Activision-Blizzard Q4 2018: Activision-Blizzard posted record profits, layoffs begin anyway

February 12, 2019 4:30 PM

Activision-Blizzard’s financial reports have been rather dull affairs for MMO gamers over the last few years, ever since the company stopped reporting World of Warcraft subscriptions and switched over to “monthly active users” to quantify its giant and ever-growing piles of money. Today’s report, however, has a much more somber tone, coming as it does during a week when rumors indicating the company will be slashing jobs to defray investor panic over the quarterly report actually seem to have caused the stock to sink even lower – its lowest in two years – before the report even came out.

The thing is, now that the results are in? It wasn’t a bad quarter or a bad year – just the opposite. Net revenues for 2018 were a record $7.5B (up YOY), and fourth quarter revenues were also a record $2.38B, up significantly over the same quarter in 2017. Operating cash flow is lower than in 2017, however. Bobby Kotick is quoted in the PR: “While our financial results for 2018 were the best in our history, we didn’t realize our full potential. 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.”

As for Blizzard itself? The companies are characterizing Overwatch and Hearthstone’s performance as “sequential stability” with declines for WoW after BFA.

“Blizzard had 35 million MAUsC in the quarter, as Overwatch® and Hearthstone® saw sequential stability and World of Warcraft® saw expected declines post-expansion-launch. Fourth quarter segment revenues grew 15% year-over-year to $686 million and operating income increased 51% year-over-year to $241 million. Building on an 11-year partnership, Blizzard extended its joint venture with NetEase to publish its games in China through January 2023.”

The press release also confirms that reorganization is in the works, though it also says it will increase the number of devs working on core online titles. In other words, it looks like the company will be trimming that 8% – we’ve heard on the order of 800 people – from other games and support staff to bolster game development of these top titles as well as mobile titles.

“The number of developers working on Call of Duty, CandyCrush, Overwatch, Warcraft®, Hearthstone and Diablo® in aggregate will increase approximately 20% over the course of 2019. The company will fund this greater investment by de-prioritizing initiatives that are not meeting expectations and reducing certain non-development and administrative-related costs across the business.”

According to Kotaku, the layoffs have already begun and are affecting “non-game-development departments such as publishing and esports.”

“Currently staffing levels on some teams are out of proportion with our current release slate,” Blizzard president J. Allen Brack reportedly told staff in a memo. “This means we need to scale down some areas of our organization. I’m sorry to share that we will be parting ways with some of our colleagues in the U.S. today. In our regional offices, we anticipate similar evaluations, subject to local requirements.” Apparently, those laid off will receive a “comprehensive” severance deal, as well as extended health benefits and job placement aid.

Brack also posted a lengthy missive to Blizzard’s players, vowing that the company is still “committed to creating epic games and entertainment experiences” but admitting to the layoffs.

“Our development pipeline is strong, and we have the largest lineup of games that we’ve ever had. At the same time, Blizzard tries to have a level of craftsmanship and excellence in all that we do. Maintaining those standards as we continue expanding these worlds takes both time and talented developers. With that in mind, we have plans to add to game development. We are dedicated to bringing you more content across existing game franchises and bringing our unannounced projects to life. Esports and the Overwatch League are also important priorities, and we will continue to produce great competitive content.”

In fact it sounds like the layoffs will continue over the next few months: “To better support these priorities, we need to reorganize some of our non-development teams. As a result, we will be reducing the number of non-development positions in North America and anticipate a related process in our regional offices over the coming months subject to local requirements.”

Get caught up on the Activision-Blizzard saga of the last few months: