Zynga has shuttered a studio and is contemplating more closures in the coming days. In a company memo published on Zynga’s blog, Mark Pincus explained the situation.
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.
Mark Pincus had previously hinted at these cuts several weeks ago in a preliminary financial report for Zynga’s third quarter.
The third quarter of 2012 continued to be challenging and, while many of our games performed to plan, as a whole we did not execute to our satisfaction. We’re addressing these near-term challenges by implementing targeted cost reductions in the fourth quarter and rationalizing our product R&D pipeline to reflect our strategic priorities. At the same time, we are continuing to invest in our mobile business where we have one of the strongest positions in the industry. These actions support our strategy to transition from being a first party web game developer to a multiplatform game network. We remain optimistic about the opportunity for social gaming and the power of our player network of 311 million monthly active users. When we offer our players highly engaging content, they respond. FarmVille2 has been our most successful launch since CastleVille in terms of daily bookings, and we now offer 3 of the top 5 most popular mobile games in the U.S. in terms of time spent according to Nielsen.
In response to this news, Zynga’s stock is trading at $2.20 per share, the lowest its been in fifty-two weeks. This is in stark contrast to Zynga’s IPO price of $10 per share.
Analysis: Another week, another bad news story for Zynga. We here at GamingBus have written extensively on the problems at Zynga, and the new decision to close perhaps up to three Zynga studios is just more symptoms of the underlying disease. At this point, Zynga is a dead horse that beats itself.
Ultimately, I think it’s fair to say that the golden age of the social game is over, and companies like Zynga that haven’t already shifted over to the incoming golden age of mobile gaming now have to face that reality.