Published February 29, 2012
Activision Blizzard, the largest U.S. video publisher, on Wednesday said it was cutting 600 jobs globally in the unit that makes Internet games including the company's most profitable property, "World of Warcraft," which has lost users in recent quarters.
Traditional video game companies like Activision and Electronic Arts have been trimming costs and releasing fewer games as the growth in the industry shifts toward free games on the Internet made by younger companies such as Zynga .
The layoffs will not have an effect on the company's financials this year and have already been included in the company's earnings forecast, Activision said in a statement.
"Their subscriber base for 'World of Warcraft' is getting smaller so they are adjusting their cost structure for that decline," said Sterne Agee analyst Arvind Bhatia.
Ninety percent of the layoffs in its Blizzard division will not be related to game development and no developers that work on "World of Warcraft" will be affected, the company said.
The company did not respond to a request for comment on how many job cuts are in the United States.
"World of Warcraft," which is 7 years old, has seen its subscriber numbers steadily decline in recent quarters. The company ended the year with 10.2 million "World of Warcraft" subscribers, down from 10.3 million in the previous quarter. It lost 700,000 subscribers during the third quarter of last year.
Investors closely watch subscriber numbers for "World of Warcraft" because the franchise is the company's most profitable business and generates a steady stream of monthly revenue from its millions of users.
Electronic Arts' new Internet game, "Star Wars: The Old Republic," may be chipping away at Warcraft's user base, analysts have said.
Bhatia said the company is most likely slashing jobs in its customer service department that serves its players.
The job cuts come about a year after Activision stunned investors by shutting down development studios that made "Guitar Hero" music games and eliminating 500 jobs.
The company said development schedules for games will not be affected by the job cuts. The company said it will announce a release date for the upcoming game, "Diablo III," in the near future.
Activision, which employed 7,300 people at the end of 2011, acquired its Blizzard unit from Vivendi in 2008.
Activision shares were flat at $12.06 on the Nasdaq on Wednesday.