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540 jobs to be cut on news that EA lost a surprising $310 million last quarter despite strong sales.


Economic burnout is far from paradise.

Nearly 540 EA employees will lose their job over the course of the next few weeks after Electronic Arts revealed a surprising $310 million dollar loss during the July-September. The upsetting news could be the start of a difficult season not just for EA, but for the gaming as a whole.

The news, which comes during the middle of the worst economic period in the US since the 1920s, directly conflicts with some analyst claims that the gaming industry is recession proof. CEO John Riccitello admits, "Considering the slow down at retail we've seen in October, we are cautious in the short term."

Sony Computer Entertainment chief executive Kaz Hirai shares Riccitello's cautious outlook. "I wouldn't go so far as to say we're recession-proof," Hirai states in an interview with the Wall Street Journal, "But we expect to be hit much less than an auto company, for example."



EA's troubles point to a rocky economy given that a number of its titles released in the last six months have sold quite well. Spore has sold over 2 million copies, Madden NFL 08 did more than twice that with 4.5 million. Tiger Woods PGA Tour 08, NCAA Football 08, and even Mercenaries 2: World in Flames moved shy of 2 million copies according to EA financial reports.

Despite solid sales, EA is hemorrhaging money. Increasing costs due to the economic crunch are catching up with EA--who's it going to hit next?

Publisher widens staff reductions to 10 percent, will reap $120 million annual savings; Need for Speed Undercover studio moving in with EA Canada, label will remain intact.

The day before Halloween, Electronic Arts spooked its staff by announcing it was laying off 6 percent of its workforce. Last week, it alarmed analysts by announcing--without revealing any specifics--that its annual earnings would fall below expectations. As a result, it was expanding its layoffs and canceling future projects.

Today, the company announced an expanded restructuring that will see EA increase layoffs to include 10 percent of its worldwide workforce. The 1,000 pink slips will be sent out by March 31, 2009, and will encompass the "consolidation or closure of at least nine studio and publishing locations," according to EA.

The restructuring will both cost and save money. After incurring charges of $55 million to $65 million as a result of severance packages and other reorganization-related expenses, EA anticipates an annual savings of $120 million.

Analysts blamed EA's troubles on the underperformance of several games, such as Mirror's Edge, Dead Space, and Need for Speed Undercover. Little surprise, then, that one affected location is Undercover developer EA Black Box, which will be closing its office facilities. (In an ironic footnote, Black Box's official site still bears the tag line "Growth...and lots of it!") The staff of the Vancouver-based shop, which is currently working on Skate 2, will be relocated to EA Canada's offices in the nearby suburb of Burnaby. However, an EA representative told GameSpot that the studio name will remain.

"This does not mean that the Black Box studio is closing," said the rep. "The studio is moving to our Burnaby campus to share the facility with EAC and other EA teams that operate out of our state-of-the-art facility. We will operate two distinct studios, each with their own distinct culture and teams, out of our Burnaby facility."

EA said that Black Box's expected move date is June 2009. The rep also said that the studio's games would follow as well, but declined to comment if any were being considered for cancellation. "[We've made] no announcements regarding franchises," stated the rep.

In the initial news release, EA also issued the following blanket statement outlining how it will examine each of its series' viability: "EA is implementing a plan to narrow its product portfolio to focus on hit games with higher margin opportunities. The company remains committed to taking creative risks, investing in new games, leading the industry in the growing mobile and online businesses, and delivering high-quality games to consumers."

http://www.gamespot.com/news/6202573.ht ... op;title;3