The troubles for Zynga just keep on coming. Earlier this week, the publisher closed its Boston studio, seriously downsized its Austin studio, and laid off 5% of its full-time workforce, with further cuts still on the way for Japan and the UK. On top of all that, the company has now announced a quarterly loss of more than US$52 million, meaning Zynga has lost more than US$160 million in the first nine calendar months of 2012.
Believe it or not, these financial results are actually better than analysts were expecting. The higher figures are boosted by an announced $200 million stock buyback, as well as a new partnership with bwin.party, a UK-based real money gambling website.
However, these are the exceptions to the rule – Zynga has been struggling as millions of players leave the publisher’s many and varied social games. There’s also the lawsuits being waged around the place, major talent leaving the company, and that deal with OMGPOP resulting in a write-down of nearly $100 million.
This week alone, Zynga CEO and founder Mark Pincus has announced the retirement of 13 older games, budget cuts on “data hosting, advertising and outside services, primarily contractors” and a significantly reduced investment in troubled game The Ville.
Pincus wrote a letter to employees, which has since been made public, outlining the various changes ahead for the casual gaming giant.
Earlier today we initiated a number of changes to streamline our operations, focus our resources on our most strategic opportunities, and invest in our future. We waited to share this news with all of you until we had first spoken with the groups impacted.
As part of these changes, we’ve had to make some tough decisions around products, teams and people. I want to fill you in on what’s happened and address any concerns you may have.
Here are the most important details.
We are sunsetting 13 older games and we’re also significantly reducing our investment in The Ville.
We are closing the Zynga Boston studio and proposing closures of the Zynga Japan and UK studios. Additionally, we are reducing staffing levels in our Austin studio. All of these represent terrific entrepreneurial teams, which make this decision so difficult.
In addition to these studios, we are also making a small number of partner team reductions.
In all, we will unfortunately be parting ways with approximately 5% of our full time workforce. We don’t take these decisions lightly as we recognize the impact to our colleagues and friends who have been on this journey with us. We appreciate their amazing contributions and will miss them.
This is the most painful part of an overall cost reduction plan that also includes significant cuts in spending on data hosting, advertising and outside services, primarily contractors.
These reductions, along with our ongoing efforts to implement more stringent budget and resource allocation around new games and partner projects, will improve our profitability and allow us to reinvest in great games and our Zynga network on web and mobile.
Zynga made social gaming and play a worldwide phenomenon, and we remain the industry leader. Our success has come from our dedication to a simple and powerful proposition – that play is not just something people do to pass time, it’s a core need for every person and culture.
We will all be discussing these difficult changes more with our teams and as a company. Tomorrow, Dave and I will be hosting a post-earnings webcast (details to follow) and next week we will be discussing our broader vision and strategy during our quarterly all-hands meeting. I’m confident this puts us on the right path to deliver on the promise of social gaming and make Zynga into an internet treasure.
If you have any immediate questions, I hope you will talk directly with your manager, Colleen, or me.
I look forward to talking with you tomorrow.