Blizzard Entertainment, the creator of "World of Warcraft" and a substantial part of the video game industry's largest publisher, announced plans Wednesday to lay off 600 employees.
The cuts, which generally come from areas other than game development, come as subscriber numbers for the hit online game have fallen substantially in recent quarters.
"Over the last several years, we've grown our organization tremendously and made large investments in our infrastructure in order to better serve our global community," said Mike Morhaime, CEO and cofounder of Blizzard Entertainment in a statement. "However, as Blizzard and the industry have evolved we've also had to make some difficult decisions in order to address the changing needs of our company."
Activision-Blizzard, the parent company of the Blizzard studios, said accounting changes from the cuts are not expected to be material and were included in its 2012 financial outlook.
Between the fourth quarter of 2010 and fourth quarter of 2011, "World of Warcraft" saw its subscriber count fall by roughly 2 million. And while the game is still far and away the leading massively multiplayer title on the market that atrophying player base is suspected to be the prime cause for the layoffs.
"'Warcraft' was a money machine for many, many years," says John Taylor of Arcadia. "The subscription numbers peaked out and have been eroding over the last several quarters. My sense is they took a pretty good look a their expense structure that they didn't need to worry about previously and decided to tighten things up a bit."
Blizzard said only 10 percent of the cuts came from the game development side. It also added that the "World of Warcraft" team would not be impacted.
The area most likely affected by the cuts was Blizzard's customer service or tech support. Blizzard has a full slate of games under development, with several due out this year – including "Diablo III" and an expected "World of Warcraft" expansion pack. A sequel to the popular "Starcraft" series is also likely.
Further down the path is a project codenamed "Titan," the company's next big massively multiplayer game. The sheer workload of those games makes the development division relatively safe.
Similarly, marketing isn't likely to be slashed with so many new titles looming – and the company is likely to leave its Chinese arm alone, since it has yet to fully capitalize on "World of Warcraft's" potential in that market (which opening embraces online games).
"'World of Warcraft' is the single most important property in the business, outside of 'Call of Duty'," notes Taylor. "But it's no longer a growth driver."
The game, which currently has 10.2 million players, has stared down several competitors, but EA's recently launched "Star Wars: The Old Republic" is considered to be the most notable competition "World of Warcraft" has faced to date. That game sold more than 1 million copies in its first week and has proven to be a "sticky" title. Players immersed themselves in the game for an average of five hours per day – logging some 28 million hours in the first 10 days.
Blizzard, for many years has been a company that creates games solely for the PC, but as it looks to continue its growth, there are signs it might be considering doing versions of its games for Microsoft's Xbox 360 or Sony's PlayStation 3. Job listings have hinted that a console version of "Diablo III" might be in the cards, though the company has made no formal announcements.
Wednesday's cuts were the first widescale layoffs in Blizzard's history – and the company, which historically has been seen as the most steadfast in the industry, knows the move could shake the confidence of its audience.
Morhaime quickly took to the forums to calm players.
"In order to keep making epic game content while serving players effectively, we have to be smart about how we manage our resources," he wrote. "You've all come to expect Blizzard to live up to our mission statement with every game, and deliver the most epic entertainment experiences ever. You can continue to expect that and nothing less from us as we move forward."