EA Laying Off Up To 1,000 Employees Due To Over-Spending In Marketing
[Update: EA denies that the situation is really bad and says they're always hiring and firing.]
Hey remember that article about the confessions of an EA viral marketer and how one of the most ridiculous things about the whole situation was how much EA literally blew on marketing? Well, that's come back to bite them in the butt hard as they have to lay off up to 1,000 employees due to over-spending in a number of areas, especially marketing.
Startup Grind has confirmed from internal sources at EA that layoffs are incoming and they were originally supposed to happen last Monday on April 9th but they have been postponed to the end of this week.
What's crazy is that everything, and I do mean everything that was mentioned in the viral marketing article is spot on true and that guy really was a former employee: EA's execs are disappointed with the overall sales and subscription numbers of Star Wars: The Old Republic (word is that the subs are slowly decreasing) as well as the sales of Mass Effect 3, which managed to sell about 1.1 million copies in North America.
According to Startup Grind they postulate that the expensive acquisition of PopCap and all the negative press surrounding being named "Worst Company in America" alongside all the beef with Mass Effect 3 has resulted in a very dire situation internally at the company, in which we can only hope that they restructure to be more consumer friendly. With their stock down to $16 as opposed to when it was $100 back in 2006, the company's slowly been driving their own business into the ground.
What's more, is that with nearly $1 billion spent in marketing last year (including more than $30 million in post-launch marketing for Battlefield 3, not including the $50 million they spent leading up to its release) Electronic Arts was bleeding as much money as they were making due to a lot of insensible business decisions.
The viral marketer mentioned that EA had about 560 marketers employed to "troll" and if I were a betting man I'd say everything that guy mentioned is spot on true and that these marketers are the ones getting the axe. In the article we mentioned that EA is currently looking to hire marketing managers in South-East Asia. The viral marketer confirmed that this is where his job was being out-sourced. It would make sense to layoff all the Stateside marketers and eventually outsource to Asia where they'll pay the workers a mere fraction of what they were paying people here in the States.
Also, let's not forget that one of the main selling points of the viral marketer was that EA was eyeing another firm to buyout in order to save face. It's hard to tell if that's actually still an agenda on the table given their current situation, however their 2012 outlook was forecasted at $4.2 billion according to Seeking Alpha, so they still have cash to burn but I'd imagine they're going to be a lot more vigilant about operating costs, which were just obscene in 2011 at a not-so-meager $2.4 billion dollars.
Hopefully the people who are out of work at the company can bounce back, but this crappy economy certainly won't help things.
In the end this is really telling that if you screw with gamers too much they'll screw with you when they Hold The Wallet. Also, it doesn't help when you make a lot of dumb decisions and over-spend with gratuitously grandiose marketing campaigns.
You can check out the rest of the story over at Startup Grind.
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