Activision Blizzard has revealed that it’s laying off 8 percent of its workforce, roughly translating to 800 employees. In an earnings call, the publisher stated that this huge round of layoffs is the result of underperformance in Q4 2018 and an unpromising first half of 2019. Activision COO Coddy Johnson explained in an earnings call that this decision was made as part of a “restructuring plan,” which “sheds investment and less productive nonstrategic areas to our business.” In other words, despite Activision achieving record-setting revenue in 2018, it still wasn’t enough to keep 800 people employed.
It’s always difficult to see another round of layoffs in the revolving door that is the gaming industry. But while the extent of Activision Blizzard’s mass exodus is shocking, the writing was on the wall as soon as the publisher parted ways with Bungie. Up until the split in January, Destiny remained the only successful IP that Activision had cultivated in the past decade that still remained relevant. Blizzard’s own games still rake in a ton of cash, though the company has largely operated as its own entity underneath the Activision Blizzard umbrella. Activision’s own projects have paled in comparison.
Looking through Activision’s lineups for the past five years reveals the gaping hole Destiny‘s struggles put in the company’s plans. In 2014 and 2015, outside of major Blizzard launches such as Hearthstone and Heroes of the Storm, Activision was putting out underwhelming releases such as The Amazing Spider-Man 2 and Tony Hawk’s Pro Skater 5. In 2016, ’17, and ’18, its previously extensive yearly lineups of game releases were reduced to a maximum of five new games. In 2018, Activision Blizzard published just two new releases in the form of Black Ops 4 and the Spyro Reignited Trilogy.
It’s clear that Activision sought to monetize its existing IP rather than shovel more games into the ether, a popular strategy in the modern gaming industry due to the prevalence of microtransactions. However, the publisher would have undoubtedly expected greater longevity from Destiny 2, a sequel that did not meet revenue expectations. Johnson explained in the call that, as Activision Blizzard did not own the Destiny IP, the company could not move in with “new engagement models” and “new revenue streams.” This indicates that it didn’t take as significant a cut of Destiny‘s revenue as its other properties, a loss which would have been offset if Destiny 2 had performed as expected.
Major controversies over microtransactions
This also provides context for Destiny 2‘s pernicious microtransactions. The sequel’s Eververse store eventually became a hive of gameplay-altering items purchasable with real money, to the point where Activision/Bungie had to significantly walk back its impact on the game due to consumer backlash. Even for a major release, Destiny 2‘s implementation of microtransactions was deemed too much by consumers. In late 2018, Johnson expressed a desire to once again ramp up monetization avenues in Destiny 2, before the eventual announcement of Activision and Bungie’s split.
Reading between the lines, it’s clear that Activision put itself in a position with Destiny where it needed to generate a significant amount of money to be deemed tenable by investors. As Destiny 2 underperformed in terms of its game sales, divisive microtransactions were shoveled into it in order to raise its overall revenue. Clearly, this revenue wasn’t enough for Activision to want to keep working with Bungie. However, Activision’s short-sighted vision for its future is the real driving force behind the layoffs.
Activision has cultivated no new IP in the past five years outside of Destiny. The overwhelming focus on Call of Duty has remained in place since the revolutionary success of Modern Warfare back in 2007, with Skylanders and Guitar Hero proving to be comparatively short-lived cultural phenomena. Compared to EA and its roster of sports titles, and even Ubisoft with its wide range of reliable franchises, Activision’s profits are overwhelmingly tied to one franchise and the continued success of Blizzard. That Blizzard is now working on Diablo Immortal, with more mobile games reportedly in the pipeline, suggests that Activision’s hands-off approach to the Overwatch creator’s development process is coming to an end.
Activision needs a new Destiny
It’s not difficult to see why Activision wants Blizzard to ramp up production in the profitable mobile sector. Blizzard basically has a license to print money with its large number of popular franchises, and while a focus on quality over quantity is excellent for consumers, it isn’t in line with the exponential growth that corporations are forever targeting. Destiny was Activision’s lone shot at publishing a bank-rolling IP outside of Blizzard’s efforts since 2014, and its failure to make the relationship with Bungie work is a huge and costly mistake.
But that’s not to say Activision is struggling. It owns Candy Crush maker King, which generated a whopping $2 billion in revenue in 2018, beating the previous year’s revenue by $88 million. Overwatch, Hearthstone, and World of Warcraft also keep the cash rolling in, helping lead the publisher to”record-setting” revenue last year of $7.2 billion in physical and digital sales. Given the success of these properties, the announcement of such extensive job losses is even more difficult to swallow. Activision’s failings are nothing to do with the work of its internal development teams, but rather its narrow-minded focus on an IP it didn’t own and the aging Call of Duty franchise.
Johnson noted that development resources previously reserved for Destiny would now go into the company’s “biggest opportunities” and “biggest franchises,” though the publisher’s outlook for this year is grim. Call of Duty 2019 is on the radar, but Activision Blizzard’s stocks took a tumble following the launch of both Call of Duty: WW2 and Black Ops 4. Despite its continued strong sales, the fifteen-year-old series isn’t what it used to be. There are also no major releases on the horizon for Blizzard; Diablo 4, the next rumored big game for the company, didn’t even make an appearance at last year’s BlizzCon.
It’s unclear exactly what went wrong with Activision/Bungie’s relationship. Though the original Destiny had a rocky start, it built itself a large and dedicated following over time, and Destiny 2 was well-received upon its release. With Bungie now flying solo with the Destiny IP, we’ll have to wait until the eventual Destiny 3 to get a clearer view of how much Activision’s involvement affected the series. In the meantime, Activision is going to need to regroup after concluding its relationship with Bungie early, and start looking towards a future that doesn’t orbit around Call of Duty.