The Fallout Of Activision Blizzard's Massive Layoffs

Photo: Blizzard

Yesterday, at the exact moment Activision Blizzard chief executive officer Bobby Kotick hopped on a quarterly earnings call to inform shareholders that his company had just gone through a “record year,” employees across the publisher of Call of Duty, World of Warcraft and more were being brought into conference rooms and informed that they were losing their jobs.

“It’s a bloodbath here,” one Blizzard employee told me last night. “A lot more cuts than we were expecting.”

As Kotick and other executives were telling investors that the next Call of Duty was shaping up to be the best one yet, employees across Activision Blizzard’s various divisions nervously sat at their desks, waiting to see who would be next to get the severance envelope.

In Blizzard’s publishing department, management had booked a series of meetings from 1pm to 3pm Pacific. On the calendar, they were all blank. Everyone knew what that meant.

“The look on people’s faces as they’re pulling in through the [campus] gates is just awful,” said another Blizzard employee. “This is the fucking worst.”

Later on the call, Kotick delivered the grim news: Activision Blizzard, which employed around 9,600 employees last year, would reduce its workforce by 8%. That equated to around 800 people.

Some were junior employees, having started at the company just recently; others had been with Activision Blizzard for 15 years or longer. Some were informed yesterday; others, particularly in Europe and other non-U.S. divisions, didn’t find out their fates until this morning.

It was carnage. People were laid off at Activision’s main office in Santa Monica, California, where an entire team of Destiny publishing staff had been coming to work with nothing to do. (Some of them were laid off; some were moved to Call of Duty or other teams.

Some in other departments were also laid off.) People lost their jobs at King, the developer of Candy Crush, and at Activision’s various development studios including Vicarious Visions (Albany, NY) and High Moon Studios (San Diego, CA), both of which had handled support on Destiny 2. Activision Blizzard staff in Europe, Latin America, and other regions across the world also lost their jobs.

Some who were laid off wrote messages on social media to say goodbye, while developers all across the video game industry tried to help by posting job listings on Twitter and Facebook. Although the bulk of laid-off employees were support staff, some were in departments like art and design as well.

Over the past week I’ve talked to around 20 people who were laid off or close to those being laid off, as well as others with knowledge as to what’s happening at Activision Blizzard. If there’s a consensus, it’s rage. Rage at Kotick’s comments, at the way Activision executives seemingly view their employees as numbers on a spreadsheet, at the callousness in which this layoff was handled.

There’s rage at who was chosen to be laid off—two people told me that it felt like a random, haphazard practice—and rage that some important employees were let go. Some who had been laid off told me they had felt safe, expecting their studios or departments to not be affected. Even those who felt layoffs were necessary or justifiable said they were shocked by the scale, scope, and coldness from executives.

Activision Blizzard CEO Bobby Kotick (Photo: Mike Windle, Getty Images)

At Blizzard, for example, rumours of big layoffs had been circulating as early as November. Back then, as I began to learn about the sweeping changes that had come to the legendary game studio in 2018, I heard from a former high-level employee that layoffs were coming in February.

I heard the same from a source plugged into the investor community. Another Blizzard employee told me today that the layoffs had been an “open secret” for months.

Blizzard, founded in 1991, has developed critically and commercially successful games from Warcraft and StarCraft to Diablo and Overwatch. It has kept its game quality high even after Activision merged with the studio in 2008. It just hasn’t produced many new games of late, increasing tensions with management in Santa Monica.

Since the beginning of 2018, as Kotaku has reported previously, the mandate at Blizzard had been to cut costs and produce more games.

To those who worked outside of Blizzard’s development teams, in departments like publishing, esports, QA, and IT, it felt last year like the axe was about to fall. After all, if Blizzard was looking to develop more games without spending more money, they’d need to lose headcount in non-game-development departments.

But management said nothing. With no union or other method for collectively communicating with executives, employees were left with nothing but whispers. As November turned into December and the new year came, all they could do was wait.

Last week, as rumours began heating up and culminated in a Bloomberg story on Friday night reporting that hundreds of layoffs were coming, one Blizzard employee reached out to me to ask if I knew whether or not they’d get severance.

The person said they weren’t expecting to be affected, but wanted to know if I’d heard anything about how impacted employees would be treated. Just in case. On Tuesday night, I found out they’d been laid off. (Full-time employees who were laid off across Activision Blizzard did get severance, although contractors did not.)

I heard other stories, too. Some people supposedly learned their fate early, signing non-disclosure agreements last week in exchange for severance packages. Others took buyouts thanks to the Career Crossroads program that allowed QA, customer service, and IT employees to voluntarily leave, as we reported in December.

Some were given hints from their managers—warnings to polish their résumés before Tuesday. One Blizzard employee told me they’d see the job networking website Linkedin open on computer screens as they walked around the office over the past week.

Some outside of Blizzard, at Activision’s various development studios, thought they were safe but on Tuesday and Wednesday reached out to let me know that they or their colleagues had been unexpectedly laid off.

Last night, the picture at Blizzard became clearer. Support teams had been gutted. The layoffs were largest in non-development departments like IT and QA, according to those who were there.

The esports department was hit hard, as many within Blizzard had expected—after all, it had been led by Amy Morhaime, wife of Mike, the long-time Blizzard CEO who left the company last fall. She departed around the same time. The two Morhaimes were seen as big advocates for esports within Blizzard, even when it wasn’t quite as lucrative as Activision’s executives might have hoped, and with them gone, the department was in danger.

Photo: Blizzard

Blizzard’s publishing department, which is comprised of PR, marketing, community, and other game support divisions, was also hit hard. Around late 2015 or early 2016, Blizzard had split North American and global publishing into two departments, according to long-time employees. It was seen as a bad move by those who worked there, one that caused resentment, redundancy, and unnecessary bureaucracy.

As part of this week’s layoffs, Blizzard reconsolidated those divisions, laying off dozens in the process. Executives like chief operating officer Armin Zerza and marketing boss Todd Harvey, both of whom are heavily connected to Activision, are running the show.

So what does this all mean for the future of Blizzard? Since the beginning of 2018, Activision has been exerting more influence on Blizzard, pushing the company to release more games and find more ways to make money. General consensus, even among rank-and-file employees, is that Blizzard’s lack of new game output over the past few years hasn’t been healthy or sustainable.

But Activision’s influence has raised questions among Blizzard staff about whether the studio can retain its culture. Said one former Blizzard employee to me last December: “There’s a real struggle now between developers and the business people… Strategic decisions are being driven by the finance group.”

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.

Read more

For decades, Activision’s philosophy has revolved around annualized releases, most notably with the gargantuan Call of Duty series, which hasn’t skipped a year since 2004. That sort of schedule is diametrically opposed to Blizzard’s “release it when it’s ready” philosophy, which has led to massively successful games like Overwatch and Hearthstone but has also led to periods like the present, in which Blizzard has gone three years without releasing a major game. T

he tension between annualised releases and “games as a service” that don’t have to have new, boxed releases and sequels is one of the main reasons that the Activision and Bungie relationship never worked out. Last month, the two companies split, with Bungie buying the full rights to sell and publish Destiny on its own.

This year will likely be a slow one for Blizzard, as the company implements its new strategy across franchises like Diablo, Warcraft, and Overwatch (all of which have new games in development, many for smartphones). Then, we’ll likely see more new Blizzard games come out more regularly than ever before. And we’ll have to wait and see if they live up to the quality bar Blizzard has set for itself over the past three decades.

At the Yard House restaurant in the Irvine Spectrum mall in California last night, a group of current and now-former Blizzard employees met up to drink and commiserate. The mood was sombre, according to one person who was there. There was plenty of sadness and blame to go around.

There was anxiety expressed by those who now need to hunt for new jobs, and those who might be forced to uproot their families for new cities or countries. And among those who remain at the company, there’s survivor’s guilt. The fallout of this layoff will linger for a long time.

“Work again tomorrow,” said one Blizzard employee who remains at the company. “I have a feeling no one will be doing much work the rest of the week.”


Comments

    It seems crazy that a company can have one of the best years in regards to earnings or returns and decide to lay off a bunch of people to thank them for their hard work. Makes it a little harder to support a company with this kind of tactic. On the other hand I am sure the cuts were justified.............Right?

      They gotta cut the staff to afford the $15m bonus to the CEO for the record breaking year.

        They have to fund a $15 million signing bonus for a new CFO, apparently.

      Making tons of money isn't enough for capitalism, you also have to have unlimited growth in a closed system. Which is why it's bullshit.

      Bit of a kick in the guts, huh? But hey, I'm sure those profits will trickle down eventually! Right?

        Trickle down economics works
        /s

          Trickle down your leg and fill your shoes with piss, maybe.

      To play devil's advocate, just because last year was good, does not mean that those roles are needed in the context of the current year.
      At the very least, it is very shitty optics.

        Yeah 100%. Looking at it that way is objective, shame there isn't a happy medium.

    It would be interesting to see the ratios of people fired, like how many were from the Destiny group who probably already suspected they would be let go after Bungie bought the publishing rights.

    Seems a lot of redundant jobs got the axe, like why have two publishing departments when Blizzard hasn't released a game in ages and Activision could do that job themselves.

      Yeah that's certainly a good way of looking at it, I guess you read this kinda of stuff on the surface but in actual fact a company like that probably has a tonne of unnecessary over heads.

    Good on them for being so progressive and restructuring fast enough to react to market demands. Maybe I should invest in Activision as well! :)

      Normal dhareholders are long term investors, this cost cutting strategy is for short term gains to feed a burst in earnings... a short term gain is nothing when the next game is lacking key support from gutted branches resulting a shocking game launch that tanks the share price. There is no ten year plan hear, this is somoeone lining a golden parachute.

      This is a last century business idea thats proven only to work for professional investments that know when to get out before the whole company falls on its sword.

      Remember part of their biggest earnings ever was them selling Destiny, short quarter bonus for cutting a profitable long term IP... for a company that hasnt made a new IP in how many years?

    I really believe that the only option left to us as fans is to no longer support either company.

    In Blizzards case its because it would be a shame to see the company continue to be dragged through the mud for some greedy pigs on the activision board and at a certain point it is no longer the company we fell in love with during the 90s and early 2ks. The last five years have seen Blizzard degenerate to the point it is really hard to recognize them any more.

    In activisions case I just don't believe that filling the pockets of grubs is something we should be able to justify and activision going belly up would have only a net positive outcome.

      while your idea is great on the surface. now take a step back from the emotional side of this news and if say we were to stop supporting these companies with their predatory practices there would be another news article springing up.and that would be every employee in a failed company would be looking for a new job.hard situation either way you look at it,with no clear solution where the company gets the message that they have severely disconnected from their customers,and the employees keep their jobs.

        See this would be a great argument if it wasn't coming off the back of a "record breaking" year for Activision. If they are happy to fire people when they are making money then this argument holds literally no water as everyone is already expendable. Letting them hold their employees as hostages is super naive and results in literally no change except that they can freely fire the next group of people without worrying that we might take action as customers then.

          Why was it a record breaking year though? Was it because Bungie split with them (meaning they were no longer paying Bungie) and that Bungie in fact gave them money to purchase the Destiny IP from them? That probably accounts for a chunk of it at the very least.

          Activision only released 3 games in 2018 - Cod Blops 4, and remasters of Crash Bandicoot and Spyro. WoW also got another expansion. Cod and WoW sold well but I find it hard to believe Crash and Spyro sold so much that it resulted in a record breaking year for them, which makes you wonder where this record breaking year came from.

            A lot of it would have been because Spyro and Crash were done on the cheap and turned over way more money than anyone could have projected.

              There's also the factor of microtransactions, which I admittedly failed to take into account.

                Their mtx were down across the board last year, so probably not that much.

      I learned on the quarterly call that Activision and Blizzard have both voluntarily boycotted themselves so we don't have to. :)

      I have a feeling it will happen naturally. Blizzard isn't making games I want to play anymore and Activision is hard at work debasing the brand that used to be a pillar of gaming that practically demanded day 1 purchase.

      I just wish there was a way to buy Sekiro that cut Activision out of profits entirely, but at least by all reports Activision are just the publisher and didn't exert any control over the development.

    Support teams had been gutted. The layoffs were largest in non-development departments like IT and QA, according to those who were there.

    This. This is what worries me. Support, QA, and IT. Three essential departments that, as a company, you really cannot afford to play around with. These are the departments that MBAs typically hit first in an effort to cut costs. Then, when the inevitable network hack or system failure comes along, or a product is released that is shockingly buggy, they wonder how it could have happened.

    I can tell them how it happened. It's because they cut resources in the departments that are supposed to prevent this!

    Hey, but that's OK. If they cut off their feet, they'll save money on having to buy shoes. Think of the savings!

      lol psych! I copied the same sentence and came straight down to the comments to make a similar comment. I work in QA and I can tell you- it is part of the development team- whether the team is "in" or "out the team" is matter of organisational philosophy.

      Fun fact: QA/Testing doesn't add quality.
      Testing tells you whether you have quality or not. Quality is put in with the design, analysis and development. If your QA sucks- they say there are no bugs when there are and your customer finds them. If your QA is good, and your design/dev isn't good- they tell you there's lots of problems- this is a good thing. If your QA is expensive and overly busy, fix design, analysis and dev. Or you can just cut QA, so they can't cover as much and let your customers test it for you in production. If you do that though, you can't complain that a game didn't make enough money or was unpopular.
      The problem that the execs have, is they see IT, QA, Support as cost centres rather than as part of the value add.
      More developers = more code = more finished product = more $
      As thinking goes- it is as flawed as it is correct.

      Last edited 14/02/19 12:07 pm

        Yeah I'm also a QA professional and I'm deeply concerned that a company the size of Activision Blizzard don't consider QA as part of the development team.

      Agreed.....no one thinks of these departments until literal crap hits the fan and they are scrambling to get infrastructure fixed or wonder why bugs make it through because no one properly qa'ed

      But hell weve all been slowly made to accept crap releases with the joys of "patches"

      As if QA wasn't bad enough in World of Warcraft when BFA dropped. This is not going to bode well for the future.

    I've said it before. I say it now. I'll say it again.
    Shareholders are ruining video games.

      That's a pretty simplistic take on it. Most AAA games only get made because shareholders tipped their money into the company in the first place.

      There are plenty of very good indie games getting made that don't have shareholders to worry about.

      So to put it simply, if you're concerned about the way these companies are run, buy more indies and less AAA.

      Although to be honest, I have no way of knowing if the culture within any given indie studio is any healthier than that of the AAA's. They might treat their people as bad or worse, but we just don't hear about it because they're smaller and thus have a lower profile. But you can at least avoid the ones (big or small) that you know are objectionable.

        Games are made to do two things. Entertain, and make money. When the priority is in that order, things don't tend to make these sorts of headlines, but when the priority is profit first, then it does.

        That's the core of the "shareholders are ruining games" mentality. Shareholders aren't tipping money in, at least not after the IPO. They are just there to absorb the profits as a dividend.

        And once its at that point, its the dividend that drives decisions. Which means the priorities change, and games ultimately suffer.

        To use an example, when was the last time an EA sports game truly innovated? Every year without fail they just roll out that years iteration, update the rosters, tweak a control or two, and that's about it. And sell millions. Its the core business model for EA.

        But none of their games are trying anything different, and haven't for years. Because they're just trying to make EA a profit to keep the shareholders happy. And they wont, because they cant risk one of those games failing.

          Shareholders aren't tipping money in, at least not after the IPO. They are just there to absorb the profits as a dividend.

          Shareholders aren't going to tip money in at the IPO if there's no prospect of being able to sell those shares to other investors later. The growth in share price and income from dividends is why people invest in the first place - there would be very little AAA games development without it, innovative or otherwise. I'm not saying that I like it, but the reality is that AAA game budgets have grown so huge that it's about the only way that most of these things are going to get made.

          EA Sports stopped innovating due to lack of competition after they sewed up a lot of exclusive rights to squeeze other games out of the market. Less competition means less innovation regardless of how the company is owned or structured.

            How does that change what I said?

            You're right, AAA games are costing more and more to make. Some of that is absorbed in recycling assets, or more efficient processes, but in general costs have gotten crazy.

            So where does the money to pay for that come from? Its not shareholders, which was the point. The IPO will cover costs for a couple of years, but after that those increasing costs have to be paid for from somewhere.

            But that IPO is still there getting in the way. Those shareholders now own the company, and you need to keep them happy. So need to make money to keep them happy. Which means somewhere along the way, its changed from "lets make the best game possible", as Blizzard did for decades, to "lets make the game that sells the most", to stop the shareholders from voting management out.

            Which gets back to the shareholders are ruining games mentality. The focus is no longer on the product in the same way it once was. You can see direct evidence of that with this whole Activision issue and how Blizzard operates these days. Its no longer about the games, but about Activision making a profit.

              Activision paid a dividend on 9th May last year of $0.34 when their share price was $71.31. That represents a 0.48% return on investment, which is worse than what I can get through a term deposit at a bank (where my deposit will be insured by the government). The only way the company makes an attractive investment is if investors also seeing a return through increased share price. And that is primarily going to happen through the company's valuation increasing through growth. That's what I think @braaains was getting at.

              While stockholders might be satisfied with dividends alone for some companies, for a company structured like Activision they will demand constant year on year growth. If they increased the dividend to a level where it represented a competitive return on investment, then shareholders might be fine with zero growth. But that's not how it is currently set up.

        Blizzard made all of its actual games without shareholders.
        All of them.

          Nintendo made all of their games with shareholders.

            Yes, but as he stated it was about the product first and the money rolled in naturally after.

            Imagine if QA in Nintendo was as crap as Activision; at a certain point their sales would naturally decline because a consumer base can only take so much abuse and we live in an age where you can get the same sort of packaged content through another provider quite easily.

              The point being that it's not the presence or absence of shareholders that is the issue, it's the management and the culture of the company. You can have brilliant publicly listed companies and shitful privately owned ones. This idea that "shareholders are ruining video games" is a gross oversimplification.

                The board room is beholden to share holders, it is in the interest of those suits to keep the shareholders happy which means dividends that are unsustainable.

                  But the Activision boardroom is no more or less beholden to the shareholders than the Nintendo one. The issue is the culture and philosophy driving the company, which my depend on the specific owners, whether it's privately owned or publicly listed. Only difference is that the ownership of public companies is much more fluid. Perhaps Activision have wankers for shareholders while Nintendo has good people, but that can all change at a moment's notice depending on what happens on a given day on the share market.

                  Activision's shareholders might be ruining Activision's games by appointing people like Kotick to run the show, but that doesn't mean that shareholders across the board are ruining video games across the board.

      Conversely - Kickstarter and Early Access didn't result in a wave of awesome new games that displaced AAA games.

      There's a lot to be said about business minds trying to mess with what is predominately an artistic product, but the fact is that many of these titles simply wouldn't get produced without significant investment. Games are so expensive to produce that outside money is frequently needed, and it's investors who have the funds to inject into big projects, not interested end users. Even many indie devs are starting to rely on investors disguised as 'extra funding' to get larger projects off the ground.

      The bedroom programmers are dying out because we've flooded with comparatively lower effort indie titles trying to use some sort of hook to stand out. 8 bit retro pixel art isn't a selling point anymore.

    It sucks big time for employees but this is what happens when you grow to fast for it to be sustainable, investors demand that every year be better than the last even though you have pretty much hit a market ceiling.

    They (both EA and Activision) are already riding the microtransaction gravy train hence a "record year" but without new innovations it'll only take them so far, there will become a time where MTX's will become less and less of a money printer.

    But as always, not just systemic the video game industry, it's always the lower tiers that get given the boot.

    To everyone left at Activision, EA, Take2 and the like, quit immediately. Go next door, and form a Co-Op. No more losing your job because some douche needs a $15M incentive to join a company that is going broke. You'll be treated a lot better and have an equal share in profits.

    Fuck Bobby Kotic. Fuck Andrew Wilson. These pricks prove on a daily basis they are not worth their pay packets, but somehow people like this are the protected species.

      How are they paying their mortgages during the years of development before the co-op releases its game? What if there are no profits to share at the end of it?

    Well, with this another stupid strawman defence of the "triple-AEYYY" game industry's shameless corporate greed has been shot to ribbons: you can no longer say "Stop complaining and just buy the games because you have to support the developers!" You supported the developers, and look how well that turned out! The publishers (mainly the shithead executives who know nothing about games and care even less) and shareholders are rolling around on their huge piles of your money, giggling like rats being tickled, but 800 people are out of a job. Well done. G-fucking-G.

    I'm going to say a dirty word, those easily offended should avert their gaze: Unionise.

    Through a wonderful process of demonising in mainstream media unions have become something no-one wants to be a seen to endorse...but it is just this sort of exploitation that lead to the formation of unions to start with.

    It is time that people started to re-evaluate their ideas of unions. When the 1% can do this sort of thing with impunity and the best response that posters here can come up with is weak willed "i'll boycott them"...and then buy the next blockbuster...

    As stated by many above - a record year should have been shared with those who helped to create it, instead they get laid off. The games industry does this time and again because nothing will change how they do business when there is a ready supply of workers willing to debase themselves, work through ridiculous crunch and pressure and then simply be "disappointed" when they are laid off.

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