With Activision’s Influence Growing, Blizzard Is Cutting Costs

With Activision’s Influence Growing, Blizzard Is Cutting Costs

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.”

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