Activision Blizzard cuts hundreds of jobs despite ‘record revenue’ year

Activision Blizzard leadership made widespread layoffs today, cutting 8 percent of its staff — or about 800 jobs — despite posting “record-setting” revenue for its 2018 fiscal year.

The news comes from Activision Blizzard’s fourth-quarter earnings call with investors today. Those affect by the layoffs were described as being in “non-development roles” on the earnings call by Activision Blizzard CEO Bobby Kotick, who said the company will still continue to scale up development-focused positions.

“We saw weaker than anticipated retail demand,” said president and chief operating officer Collister “Coddy” Johnson during the call. But “we will not improve retail monetization as quickly as we liked,” referring to the slowing sales of microtransactions within games like Overwatch and Hearthstone.

According to chief financial officer Dennis Durkin, Blizzard does not have a major or “frontline” release planned for the 2019 fiscal year. This means Blizzard has no plans to release a new Diablo (beyond the already announced mobile game) or any other major game. As a result, Durkin attributed the lower income and revised guidance for the upcoming year to disappointing returns from the Blizzard segment of the company.

Activision parting with the Destiny property does not account for much of the restructuring this year, said Kotick during the call. This past January, Bungie assumed total control of its series, ending its partnership with Activision Blizzard earlier than initially agreed upon.

“We’re confident this was the right decision for both parties,” Kotick said. “For us, at least, it was rooted in our strategies overall. We did’t own the underlying Destiny IP.”

He added that Destiny “was not meeting our financial expectations,” and that the decision to part ways with Bungie was “mutual.”

But without additional Destiny profits in the coming year, Activision anticipates its revenues to remain “flat,” leaving the company to redirect efforts toward the Call of Duty series. A new Call of Duty entry is due out in Q4 2019 and a mobile game from Tencent is in development.

Before announcing the layoffs, Activision Blizzard noted that it posted record revenues for the 2018 fiscal year. According to its fourth-quarter earnings report, the company made $7.26B in physical and digital sales, compared to $7.16B in 2017. But CEO Bobby Kotick explained that the numbers failed to meet expectations.

“While our financial results for 2018 were the best in our history, we didn’t realize our full potential,” Kotick said in the report. During the Q&A portion of the investor call, Blizzard president J. Allen Brack described the layoffs as a “top-five career-difficult moment for me personally.”

Despite the self-proclaimed underwhelming revenues and the layoffs, Activision Blizzard said that it plans to expand its development teams on key, internally owned games (like Call of Duty, Candy Crush, and Overwatch) by 20 percent. Funding this will come through “de-prioritizing initiatives that are not meeting expectations and reducing certain non-development and administrative-related costs across the business,” according to its fourth-quarter fiscal earnings release. Other non-core positions will be eliminated to rededicate resources toward beefing up its development slate, the team said on the call.

Blizzard has already faced plenty of internal changes over the last few months. Long-time CEO Mike Morhaime left the company in October; Brack replaced him, albeit under the role of president, not CEO. Brack addressed the company in a memo Tuesday:

This was an extremely difficult decision, and we want to acknowledge the effort of everyone who has contributed to Blizzard. To assist with the transition, we are offering each impacted employee a severance package that includes additional pay, benefits continuation, and career and recruiting support to help them find their next opportunity.

The company also previously scaled back work on Heroes of the Storm, the online battle arena game with a dwindling fan base. In December, Blizzard canceled the game’s annual esports season as well, further casting its future in doubt.

Despite the major layoffs and missing targets, Activision announced it is increasing its shareholder dividend by nearly 9 percent, to 37 cents a share. This is the ninth consecutive year the company has increased its dividend.

Update: We’ve properly re-attributed a quote about the layoffs above to J. Allen Brack, not Bobby Kotick. We’ve also clarified and elaborated on Kotick’s comments regarding Destiny’s effect on Activision’s revenue projections.