Electronic Arts is laying off 5% of its workforce, or approximately 670 company employees. EA employed approximately 13,400 people at the end of March, according to a registration application. Sixty-five percent of those employees are outside the U.S., it said at the time. Informing affected employees “has already begun and will be largely completed early next quarter,” EA CEO Andrew Wilson wrote in a letter to employees Published Wednesday.
Wilson also said that EA is “moving away from developing future licensed IP that we believe will not be successful in our evolving industry.” Instead, it will focus on “proprietary IP, sports and massive online communities.”
“We are also leading through an increasingly rapid industry transformation, where player needs and motivations have changed significantly,” Wilson wrote. “Fans are increasingly engaging with the biggest IP and looking to us for broader experiences where they can play, watch, create content and forge deeper connections. Our industry is at the cutting edge of entertainment, and in today’s dynamic environment we are improving the way we work and continuing to develop our business.”
No specific games were mentioned in Wilson’s note, although EA is currently developing several games based on licensed properties, such as 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 past few months, it’s clear that the games our players are most excited about are Jedi and Respawn’s rich library of proprietary brands,” said Laura Miele, presenter of EA entertainment and technology , in a statement to the publication.
The cuts come almost a year after EA laid off about 700 people, or 6% of its workforce, in March 2023. Earlier in February this year, EA fired The company also laid off “a small number of employees” earlier this week when it ceased operations EA Sports MLB Tap Sports And F1 mobile racing. (These layoffs may be included in the 670 number announced Wednesday.) These games are likely part of the company’s plan to “pause” several games, as Wilson noted in the letter to employees.
EA expects to spend between $125 million and $165 million on these layoffs and other cost-cutting measures. Downsizing office space will cost approximately $50 million to $60 million, while $35 million to $45 million is expected to go toward “costs associated with licensors’ obligations.” This is evident from a securities document filed on Wednesday. EA said it will spend $40 million to $55 million on laying off employees, adding to the $170 million to $200 million it spent on its restructuring cost-cutting plan last year. (EA expected to complete actions related to these charges by September 30, 2023 around this time last year. This time, it expects to complete by December 31, 2024.)
Image: Respawn Entertainment/Electronic Art via Polygon
The end of January, EA has released its recent financial results where it reported that it earned $7.6 billion in the last 12 months before December 31, 2023. Of that, EA earned $5.8 billion in gross profit. EA reported that its net bookings were up 1% year-over-year – some of that tied to the success of its live service, where it earned a “record $1.712 billion,” up 3% from last year. “Over a twelve-month period, live services made up 73% of our revenue,” EA wrote. EA especially shouted EA Sports FC for ‘exceeding expectations’.
“I understand that this will create uncertainty and be challenging for many who have worked with such dedication and passion and made significant contributions to our company,” Wilson said in the letter, adding that the company will do its best to helping employees 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. We have thoroughly considered every option to limit the impact on our teams.”
Unfortunately, EA is not alone in the worrying trend of increasing layoffs in the video game industry. On Tuesday, Sony Interactive Entertainment announced it would lay off 900 people, or 8% of its workforce. Insomniac Games, Naughty Dog, Guerrilla Games and Sony’s Technology, Creative and Support divisions were all affected. This week alone, studios like Deck Nine Games, Supermassive Games and esports company ESL have seen people laid off; there was also a production stop at Die Gute Fabrik because financing dried up.
About 8,000 people were laid off in the first two months of the year in a worrying trend that is quickly outpacing 2023, when around 11,000 people were laid off, per industry trackers. Why are these layoffs happening? A post-pandemic comedown is part of it, but not the whole story, including rising interest rates on loans, how expensive it is to make games and a shift in the video game industry’s business models. A key mistake to consider is that executive leadership expected engagement to continue and grow during the pandemic; Executives recklessly expanded their businesses without a realistic long-term plan.
