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Vivendi Game Unit Slashes 350 Jobs as Sales Fall

California

The publisher of 'Warcraft' lays off about 30% of its workforce in North America. Half the cuts occur in L.A.

June 22, 2004|Alex Pham | Times Staff Writer

Vivendi Universal Games on Monday laid off 350 employees, or nearly 30% of its workforce in North America, as the publisher of the popular "Crash Bandicoot" and "Warcraft" series slashed costs amid falling sales.

"Restructuring the organization and reducing our cost base are necessary to improve our operating effectiveness and profitability," said Bruce Hack, chief executive of Los Angeles-based VUG, a subsidiary of French entertainment company Vivendi Universal.

Half the layoffs occurred in Los Angeles, where 425 people are still working. The company also eliminated 110 jobs at its operations in Bellevue, Wash. An additional 50 came from shuttering two development studios in Boston. Before the layoffs, VUG employed 1,200 in North America and 600 in Europe and Asia.

Hack, 55, took over VUG in January after stints as chief financial officer of Universal Studios and vice chairman of Universal Music Group. The appointment signaled Vivendi's intent to keep its games business, its executives said. In the last two years, Vivendi turned down at least two cash offers for VUG, one worth $1 billion, executives involved in the deals said.

The on-again, off-again discussions, however, took their toll on the organization by putting on hold strategic efforts to reorganize the unit's sprawling operations or launch new development initiatives, say former and current senior executives.

Sales sank 28% to $600 million in 2003, from $750 million in 2002. The unit lost close to $200 million last year, compared with a profit of $60 million the year before.

"After a period of declining sales, you need to make sure your costs are commensurate with your top-line revenues," said Edward Williams, an analyst with Harris Nesbitt.

One reason for the decline was a dearth of hits in 2003, analysts said. Though "Simpsons Hit and Run" and "Hulk" sold more than 1 million copies each, none were clear blockbusters. In 2002, VUG released "Warcraft III," a hit that accounted for 11% of the unit's revenue that year.

This year, the firm hopes to turn things around with several highly anticipated titles, including "Half Life 2," "The Chronicles of Riddick" and "World of Warcraft," an online multiplayer game developed by Blizzard Entertainment in Irvine.

Senior VUG executives said one key plank of the reorganization was a focus on online titles, such as "World of Warcraft," aimed at older, hard-core gamers who are willing to pay monthly fees to play.

At the same time, Vivendi plans to scale back titles aimed at the educational software and casual games markets, executives said.

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