Earlier this morning, Blizzard management began informing staff that employees would start being made redundant from today, with layoffs to affect the company worldwide. Around the same time, Activision Blizzard executives were holding an earnings call with investors, outlining more detail about the company's future strategy and the layoffs that were afoot.
Publisher Activision Blizzard has begun its long-rumored layoff process, informing employees this afternoon that it will be cutting staff. On an earnings call this morning, the company said that it would be eliminating 8% of its staff. In 2018, Activision Blizzard had roughly 9,600 employees, which would mean nearly 800 people are now out of work.
In the earnings report, which is now publicly available, Activision CEO Bobby Kotick noted that Activision Blizzard's 2018 financial results were "the best in our history":
"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.”
On hiring developers over the course of the next year:
In 2019, the company will increase development investment in its biggest franchises, enabling teams to accelerate the pace and quality of content for their communities and supporting a number of new product initiatives. The number of developers working on Call of Duty, Candy Crush, Overwatch, Warcraft, Hearthstone and Diablo in aggregate will increase approximately 20% over the course of 2019.
The company is in the process of making approximately 8% of its workforce redundant as of today. The 20% increase in "development resources" was also listed alongside a slide shown to investors, which noted that they would cover those costs by "reducing certain non-development and administrative-related costs across our business":
Bobby Kotick on the mutual separation with Bungie and Destiny 2:
Turning to Destiny the mutual agreement with Bungie to sell back the commercial rights to Destiny and eliminate our ongoing investment in the game did not have a material impact on Activision's segment operating income in the quarter, but will free up capital and development resources for the future.
On the success of Black Ops 4, particularly on PC, in the last year:
Call of Duty was again the number-one selling console franchise worldwide for the year, a franchise feat accomplished for nine of the last 10 years. In its launch quarter, Call of Duty: Black Ops 4 sold-through more units than Call of Duty: Black Ops III, with PC units more than tripling. Full-game downloads were over 40% of Call of Duty: Black Ops 4 console sell-through, versus approximately 30% for the prior release, Call of Duty: WWII.
The company also noted that Call of Duty: Black Ops 4 had more average hours per player than Black Ops 3:
Revenue for the year is expected to be down 13 percent year on year - primarily driven by Blizzard. Investors were told that the focus would be on this year's Call of Duty, which would also be coming to mobiles in partnership with Tencent.
Consoles remain the highest generating platform for the company, accounting for $US808 million net revenue for the fourth quarter of the 2018 calendar year, with the PC market generating $US727 million in net revenue and $US596 million coming from the mobile market.
Activision chief operating officer COO Coddy Johnson on microtransactions and planned releases for 2019, according to CNBC:
"In-game execution was inadequate in some of our franchises, and we saw weaker than anticipated retail demand ... our 2019 outlook assumes that we will not improve in-game monetisation as quickly as we would like and that it is a transition year where we have less new major content to release than we should."
Notably, the cost of software development for Activision Blizzard shrunk last year, dropping from $US174 million in the third quarter of 2018 to $US65 million in the fourth quarter. The quarterly development cost is also down year on year, with Activision's development expenses totalling $US86 million in CY2017.
While Blizzard employees and staffers began learning of their fate, investors were also getting an update from Activision Blizzard management about the company's outlook for the next year. Part of that warranted an explanation into what Activision expects will be a downturn in revenue over the coming year, and what is affecting the Blizzard side of the business in particular.