Electronic Arts Announces Earnings, Layoffs

Within hours of confirmation that Electronic Arts had acquired social game developer Playfish, the company also confirmed that it would lay off 1,500 workers despite announcing record digital revenues of $138 million
for Q2 2009 (up 23% year-over-year). Despite digital growth, EA posted
a net loss of $391 million for Q2 (up 26% year-over-year). The company
announced $788 million in GAAP revenue, a 12% year-over-year decline.  

EA internal studios confirmed affected by the layoffs
include EA Redwood Shores, Tiburon, Mythic, and Black Box. Mythic is
associated primarily with MMOs, while Black Box is known primarily for
the Need for Speed and Skate series of games. Layoffs at these
divisions are logical in light of EA's ongoing move away from
traditional games publishing models and toward digital revenue streams like virtual goods. 

Mythic may have been one of the hardest-hit studios, with Katherine Pitta claiming the loss of 40% of the developer's staff (about 80 employees). Rumors indicate that about 90%
of those employees may have been working on creation of new content for
Warhammer Online. If true, this would be a clear sign that EA is
looking to reduce support for the troubled subscription MMORPG. 

Layoffs
at EA Redwood Shores and Tiburon are more troubling for the virtual
goods sector. Tiburon is the primary developer of EA's various sports
titles, including Madden NFL,
which have all begun supporting microtransactions either as DLC or as
part of freemium reinventions of the franchises. EA Redwood Shores is
the company's headquarters. All of these franchises had made moves to
include virtual goods in their business models, whether as DLC add-ons
or online freemium reinventions. 

There is some good news for EA
to announce this quarter, aside from the Playfish acquisition. The
company's non-GAAP revenue was up 2% to a record high of $1.147
billion. The layoffs are part of a restructuring plan that should save
the company $100 million annually by letting it close down some of its
internal developers. The restructuring itself will cost EA $130
million, a sign of how difficult it can be for a traditional games
company to transition into a newer business model.

[This story first appeared on virtualgoodsnews.com]

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