Looks like Mattrick brought his well-tread "why retrain when you can swap out people" practices with him from EA.
> On November 9, 2009, EA announced its acquisition of social casual games developer Playfish for US$275 million. On the same day, the company announced layoffs of 1500 employees, representing 17% of its workforce, across a number of studios including EA Tiburon, Visceral Games, Mythic and EA Black Box.
I was at Tiburon when that happened. Not a fun day. :(
Its not that weird. They had 200M in revenue last quarter[1] with about 2000 employees. That is about $100K/employee, since employees probably cost more than that at the median, its not really a sustainable strategy. Swap out employees who are making more $/employee to boost the average and maybe you have a going concern.
Interesting, so its $100K in revenue per employee per quarter, that is annualized out to $400K/employee/quarter.
Note that it isn't that people are being paid $100K per quarter, it is that the business generates $100K in revenue per quarter per employee. When you manage a business one generally has a model, generally that model starts with revenue - cost of goods or "gross margin", in an info business like this I tend to model the Operational expense of "operations" (the folks who run the server, the cost of IP transit service, co-location fees, etc) as the "cost of goods" (basically the amount of money you're spending to make the product available for the customer).
So you start with that Gross Margin and your business model is the formulae you use to "spend" it. In old school tech companies you'll spend x% of your gross margin on "R&D", y% on sales, z% on customer acquisition etc. And at the end of the trough is your "net profit" which some folks report as free cash flow. So lets say Zynga spends 10% of their gross margin on R&D, then the money available for R&D would be $100K * GM * R&D margin. To work an example lets say Zynga's margins are 80%, 100K * .8 * .1 is $8k/quarter available for our R&D employee during the quarter. That is not even $3k/month or $36K/year loaded cost (meaning their salary, benefits and office space).
That is why it is a useful sanity check to see what the revenue per employee is. That helps you understand how healthy (or unhealthy) the business is. In comparison Apple has 80,000 employees and a quarterly revenue of 57B for a revenue per employee of 720K (about 7x Zynga).
I know boring stuff but sometimes it helps when trying to figure out if you're making progress or not.
That's $100k revenue per employee in Q3 but employee expense is much lower than that[1]. Probably a median annual salary+bonuses of $100k + 15% in taxes & benefits, we're still looking at maybe $30k/employee/quarter.
If the average person there makes 100k per QUARTER I can see how they'd be losing a lot of money. Either you mixed quarters and years, or I'm in the wrong type of business.
your estimation for employee cost is too much. 100k/quarter is more than double on what you will need to hire an employee/rent/coffee/massage/heathcare all package included.
It's a new radical management concept: you start replacing pieces of your failing company with other smaller but more successful companies. Start at the bottom, finish at the top. In two years after a series of lay-offs and acqui-hires the whole staff will be replaced finishing with CEO with a proper replacement hired from Rovio's board.
From what I've read, Zynga is not run as a monolithic company, but as a confederation of studios that do not necessarily share programming, design and product management talent, but share HR, legal, and administrative.
Thus when some project reaches end of life, it's time for the entire studio to go.
trimming fat while investing in innovation is not mutually exclusive, esp if you have a sizable cash cushion and a new CEO like zynga. on the surface, it seems unfair to compare this acquisition with omgpop since naturalmotion offers defensible IP and technology that can be used in helping zynga's games appear more lifelike, or like lucas technologies, help others make their creations, whether games or movies, appear more lifelike. more realistic animations and game play will become more common as mobile phones become more powerful, much as we saw with gaming consoles. this is a bold investment in the future of mobile (and potentially smart TV) entertainment.
Because it's massively beneficial from a PR perspective to lay people off the same day you're doing something "positive."
Specifically here, it has certainly diverted a lot of attention that would otherwise be on a negative like laying people off into something that looks far more positive for the company.
Last time Zynga laid off a large % of their workforce, wasn't it during a huge conference or the same day Apple had made an announcement about new products or something? That's another great way to minimize attention toward something like this.
Basically all of their previous staff was hired by chimps, so they had to fire them. Fire staff that is, not the chimps. The chimps ordered a new batch. Perfect moon logic.
munificent|12 years ago
> On November 9, 2009, EA announced its acquisition of social casual games developer Playfish for US$275 million. On the same day, the company announced layoffs of 1500 employees, representing 17% of its workforce, across a number of studios including EA Tiburon, Visceral Games, Mythic and EA Black Box.
I was at Tiburon when that happened. Not a fun day. :(
acjohnson55|12 years ago
ChuckMcM|12 years ago
[1] http://investor.zynga.com/releasedetail.cfm?ReleaseID=800274
ChuckMcM|12 years ago
Note that it isn't that people are being paid $100K per quarter, it is that the business generates $100K in revenue per quarter per employee. When you manage a business one generally has a model, generally that model starts with revenue - cost of goods or "gross margin", in an info business like this I tend to model the Operational expense of "operations" (the folks who run the server, the cost of IP transit service, co-location fees, etc) as the "cost of goods" (basically the amount of money you're spending to make the product available for the customer).
So you start with that Gross Margin and your business model is the formulae you use to "spend" it. In old school tech companies you'll spend x% of your gross margin on "R&D", y% on sales, z% on customer acquisition etc. And at the end of the trough is your "net profit" which some folks report as free cash flow. So lets say Zynga spends 10% of their gross margin on R&D, then the money available for R&D would be $100K * GM * R&D margin. To work an example lets say Zynga's margins are 80%, 100K * .8 * .1 is $8k/quarter available for our R&D employee during the quarter. That is not even $3k/month or $36K/year loaded cost (meaning their salary, benefits and office space).
That is why it is a useful sanity check to see what the revenue per employee is. That helps you understand how healthy (or unhealthy) the business is. In comparison Apple has 80,000 employees and a quarterly revenue of 57B for a revenue per employee of 720K (about 7x Zynga).
I know boring stuff but sometimes it helps when trying to figure out if you're making progress or not.
meritt|12 years ago
[1] http://www.glassdoor.com/Salary/Zynga-Salaries-E243552.htm
qdog|12 years ago
hatred|12 years ago
Mikeb85|12 years ago
Yeah right, game developers are cheap.
Edit - only because of supply/demand, not saying anything of their worth. Developing games is fun, I have a lot of fun doing it in my spare time.
ankitml|12 years ago
_random_|12 years ago
prostoalex|12 years ago
Thus when some project reaches end of life, it's time for the entire studio to go.
jlees|12 years ago
panabee|12 years ago
Ygg2|12 years ago
notwedtm|12 years ago
sharkweek|12 years ago
Specifically here, it has certainly diverted a lot of attention that would otherwise be on a negative like laying people off into something that looks far more positive for the company.
Last time Zynga laid off a large % of their workforce, wasn't it during a huge conference or the same day Apple had made an announcement about new products or something? That's another great way to minimize attention toward something like this.
Ygg2|12 years ago
unknown|12 years ago
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WilliamCClegg|12 years ago
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clockworkelf|12 years ago
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