Yesterday morning, game publisher Electronic Arts announced the purchase of Playfish, a social game developer (think Facebook games) for at least $300 million, and as much as $400 million depending on "certain performance milestones" achieved by Dec 31, 2011. See the full release here.
Yesterday afternoon, Electronic Arts announced they were laying off 1500 employees from their existing studios, with 1300 of the cuts in the form of a restructuring plan scheduled to be completed by March 31, 2010. This in spite of quotes such as "EA is performing well, with quality, sales and segment share up so far this year." (EA CEO John Riccitiello) and ""We met our second quarter expectations and delivered a record quarter for revenue." (EA CFO Eric Brown). You can read the financial summary here.
The Escapist has been gathering information and claims that the initial cuts came primarily from four development houses: Tiburon, Mythic, Black Box, and Redwood Shores. This is still firmly in the category of rumor; EA hasn't made any official announcements. Tiburon is the house that handles the Madden Football franchise, which seems like an odd place to start making cuts. Madden is a yearly staple with sports gamers. Mythic is the house that handles a lot of the MMO work for EA, in particular Warhammer Online. Now, Escapist is basing their intel on a twitter user who claims to volunteer at Mythic (and who seems to be working hard at turning this situation into her 15 minutes of fame), but if this person is to be believed, Mythic lost 40% of its workforce today. That doesn't bode well for Warhammer Online fans. On the other hand, Mythic Producer Josh Drescher tweets: What makes bad situations worse is when people who know nothing keep getting quoted as "sources" after posting incorrect, random info. So the verdict is still very much out on the validity of these numbers.
Anyway, so what's the point? Well, more speculation, but from the outside looking in, EA is downsizing its 'traditional' gaming resources (consoles, PC) and building up its casual division. Backing up this speculation, Gamasutra quotes Riccitiello from a conference call saying "...these cuts are essential to transforming our company." From the same conference call, Kotaku reports that EA has cut a dozen unannounced projects, what EA's John Schappert called "the bottom third" of its in-progress portfolio. Presumably EA thinks there's more money in first-taste-is-free social web games than in $60 console titles, but how can that be? Low development costs, presumably.
TechCrunch's Mike Arrington has been on a bit of a crusade against the scams these social media games foist on users (see Scamville: The Social Gaming Ecosystem Of Hell) but I guess EA isn't worry about getting into this space in a big way, despite increasing scrutiny by both the FTC and the advertisers who pay firms like Playfish for worthless lead gens.
As a gamer, this just feels like really sad news for the hobby. Electronic Arts was long considered 'the Evil Empire' in gamer circles, but in recent years their attitude seemed to be softening. They were willing to try new IPs rather than cranking out sequel after sequel and, at least compared to competitor Activision (where CEO Bobby Kotick is infamous for his '...take all the fun out of making video games.' and 'We are very good at keeping people focused on the deep depression.' quotes) they seemed like they were undergoing a Grinch-like heart expansion. Apparently not. My thoughts go out to all the people affected be the cuts; here's hoping you find new gigs very soon.