Activision Blizzard is "laying off approximately 8% of its workforce in the face of drastically lowered revenue expectations" for '19, resulting in more than 780 Activision employees that "could be out of a job in the coming months," according to Sam Dean of the L.A. TIMES. Blizzard Entertainment President J. Allen Brack in a note to employees said that the cuts "were slated to hit nondevelopment teams hardest." The layoffs were confirmed on a call following the release of the company’s Q4 earnings yesterday. The company "hit analysts’ consensus on earnings but missed the mark on revenue for the quarter." Activision also reported that it expected to bring in $6.025B in '19, a "major decline" from its '18 revenue of $7.5B. The company’s reduced forecast "comes after a turbulent year in the video game industry." The rise of Fortnite, which is free to play, "shook investor confidence in the business models of major publishers including Activision Blizzard" (L.A. TIMES, 2/13). Jefferies Senior VP/Equity Research Timothy O’Shea said investors' questions are "not about Fortnite the game, it’s more about Fortnite the business model" in a "world where games are increasingly free." Polygon co-Founder Russ Frushtick said the “big problem” with Activision Blizzard is their business model "feels a little bit old, feels a little bit stodgy, they need to update a lot of their franchises to accommodate this new world of Fortnite" ("Power Lunch," CNBC, 2/12). BTIG Managing Dir Brandon Ross said industry insiders "knew that 2019 was going to be a transition year" for Activision Blizzard (“Closing Bell,” CNBC, 2/12).
CHANGING LANDSCAPE: VARIETY's Michael Futter noted Activision Blizzard now "refocuses its efforts" on the likes of its Call of Duty and Overwatch franchises. Activision Blizzard CEO Bobby Kotick said that the cuts "would come from support staff while the company consolidates its commercial operations and reorganizes its marketing initiatives." The company "will be instead investing more" in live services, esports and advertising efforts. Activision Blizzard experienced similar layoffs in '12, cutting 600 jobs (VARIETY.com, 2/12). CNBC’s Tyler Mathisen said the game industry is "evolving in a big, big way," as free play games are "changing the whole look" of the space (“The Exchange,” CNBC, 2/12).CNN.com's Paul La Monica noted Activision Blizzard "isn't the only gaming company that has struggled to keep up with the surging interest in free multiplayer games." But it has been "hit harder" than competitors EA and Take-Two Interactive (CNN.com, 2/12).CNBC's Jim Cramer: "This is an industry that is so rapidly changing that you could have Electronic Arts have a huge bear market and then a bull market within a few minutes" ("Squawk on the Street," CNBC, 2/13).
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