Electronic Arts laying off 5% of workforce to focus on ‘owned IP’

Electronic Arts is laying off 5% of its workforce, or around 670 of the company’s workers. EA employed around 13,400 people by the end of last March, according to a regulatory filing. Sixty-five percent of those employees are located outside the U.S., it said at the time. Notifying impacted employees “has already begun and will be largely completed by early next quarter,” EA CEO Andrew Wilson wrote in a note to staff published Wednesday.

Wilson also said EA is “moving away from development of future licensed IP that we do not believe will be successful in our changing industry.” Instead, it’ll focus on “owned IP, sports, and massive online communities.”

“We are also leading through an accelerating industry transformation where player needs and motivations have changed significantly,” Wilson wrote. “Fans are increasingly engaging with the largest IP, and looking to us for broader experiences where they can play, watch, create content, and forge deeper connections. Our industry exists at the cutting edge of entertainment, and in today’s dynamic environment, we are advancing the way we work and continuing to evolve our business.”

No specific games were mentioned in Wilson’s note, although EA is currently developing several games based on licensed properties, like a reported third Star Wars Jedi game, along with Marvel’s Black Panther and Iron Man. EA announced in 2022 that Respawn was developing three separate Star Wars games, one of which was Star Wars Jedi: Survivor. The two others were unannounced; one of those games, a first-person action game, has been canceled, according to Video Games Chronicle. “As we’ve looked at Respawn’s portfolio over the last few months, what’s clear is the games our players are most excited about are Jedi and Respawn’s rich library of owned brands,” EA entertainment and technology present Laura Miele said in a statement to the publication.

The cuts come almost one year after EA laid off around 700 people, or 6% of its staff, in March 2023. Earlier in February of this year, The company also laid off “a small number of staff” earlier this week as it ceased operations on EA Sports MLB Tap Sports and F1 Mobile Racing. (These layoffs may be included in the 670 number announced Wednesday.) Those games are presumably part of the company’s plan to “sunset” several games, as Wilson noted in the letter to staff.

EA expects to spend $125 million to $165 million on these layoffs and other cost-cutting measures. Office space reductions will cost roughly $50 million to $60 million, while $35 million to $45 million is expected to go toward “costs associated with licensor commitments,” according to a securities document filed Wednesday. EA said it’ll spend $40 to $55 million on employee severance, which is on top of the $170 million to $200 million EA spent last year on its reorganization cost-cutting plan. (EA, at that time last year, expected to finish the actions related to those costs by Sept. 30, 2023. This time around, it expects to be finished by Dec. 31, 2024.)

Star Wars Jedi: Survivor Cal, BD, and Merrin riding a spammel through the Jedha desert

Image: Respawn Entertainment/Electronic Arts via Polygon

In late January, EA released its recent financial results where it reported earning $7.6 billion in the past 12 months before Dec. 31, 2023. Of that, EA made $5.8 billion in gross profit. EA reported that its net bookings are up by 1% year-over-year — part of that is related to its live service success, where it earned a “record $1.712 billion,” 3% more than last year. “On a trailing twelve-month basis, live services were 73% of our business,” EA wrote. In particular, EA called out EA Sports FC for “outperforming expectations.”

“I understand this will create uncertainty and be challenging for many who have worked with such dedication and passion and have made important contributions to our company,” Wilson said in the letter, adding that the company will do its best to help affected workers find “new roles or paths to transition to other projects.” “While not every team will be impacted, this is the hardest part of these changes, and we have deeply considered every option to try and limit impacts to our teams.”

EA is, unfortunately, not alone in the worrying trend of increasing video game industry layoffs. On Tuesday, Sony Interactive Entertainment announced it was laying off 900 people, or 8% of staff. Insomniac Games, Naughty Dog, Guerrilla Games, and Sony’s Technology, Creative, and Support divisions were all impacted. This week alone, people have been laid off from studios like Deck Nine Games, Supermassive Games, and esports company ESL; there was also a production halt at Die Gute Fabrik as funding ran dry.

Roughly 8,000 people have been laid off in the first two months of the year in a worrying trend that’s quickly outpacing 2023, where around 11,000 people were laid off, per industry trackers. Why are these layoffs happening? A comedown after the pandemic is part of it, but not the whole story that includes increasing interest rates on loans, how expensive it is to make games, and a shift in video game industry business models. One important failure to consider is that executive leadership expected the engagement built during the pandemic to continue and grow; executives expanded their companies recklessly without a realistic long-term plan.

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