Major Tech Firm Announces Major Layoffs

Last week I reported that Electronic Arts, the largest and most powerful video game publisher in the world, had cancelled plans to open a new studio in lovely downtown Vancouver, British Columbia. Well, it seems EA's problems run much deeper -- in fact, the game company recently announced it will lay off a large portion of its workforce.

According to reports, EA will eliminate one-tenth of its entire workforce as part of a broad restructuring plan meant to maximize profits and stop the bleeding caused by a dragging economy and slow holiday sales. Although this is not the first word of EA's plans to lay off employees, it is a jump from the six per cent layoffs the company revealed in October. The new restructuring plan eliminating ten per cent of EA's work force (approximately 1,000 jobs) is expected to be complete by the end of March, 2009. (Source: asiaone.com)

On the surface, last week's Vancouver cancellation seemed to indicate that the recession had caused EA to slow plans for expansion. Though things weren't necessarily booming, they didn't appear to be drastically slowing, either. After all, this is the company behind a countless number of popular video game titles, including the PC hit Spore, the console NFL series Madden, along with NHL, NBA, and MLB fan favorites.

Unfortunately, sales appear to be down for many of these popular titles. Spore might be the best example; though EA and some critics expected the game to reach Sims-like sales, Spore received only above-average reviews and revenue. DailyTech recently referred to it as "the most pirated game in history," a rather miserable distinction for the company selling it. (Source: dailytech.com)

Now that layoffs are imminent and a vague restructuring plan in place, speculation will revolve around the impact on production. Reports already suggest that EA will probably abandon new, higher-risk projects for those that lead to higher, guaranteed margin opportunities. Thus, Madden 2010 is assured -- but will the improvements that justify its yearly purchase be reduced or less visible than previous years? Is this really an effective cost-saving strategy?

Love them or hate them, EA's successes and struggles act as an effective measuring stick in following the economy's impact on the video game industry.