Electronic Arts is to lay off between 500 and 1,000 staff, sources claim, reducing its total workforce by five to 11 per cent, raising questions over the future of CEO John Riccitiello.
Multiple sources have confirmed to Startup Grind that EA originally intended to announce the layoffs this time last week; instead, confirmation is expected in the coming days.
The reported layoffs come at the end of a financial year which, despite several highlights, has been an expensive one for EA. While the acquisition of PopCap in July for an initial $750 million was well received in most quarters, it is expected to be some time before that investment is recouped. Losses rose by 69 per cent in the quarter during which the acquisition was announced.
While it is generally accepted that EA was successful in its bid to eat into the Call Of Duty userbase with Battlefield 3 – which sold 8 million units in its first month on sale, almost four times as much as predecessor Bad Company 2 – that too came at a cost. One source claims EA spent $30 million marketing a game which has sold an estimated 13 million copies.
It has spent heavily, too, on The Old Republic. BioWare's Star Wars MMOG, which was in development for over three years, had 1.7 million subscribers in February, and again in March – though EA was quick to stress that should not be interpreted as signs that the game's popularity had peaked, pointing out that many of the first 1.7 million were still in the 30-day trial period, and had since converted to full subscriptions.
Yet late last week came signs that EA was nervous about losing users, offering a free week of play to lapsed subscribers to coincide with the release of the game's 1.2 update, Legacy. Player churn in MMOGs is far from uncommon – Blizzard said last year it was speeding up development of World Of Warcraft expansions because lapsed players resubscribe, charge through the new content and leave again – but at the time, WOW had 11.4 million subscribers, and it says a lot that EA is acting so early in the game's life.
Startup Grind suggests all this could spell bad news for John Riccitiello, the EA CEO who has an approval rating of just 53 per cent on Glassdoor, a website which collates reviews of US companies from anonymous employees.
When Riccitiello took over EA in February 2007, its share price stood at $51.96; by the close of business on Friday it was $16.18. While few would dispute that the five intervening years have heralded unprecedented change in the game industry, a 69 per cent fall in company stock is hard to defend; Activision's share price has risen 41 per cent in the same period.
Riccitiello's tenure has also seen a number of high-profile departures from EA's management team, with many leaving for Zynga. Five of Zynga's 11 top executives came from EA, and CFO Eric Brown left in February. Riccitiello said that the senior staff that left EA for the king of Facebook gaming did so for the money, and that EA hadn't been weakened by their departures; he will find it much harder, however, to explain away the layoffs of up to 1,000 staff.
EA, however, has moved to deny the news, with a spokesperson telling MCV: "There are no layoffs as such, we always have projects growing and morphing. At any given time there are new people coming in and others leaving.
"EA is growing and hiring and building teams to support the growing demand for digital games and services."