The Recession Hits the Gaming Industry

Electronic Arts sheds 1,500 jobs in response to big losses this year

Recently, the video-game maker Electronic Arts announced it was cutting 1,500 jobs across the entire company. This is a large reduction for EA, amounting to 17 per cent of its entire workforce. The Canadian offices that will be affected include those in Burnaby, Montreal, and Edmonton.

The layoffs are in response to a second quarter loss of $391 million, with the expectation of a net loss for the fiscal year. EA expects that the cuts, to be completed by March 31, 2010, will save the company $100 million annually.

While this isn't the first round of layoffs made by EA that have been felt in Canada - remember Black Box? - it is a significant one. The move makes sense from an operations and revenue standpoint, as EA wants to focus their resources and efforts on game titles that yield higher margins and better profits. These would likely include popular and successful sports series such as Madden, NHL, and FIFA, as well as the Rock Band series of games.

For the Canadian gaming industry as a whole, the job loss puts a damper on recent positive news, including the opening of a Ubisoft office in Toronto and increased government investment at the federal level and by Ontario. That said, it's not surprising that these types of cuts are occurring, as consumers are showing much more discretion in how they spend their money and are being highly selective in what games they choose to purchase. Faced with these challenges, it is expected that gaming companies will look to reduce or altogether eliminate investment in titles that are not successful. Let's just hope that both EA and the B.C. video game industry can rebound from this soon.