As I’m sure you’ve heard, Activision Blizzard laid off around 8% of its staff yesterday. Revealed by Kotaku, these cuts affected every division of the company, including Activision, King, High Moon, and Blizzard. These layoffs are a result of the companies restructuring efforts - a focus on game development and expansion of current franchises. The earnings call goes into this:
"As a company, we will continue to invest in breakthrough new ideas and incubation, with focused resources and some of our best creative talent. With 2019 set to be a quieter year for upfront launches now is the right time to implement this plan. Work is already underway across the company as we speak. We expect to have completed North American components of our plan by the end of Q1, with implementation of the international components by end of year. And we have already started to increase developer resources on our biggest franchises, and we'll be aggressively hiring talent in the coming quarters."Despite these cuts, Activision Blizzard hit record numbers for the quarter ending on December 31st, 2018. The company hit $2.38 billion in net revenues, much higher than 2017’s $2.04 billion. “Digital channels” made up around $1.79 billion of this.
For the year of 2018, Activision Blizzard hit a record $7.50 billion in net revenues. This number beat out $7.02 billion in 2017. Digital channels for the year generated $5.79 billion as well.
Overall, Activision saw 53 million monthly active users (MAUs) last quarter, “growing double-digits” from the one before. Call of Duty: Black Ops 4 sold much more than 3, tripling its PC sales, making Call of Duty one of the highest selling console franchise once again. This year's Call of Duty will bring back a campaign alongside a "huge and expansive multiplayer world" with some "fun co-op gameplay."
Blizzard reached 35 million MAUs thanks to Overwatch, Hearthstone, and World of Warcraft. That said, WoW saw some expected player drops after Battle for Azeroth launched in August. Otherwise, the company extended its partnership with NetEase to continue publishing games in China until 2023. That said, Blizzard isn't incredibly happy with their ongoing revenue. Both Overwatch and Hearthstone dropped off in net bookings from players spending less in-game and improving this is one of their focuses of the restructuring.
The mobile-focused King saw 268 million MAUs. This massive number was thanks in part to the launch of Candy Crush Friends Saga. Friends Saga joined the original Candy Crush Saga in being one of the top-10 highest grossing titles on the U.S. app store. Revenue grew 5% from the year before, reaching $543 million with operating income hitting $207 million - a 28% increase year-over-year. One of the challenges Activision Blizzard mentioned for the year is a higher tax rate, and this is likely due in part to a dispute surrounding King. The Swedish government fined the company $397 million according to The Local, because King failed to pay taxes on its IP sale when bought by Activision back in 2016.
Thanks to those mobile numbers, it’s no wonder that the company is focusing on this industry with Diablo Immortal. Call of Duty is coming to mobile as well, thanks to ActiBlizz's partnership with Tencent.
According to Variety, Activision Blizzard’s desire to consolidate has been clear for a while now. It started with Destiny 2’s PC exclusivity on the Battle.net platform. This was the first time Activision and Blizzard properties worked directly together. The same happened with Call of Duty: Black Ops 4 later on. Support for Guitar Hero Live has also been cut, with the company providing refunds to recent buyers.
While the numbers mentioned above were record-breaking, they weren’t enough for investors. CEO Bobby Kotick makes this clear in a statement:
“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.”Activision Blizzard stock fell earlier this week when the layoffs were rumored. However, it has been rising ever since. Restructuring happens with the intent of bettering the company, a move investors appreciate. In fact, ActiBlizz saw a 9% rise in dividend shares up to $0.37 per share. That, and a $1.5 billion share repurchase authorization plan to take place over the next two years mean that while many employees are looking for work, investors are plenty happy.
