• by Thom Forbes  @tforbes, February 13, 2019

Coming off the best financial results in its history, video game publisher Activision Blizzard yesterday also announced it would be laying off about 8% of its workforce as the trend toward free-to-play online games such as “Fortnite” continues to shake up the industry.

“The cuts will eliminate around 775 people from Activision Blizzard’s workforce of about 9,800. The company expects to record $150 million in pretax charges in connection with the moves, most of which will be incurred this year,” Patrick Thomas and Sarah E. Needleman write  for the Wall Street Journal. 

“The job cuts underscore the tough environment video game makers face as players increasingly sink their time and money into only a handful of games they can play in perpetuity -- the current king being “Fortnite.” The stakes are high: Players who aren’t kept busy in one game might take their time -- and money -- to a rival,” they add.

“Fortnite” generated $2.4 billion in revenue in 2018, according to Nielsen’s SuperData, and “drove a 209% increase in the free-to-play segment” last year.

“The shift is meant to help Activision prioritize its biggest franchises -- ‘Call of Duty,’ ‘Candy Crush,’ ‘Overwatch,’ ‘Warcraft,’ ‘Hearthstone’ and ‘Diablo’ … and the number of developers working on those games is expected to increase around 20% this year,” Natalie Jarvey writes for The Hollywood Reporter. 

“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,” Activision CEO Bobby Kotick states in the company's earnings report, pointing out its “powerful” franchises, “strong” commercial capabilities, connection to “hundreds of millions of players” and its “extraordinarily talented” employees (who remain). 

“The cuts will come from non-development teams and support staff, according to an internal letter from Blizzard president J. Allen Brack that was seen by Kotaku,” CNET’s Sean Buckley writes.

“Over the past year, a number of executives have left, including Eric Hirshberg, CEO of Activision Publishing, and Mike Morhaime, the longtime head of Blizzard,” Bloomberg’s Christopher Palmeri reports.

On New Year’s Eve, Activision said it was firing chief financial officer Spencer Neumann -- shortly before he took the same position at Netflix Inc. Tim Kilpin, a toy-industry veteran recruited to lead Activision’s consumer-products division two years ago, retired this month,” he adds.

"We’re confident that over time this plan will enable our teams to accelerate the delivery of high-quality content to our communities,” Activision COO Coddy Johnson said on an earnings call transcribed by Seeking Alpha.

Shares of Activision have lost nearly 50% of their value since hitting a 52-week intraday high of $84.68 in October. The stock surged 4% Tuesday ahead of the earnings report,  CNBC.com's Sara Salinas reports. They then “fell as much as 5% in extended trading before gaining as much as 4%.”

“In-game execution was inadequate in some of our franchises, and we saw weaker-than-anticipated retail demand,” Johnson said on the earnings call. “Our 2019 outlook assumes that we will not improve in-game monetization 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.”

“It’s also worth noting that ‘Destiny’ developer Bungie ended its relationship with Activision. While ‘Destiny 2’ did not perform up to expectations, that move likely left many in marketing and other areas at Activision without a major franchise to work on. This followed the decline of the highly lucrative ‘Skylanders’ and ‘Guitar Hero’ franchises as well,” Samuel Axon points out for Ars Technica.

Activision is not the only company feeling heat from “Fortnite,” of course. “Last week, Electronic Arts and Take-Two Interactive lost 13% and 14% respectively in a single day after revealing increased competition,” CNBC.com's Salinas writes.

But “optimism that EA has created a blockbuster ‘Fortnite’ rival powered a recent recovery in the company’s stock. EA said late Monday more than 25 million players had signed up to play ‘Apex Legends’ in its first week of release, sending shares another 5.2% higher on Tuesday,” Matthew Rocco reports for Financial Times.

Meanwhile, the retrenching Activision-Blizzard “splurged on a recent company outing to Disneyland,” Michael Futter coyly observes for Variety. “The company rented the entire park for its employees use. Restructurings take time, and depending on perspective, this was either a lovely send-off for employees the company knew would be leaving just a month later or a waste of money that could have been used to retain a few more of those laid off.”

Or, it’s just the way the games are played nowadays -- here today, vaporized tomorrow.