In response to questions about layoffs, Zynga emailed Betabeat an internal memo that CEO Marc Pincus sent out to staffers this afternoon. In the note, Mr. Pincus confirmed that the company cut approximately five percent of its full-time workforce today, including the shuttering of its Boston studio and mass layoffs at its Austin location.
Mr. Pincus also said that Zynga is proposing closures of its Japan and U.K. offices. In addition, the company will be sunsetting 13 of its games and reducing investment in TheVille, a Facebook game that’s facing a lawsuit from EA for looking a whole lot like a Sims game.
In the memo, Mr. Pincus wrote that he believes the cost-cutting measures will “improve our profitability and allow us to reinvest in great games and our Zynga network on web and mobile.”
The memo comes after a day of intense rumors about the flailing social gaming company filled the tech universe. Despite the fact that the news emerged during the attention-sapping Apple keynote, TechCrunch reported that the timing of the news had more to do with Zynga’s impending earnings call, scheduled for tomorrow, than with the Apple presentation.
Earlier reports indicated that the Boston and Austin offices would be closing altogether; Austin, however, will remain open, though its staff was dramatically reduced.
Zynga has been on a downward spiral for the last few months, reporting an estimated net loss of $95 million to $105 million for its third quarter, which will be discussed on tomorrow’s earnings call. Following that announcement earlier this month, its stock price immediately plummeted 19 percent. Currently, it’s hovering around $2.20, after experiencing a 5.17 percent drop today.
SuperData Research analyzed some of Zynga’s recent game statistics and concluded that player engagement reached an all-time low of 14 percent in September and that it has fewer monthly active users in simulation games now than it did two years ago. The hope for Zynga’s salvation, SuperData’s Sam Barberie (and others) have argued, is a pivot to social gambling, but current U.S. laws have tight control over the function of gambling games.
You can read the full text of Mr. Pincus’ internal memo below.
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.
With reporting contributed by Nitasha Tiku.