again to do the highest level content.

            The only good thing the did was create flexible raids. I love being able to have 17 people or 13 or 24 and still having a (relatively) good chance of actually raiding. The problem of course being that it still doesn't allow for mythic level difficulty :(

            I'm waiting for the BFA successor to change raiding numbers again. Will it be 10 or 15 or maybe 37!?

              Wrath was terribly designed, gameplay wise. It was the era of health sponge tanks and largely meaningless threat generation. DPS was trivialised, healing was entirely triage. It was by far the worst period of WoW raids mechanically. ICC and Ulduar were attempts to fix the problems with bad raid design that had plagued the rest of Wrath, including the Naxx redesign, Obsidian Sanctum and Eye of Eternity.

              I saw both versions of Naxx through to completion. Naxx revisited was a great idea, but a bad implementation.

              I disagree on the 40 to 20 change, that had much more benefit than it did disruption. Most guilds didn't split, they just fielded multiple teams. But wrangling 20 people was drastically easier than wrangling 40 - as a raid leader on both sides of that change I found it a godsend.

              Raids have been flexible 10-25 for multiple expansions now, BFA didn't change it and the next one won't either. You'll be waiting a while if you're waiting for that.

                Wrath is still my favourite xpac, I Dpsed fully through ICC and tanked most of it as well. I feel like if you're going to nerf threat production you need to give tanks better threat indicators. So I dislike the current tanking situation.

                Maybe on your server. On ours 40-20 split guilds. It created a ton of dissension because people inevitably view it as "good team" and "bad team". But to be fair, it's not so much the move from 40-20 that's the problem it's the fact that they've changed raiding makeups something like five times. That seriously messes up guilds.

                I'm well aware that flex has been around for awhile, but it doesn't cover mythic difficulty. So you still create problems when (if) you get over 20 raiders because people need to sit out. And the flip side is that if you *can't* get a reliable 20 raiders forget mythic. When I said I was waiting for the next xpac to change raiding numbers I wasn't referring to flex, I was referring to mythic. God knows what some designer is going to do, especially if they're being driven more by "genius" finance/marketing types.

                  Oh forgot to add that tanking is pretty much a joke in most of Uldir at the moment. Something like five bosses in before the offtank is useful for anything more than being a damage sponge too. So many xpacs and they still haven't made it exciting for *two* tanks. Heck it's barely exciting for one.

    Activision has always had a lot of influence on Blizzard and others, they have just always preferred to stay quiet and let their studios and other subsidiaries get the attention (both good and bad)

    Maybe their clout is just becoming more obvious since they've decided to cut costs across the board?

    Blizzard was sold out and is done. The writing is on the wall. So long wow. Activision will bleed it dry and bury it this much seems clear.

      I'd add OW to that list as well. The longer queue times over the past year and few months have been getting harder and harder to ignore. Comp and QP weren't overwhelming but vs AI had many instances of 10-20 minute waits. On top of all that the forums, never a quiet place, just exploding after the Mercy rework and with further booms after each other rework or hero gutting and Blizzard just not caring about what people actually wanted at all...

      Good thing I quit a couple of months ago.

      I miss OW. I miss it when it was good. Not perfect by any means but it was lots of fun as of the second summer games. Oh well.

    The last quote worries me. I think those employees are like frogs in boiling water. No idea.

    Can't wait for Activision to stop selling their games on Steam and just run the Blizzard launcher/store into the ground with piles upon piles of shit.

      The worst thing with that is the launcher really isn't well designed to cope with a bunch of games. It's not terrible (not great either) with *just* the half dozen blizzard games but they'll have to totally rework it if they want to add in all the other franchises.

    from a commercial point of view the "release when ready" approach won't last. it just doesn't make any mathematical sense, if somebody releases a game for 80 dollar (AUD) year on year how are you ever going to compete with your 10 dollar DLC

    I think it sucks for us as fans sure but I can also understand why the bean counters are going "ok we sold X amount of games, Y amount of DLCs but your expenses is still 500 million dollars, we need to do something about this"

      That logic only holds up if the annual $80 games are good enough to spend $80 on. I wouldn't buy CoD every year, or an annual sports game. I don't really see the value. I'm sure some people do, but not everyone.

      It also falls apart based on how much $10 DLC is released and how many people buy it. It's often ludicrously easy to create DLC compared to their price. Take the WoW pets and mounts for example, you can buy the new charity pet for $13.50 or a new mount for $34. The amount of work to create them is a fraction of the time required to create an entire $80 game. Even if not everyone buys one it's a great profit for effort equation for Blizact.

    A pity, but not a big surprise, Blizzard has been failing over the last few years.

    Diablo 3 - do you remember what is was like initially?, yes it has been fixed to make it a good game, but it is now getting dated continuously with no plans for a new game\story (and they may have said all that about Blizzcon this year but it was a big waste to pay for access to video from their show just to unlock the achievements again. no useful info)
    Mobile development of this game? please a stupid time to announce this, especially when you have just released the game on Nintendo console. (hell lets ignore PC's altogether)

    World of Warcraft : another screw up, buggy as hell, and basically still in the alpha mode that I had access to initially this year. No updates on a weekly basis, which means almost no progress in the last 3 months (story)

    Starcraft : yes its the initial game, last time I played it through their client is was the same game as 20+ years ago. should have been updated (made to look/play like SC2)

    Heroes of the Storm : people randomly made this in warcraft 3 back in the day, of course because it took Blizzard so long to get around to this kind of game, these have been several online comp games that were made years before that gets far more support.

    I would say Blizzard should just stop doing Blizzcon, for starters. (it's ok if they charging for actually going there but online?, nope)

      That's not really true, they've gone on record saying that there are multiple Diablo projects being worked on. They just haven't given us details of them. If anything genuine Diablo (not Diablo Immortal) is still holding to their old methodology of "when it's done".

      As for WoW, yes it is still buggy, but I've got to say it's always been that way. I can't remember a time when WoW didn't have at least some bugs. Every patch/xpac introduced new problems that get fixed (or not) over time. And honestly, with a game like WoW weekly updates is a terrible idea. Unless you literally live in the game full time you won't have time to deal with that many updates. Personally I'd rather the breathing space of major updates every 3 months (or so) that add to the story. That way I actually have to time to gear up, experience the story, raid and do other stuff.

      I won't comment on the other games since I don't play them.

        This issue with BFA release is that a lot of these bugs were reported in Alpha/Beta and were not fixed before launch. It's really disappointing to see multiple bugs you've reported yourself still on Live when the expansion launched. Really hits home when similiar bugs in other Beta tests were fixed before launch of that particular Xpac.

          I've seen beta bugs from previous xpacs betas make it into production so it's nothing new, sadly :(

    The most upvoted thread on the WoW subreddit:

    https://www.reddit.com/r/wow/comments/a7rrmy/a_letter_to_blizzard_entertainment/

    @zombiejesus does any of this resonate with you? Or do you still think they're doing a great job? Not supposed to be as snarky as it sounds - I just find it difficult to fathom anyone could like the direction Blizzard is taking their games at this stage.

    I remember when we had a discussion about why we needed WoW Classic (and why I thought J Brack was a douche for telling us we don't want it).

      Parts of it resonate, yes. Other parts don't. BfA is missing some of the heart that was present in previous expansions, particularly Legion. The game isn't a giant marketing tool; the game makes far more from long-tail new expansion subs when the expansion has good content than from all other sources combined, including merchandise. Their quarterly filings confirm as much, subs are the most important revenue driver. They're not deliberately stalling content on monthly sub boundaries, they've done staggered raid releases since vanilla - the very first openings of Ahn'Qiraj were a month after the patch hit, and ICC wings had staggered releases too, with only the first two wings releasing in the first month of the patch, and the second wing only barely in that period.

      These are the same people responsible for the best content in the game. They were involved in the better parts of Wrath, the better storytelling of Mists onwards, etc. Given they're the same people who brought the same solid stuff as recently as Legion, and given that we already know Activision issued a directive to Blizzard to cut costs and ship more products, which do you think is the more likely: that the same people responsible for the best elements of the game are also just bumbling incompetents with no idea what works or doesn't; or that Activision has been exerting increased influence over the company's operations for years and Morhaime's retirement was the perfect opportunity for them to break the shell, so to speak?

      I think the latter is much more likely, but maybe that's just because I've been at companies where that's happened before. Hell, I left a developer not long before it was acquired because I strongly disliked the potential (now actual) new owners. I've seen first hand the frustration of even upper management as their hands become tied but they're still forced to try to make the best of it and minimise the damage from poor 'corporate' decisions.

      For the record, I don't think Brack was being a douche when he said you probably don't actually want WoW classic, and I still think it's going to get a surge of interest on release and then drop off very steeply. I know there's a core of people who love it, that you're one of them, and I'm not trying to detract from that at all. I genuinely hope it succeeds and it's what you're looking for, but the realist in me thinks the long-term numbers are going to be a lot less than needed, and I do think a non-trivial percentage of people who played pirate servers like Nostalrius did it because it was free moreso than because it was vanilla. Fingers crossed that I'm wrong.

        For the record, I don't think Brack was being a douche when he said you probably don't actually want WoW classic, and I still think it's going to get a surge of interest on release and then drop off very steeply.

        I agree 100% with your last paragraph. I suspect people who weren't around for vanilla will play out of curiosity then go "jesus this is too hard" because they've been acclimatised to LFR, flexi raids, dumbed down talent trees, quests that hold your hand and super easy gearing. There will be some people who preferred the tougher old school approach who might stick around. The question will be are there enough of them to make it profitable?

        As for Nostalrius, I'm not sure. A lot of people actually contributed to that monetarily to keep it running so it's hard that it was "just because it was free".

      Many parts of that letter resonated with me. It's a really hard, bitter pill to swallow when it becomes obvious that something you really, really loved no longer loves you back, so to speak. Rather... that they're chasing an audience that isn't me. I was the audience for years... near decades. Now I'm not. It's not a nice experience.

    "Employee Buyout" is just a diplomatic way of saying "Voluntary Redundancy", something that in my experience generally precedes actively making positions redundant if not enough people leave.

      That is true, but giving people who may wish to leave the option to do it with severance options reduces the amount of forced redundancies from people who do want to stay.

      Redundancy implies that the position the employee held no longer exists. If they were just using it as a way to encourage older employees to move on so they could be replaced with younger (read cheaper) employees, then it isn't quite a redundancy. For a support department, that seems likely if the company doesn't have any career progression options for the position.

      I agree that it sounds like a name a marketing or a consultant person would have come up with.

    I've had 2 redundancies in the last decade, both having the exact same earmarks. It's definitely an end goal to phase out the blizzard name and I wouldn't be surprised if there was some sort of inside sabotage with the whole diablo mess up to try and show the acti-bliz shareholders that blizzard is incompetent and move it along a bit faster.
    Politics really shit me up the wall

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